Network News

X My Profile
View More Activity
2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Unemployment Dips Slightly: What Does It Mean?

UPDATED with remarks from President Obama at 1:24 p.m.

The official U.S. unemployment rate dipped to 9.4 percent in July from 9.5 percent in June, according to numbers out this morning from the Labor Department's Bureau of Labor Statistics.

What does that mean? Does it mean the recession is over? Does it mean that unemployment will continue to shrink?

No, and probably not.

The economy remains in recession, officially, until the GDP goes positive for one quarter. And as for unemployment, even the White House -- which has been too optimistic in the past, saying unemployment would top out at 8 percent -- says the number will continue to rise, cresting at more than 10 percent.

So how should you feel about today's number?

Here at The Ticker, when we report some not-so-bad news, we like to say "it's better than a poke in the eye with a sharp stick."

We're not sure we can say that this time.

Yes, even a slight tick down in the rate can goose the stock markets -- as is happening right now -- and that means more recovery for your 401(k) and stock portfolio.

But there's little in today's jobs report that says the economy is in real recovery. Instead, it looks like the uptick was caused by "fake" money, which is to say, government spending, and not by consumer spending, exports and other "real" money and growth.

Or, as former labor secretary Robert Reich said on CNBC moments ago, "I have no reason to assume the aggregate demand is out there."

President Obama sounded a more positive note in remarks made moments ago, but cautioned: "We have a lot farther to go," adding that, "it's not a true recovery until we stop losing jobs."

Let's take a look into the report, which you can see by clicking here.

-- 247,000 jobs were lost in July, putting the number of officially unemployed at 14.5 million out of a workforce of 154.5 million. That's a better-than-average decline compared with the period from November through April, when the economy was shedding an average of 645,000 jobs per month. So that's good. However:

-- The real unemployment rate -- which we like to flog here at The Ticker -- dropped from 16.5 percent in June to 16.3 percent in July. This figure takes into account people who should be working full-time who are not: the discouraged, who have given up looking for work, people working part-time for economic reasons, the self-employed and so on. They are not counted in the official monthly unemployment number (even though the BLS notes them) because of the way the BLS computes unemployment, which is not a little controversial.

Troublingly, 2.3 million people in July were "marginally attached to the labor force," the official term for what we described above, which is 709,000 more than a year ago.

Among that 2.3 million, discouraged workers made up 796,000, up from 335,000 this time last year.

-- Five million Americans have now been out of work for at least six months and long-term unemployment continued to rise.

-- Nearly every private sector lost jobs in July -- construction, manufacturing, retail (a worse-than-average tanking), transportation, professional and business services and financial services.

-- The semi-private health-care sector added jobs in July. It has been largely recession-proof, thanks to the aging population and -- let us not forget -- government subsidies in the form of Medicare and Medicaid.

-- The travel and leisure sector added a handful of jobs in July, but that's all seasonal and not indicative of anything other than people taking summer vacations (which, in itself, is not a bad sign).

-- The growth in this jobs report came from the government sector, which added 9,000 jobs in July, most probably directly related to the first bit of spending from the $787 billion stimulus passed earlier this year.

This is problematic for long-term growth for the same reason that the cash-for-clunkers deal is problematic for the auto industry.

Sure, cash-for-clunkers is helping dealers and ailing auto companies, and there's value in that. But the program is probably only pulling future demand forward -- meaning more cars are not being sold over the long term -- and the program is only burning down inventory. Cash-for-clunkers does not mean that more new cars are being manufactured, nor are there any downstream benefits, such as for parts makers.

This is why the White House and many economists believe the July unemployment dip to 9.4 percent is a blip and the figure will go back to rising, even after GDP turns positive and the recession ends.

Remember: In the seven U.S. recessions since 1970, unemployment continued to rise for several months after each recession ended.

Or, to put it more bluntly: What happens when the government money runs out?

