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The Job Market Is About to Get Worse

Written by Gary North on February 22, 2012

President Obama hopes that good news on the job front will guarantee his re-election. That hope is about to hit the statistical wall.

A hullabaloo broke out on February 3 after the BLS released its jobs report that indicated that a surprisingly robust 243,000 jobs were created in January, and that the unemployment rate had dropped to an even more surprising 8.3%. Cynics, academics, BLS heretics, BLS true believers, hype mongers, and politicians of all stripes waged a veritable media battle over these numbers that President Obama serenely trotted out as validation of his policies. Even Rush Limbaugh jumped into the fray. Rarely, if ever, had BLS numbers caused so much public disagreement—and scorn. But that’s history. Now we’re in February, and unemployment, after a year of fairly consistent improvement, is suddenly showing a sharp deterioration.

On Friday, Gallup’s mid-month unemployment reading, which covers the preceding 30 days, jumped from 8.3% in mid-January, the low point since the financial crisis, to 9.0%. An astounding increase. And its Job Creation Index confirmed that trend, dropping from +16 in January to +13 in February.

Worse, 10% of the employees in mid-February were part timers in search of full-time jobs, though down a tad from January’s of 10.1%, the all-time worst level in Gallup’s history! Underemployment—a combination of the unemployed and part-timers who are looking for a full-time job—jumped to 19% from the mid-January reading of 18.1%. While Gallup’s unemployment reading has improved steadily over the course of 2011, the underemployment reading has simply gotten worse.

Gallup’s mid-month reading has been a good predictor of the non-farm payrolls report that the BLS releases two weeks later on the first Friday of the following month. For example, Gallup’s mid-January reading improved to 8.3%, in line with what the BLS would report two weeks later (causing the above hullabaloo). Unlike the BLS, Gallup, does not seasonally adjust its unemployment reading, so some uptick during this time of the year is normal. But that kind of jump is far beyond normal.

Of course, the BLS might tweak its formula to further decrease its utterly confounding workforce participation rate to the point where the resulting unemployment rate will actually, and once again, surprise on the upside, despite the hue and cry that may cause.

The trick here is to report that a lot more people gave up looking for jobs. This indicates a rotten job market. But, because the unemployment figure is a percentage of out of work people who are looking for jobs in relation to people employed, the unemployment rate goes down. The worse things are, the better the statistic looks.

And there was another indicator: the Philly Fed employment index collapsed from 11.6 in January to 1.1 in February. . . .

Over the years, the Philly Fed employment index has shown a strong correlation with the BLS jobs report. . . .

Unless the BLS can figure out how to statistically adjust its next set of data and estimates to relegate any negative elements to blissful oblivion, there will be disappointment.

The games people play!

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3 thoughts on “The Job Market Is About to Get Worse

  1. The job market will never improve until we bring back most of the manufacturing jobs that were intentionally legislated out of this country, and that will require putting a president and a majority in congress that are pro-America, not the current bunch that work every day to inflict as much damage and take away as many freedoms as they can get away with.

  2. For 30 plus years we have been creating the ground work to drive just about all business out of America. insane regulations, taxes, and thug run unions. Only when this stops, will business come back. Why should GMC workers putting parts on a car get $78.00 a hour? Thats more then a registered nurse gets. Your President supports all of the items I have stated. Your President has put more then 17,000,000 people out of work with his plans to kill America. Give him 4 more years and he will succeed.

  3. Frank Norton says:

    The job unemployment statistics has been almost always around 5 % as a messure of the number of persons unemployable. In most cities the roads are overcroweded in the morning and afternoons with people going to and coming from work. I have had some 6 paying jobs, with 53 years the longest at any one of them. I have never had any problem getting a job, even in a major company who has had an hiring freeze for two years and pending layoffs during the summer – I even got to name the job that I wanted. Doers are always in demand. Businesses are looking for workers that will make money for them and they are always on the lookout. When the unemployed gets to 10-20 percent, it indicates that there are a lot of poor performers out there. Just look at the school dropout rate.