-- Frank Ahrens
Sign up to get The Ticker on Twitter

By Frank Ahrens  |  August 7, 2009; 1:24 PM ET
Categories:  The Ticker  | Tags: recession, unemployment  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Markets Open Up on Job News
Next: Consumers Continue To Cut Debt

Comments

OBAMA COOKS THE BOOKS ON UNEMPLOYMENT

by the easy expedient of DROPPING 400,000 long term unemployed Americans from the count.

The NYT today explains Obama's latest SCAM:

" The government said fewer jobs were lost this spring than it had initially estimated, revising June’s lob losses to 443,000 from 467,000. And hourly earnings rose.

In a reversal, the unemployment rate dropped to 9.4 percent from 9.5 percent, defying expectations of an increase.

But economists cautioned that the unemployment rate had only declined because 400,000 people gave up their search for work and left the labor force."

RESPONSE: See, if you add the long term unemployed unemployment INCREASED.


I guess those long term unemployed should just go quietly into the night.......

Posted by: JaxMax | August 7, 2009 2:45 PM | Report abuse

Here's my take on the cooking of the books:
If the Inner Party (Dems and Repubs) don't like the unemployment figures, just have the Labor Department muddy the waters a bit. Just use the tried and true deceptive statistical methods we have had around for a long time. Very few of the media will ever catch on and the others will be too scared to report on it (25% of the reporters in the US have been laid off or fired in the last 2 years).
Inconvenient Items:
1. Those people on Extended Benefits (EB) are not found in the figure reported above. I called the labor department and one expert(getting a straight answer out of these experts is almost impossible) told me they are listed under another category.

2. Thanks to the Wall Street Journal for this one: "The payroll figures jobs lost comes from a Labor Department survey of employers. The unemployment rate is measured through a separate survey of households, asking people whether they have a job, whether they want a job and whether they searched for a job (among other things).”
(Question: how many hours do you have to work for the Labor department to classify you as being employed FULL TIME? Answer: 4 HOURS OR MORE)
“If people drop out of the labor force, the unemployment rate can decline because fewer people would be considered jobless." (Question: Did they really "drop" out or were they pushed out?). "The July household survey showed the civilian labor force shrinking by 422,000 and employment falling 155,000. That translated into 267,000 fewer people listed as unemployed. The labor-force participation rate fell 0.2 percentage point in July to 65.5 %"
3. There is also the inconvenient Labor Dept U-7 report level that includes so-called "discouraged" workers" (see above, well sort of) (4-7% or more of additional unemployment). The U-7 levels are given short shrift in most of the media who only report the figure that comes out at the beginning of the month.
4. Other lies, distortions, and half-truths using statistics and sleight of hand by the people who have a legal responsibility to report unemployment figures accurately, and a media who usually don't take their job seriously or who have been recently laid off themselves, and politicians who have bigger noses than Pinocchio.
Bottom Line: Want to know what the real U.S. Unemployment rate is: JUST DOUBLE ANY NUMBER THEY FEED YOU!
Also: Employment Speak 17.1 is very popular this month with politicians and hack media people. (Past Erased and outdated examples of Employment Speak 4.3 and 16.4: "Happy days are here again”, “Prosperity is right around the corner", "We now have a good excuse to not pass additional Unemployment Extended Benefits so we can give your local banker a one trillion dollar gift").

Posted by: orwell101 | August 7, 2009 4:28 PM | Report abuse

It's time for JaxMax yto study some basic economics. This person takes date completely out of context, twists it to suit his/her political agenda, shouts while writing his comment and expects us to believe his/her nonsense.

FYI, JaxMax, the recession isn't over yet, people are still unemployed, but there are beginning to be indications that the economy is in not as bad a shape as it has been been or has been anticipated to be.

Rather than finding fault (where there is little fault to find with these figures), it might be a change if you could celebrate the knowledge that slowly, every so slowly, things are getting better.

Have a nice weekend!

Posted by: marmac5 | August 7, 2009 4:32 PM | Report abuse

While I don't personally pin the fault on President Obama, like many readers seem to do, he's definitely going along with the "official version" of what's happening with the economy.

Yes, nobody wants to hear a doom and gloom forecast, but really, the citizens of this country deserve an honest and objective snapshot of where things really do stand.

What kind of jobs do we have to look forward to if and when "the recovery" does happen? Are wages going to bounce back, will people be working full time, will companies continue to send jobs off-shore?

The people who are facing the prospect of continued unemployment with their long-term unemployment benefits running out should not be treated as nameless statistics. They have to be able to do something to make a living: survival involves the present, not some hollow promises for a better future.

It's so easy for those in the aristocracy to overlook the tide of economic misery being visited on so many Americans. Our "leaders" need to lead, before civil unrest decays into social upheavel and rioting on "Main Street".

Posted by: dlkimura | August 7, 2009 4:34 PM | Report abuse

The arrogant flop eared incompetent in the White House continues his campaign to destroy our economy, and his corrupt party in Congress continues to try to pull the wool over voters' eyes on the health care rape.
What a despicable bunch of dishonest slugs these democrats are.
The economy continues to tank, and it will so long as the A hole democrats in the White House and Congress continue to impose more rules on business and to spend money irresponsibly.

Posted by: LarryG62 | August 7, 2009 4:59 PM | Report abuse

JULY UNEMPLOYMENT RATE BY GROUP
9.8 percent: Adult men
7.5 percent: Adult women
12.6 percent: Female heads of households
8.3 percent: Asians
8.6 percent: Whites
12.3 percent: Hispanics
14.5 percent: Blacks
23.8 percent: Teenagers
Obamacare is not working too well.

Posted by: mharwick | August 7, 2009 6:11 PM | Report abuse

The Obama Paradox

why and how the Obama Presidency has ALREADY FAILED

Obama attacks the entire concept of Capitalism and Private Enterprise through regulation, taxation, and confiscation that meets and exceeds all Socialist expectations.

Amazingly, Obama is embracing Socialism at the same time he is having to bow down to the Chinese who have ONLY found success since embracing Capitalism.

Obama’s embrace of Socialism is like a football player who was hit in the head and started running with the ball in the wrong direction, towards the wrong goal. His teammates couldn’t catch him to tackle him, and were yelling “You are heading the wrong way” and the dazed player yelled back, “Don’t worry Coach, I will just run faster!!”

The Obama Paradox is that it is ONLY the Private Sector which can reverse Unemployment. So Obama is ATTACKING the only means of reversing the failure of his Presidency.

Obama’s approval ratings are already below 50%. The August recess is imminent, and each day Unemployment remains above 7% Obama will track downward. But the decline will not be steady, rather geometric.

Today, August 7, 2009 the Bureau of Labor Statistics CONFIRMED that NEW long term unemployment of Americans exceeded 584,000 in July, 2009.The official Govt report, widely ignored in the Media states:

"The number of long-term unemployed (those jobless for 27 weeks or more)
rose by 584,000 over the month to 5.0 million. In July, 1 in 3 unemploy-
ed persons were jobless for 27 weeks or more. (See table A-9"

Obama’s Presidency has already FAILED. He is running to the wrong goal.

Posted by: JaxMax | August 7, 2009 6:18 PM | Report abuse

"You can go broke trying to save money".

Posted by: indy474 | August 7, 2009 10:09 PM | Report abuse

And the NeoCon temper-tantrums continue! After we put all this partisan sour grapes about our economic recovery aside, we can see another piece of the recovery puzzle fitting into place. Over the next 6-12 months, hiring should kick into high gear, if the 5 month stock market rally is any indication.

Posted by: free-donny | August 7, 2009 10:46 PM | Report abuse

"So many people are flocking to the military during the current economic meltdown that Uncle Sams recruiters are turning applicants away." We're at war and they aren't accepting new recruits. Go figure. Like a draft in reverse or something.

Posted by: Dermitt | August 8, 2009 10:36 AM | Report abuse

New York state unemployment head count 824.000.

The coming month will show us whether there is an improvement. Meanwhile Geithner asks Congress to raise the debt level with another 2 trillion.

Why?

Posted by: holocaustgaza | August 9, 2009 8:31 PM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company