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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

May jobs report analysis: Can we make the Census go on forever?

As I do every month, I like to unpack the fresh jobs report data released by the government to get behind the headline numbers.

Today's headline numbers: The May official unemployment number dropped to 9.7 percent from 9.9 percent in April. The economy added 431,000 jobs, more than in April but fewer than were expected.

First look behind the headlines: The drop in unemployment and the rise in new jobs comes almost entirely from temporary workers hired for the 2010 Census. In May, the Census hired 411,000 workers. A shockingly few number of new jobs -- only 41,000 -- were created in the private sector, well below the 180,000 private-sector jobs forecasters expected. (An explainer on the math disparity: If you subtract the 411,000 Census jobs from the 431,000 total jobs created, it looks like the private sector created only 20,000 new jobs, not 41,000. But the gains in Census hiring were offset by 20,000 lost jobs in non-Census government jobs in May, typically cut at the state and local level. State and local governments are in real trouble and are slashing workers to balance budgets.)

This is an untenable trend. All of those Census jobs will go away when Census 2010 ends this fall, and President Obama acknowledged this morning "that may be reflected" in the unemployment rate then, i.e., it will go up. The bottom line is that the government cannot be the driver of economic recovery and job growth. There are only so much tax money and government bonds available to raise funds to create new jobs. After that, you have to raise taxes and sell more debt, and we know where that takes us.

Of the Census workers, John Hancock Financial Services chief economist Bill Cheney said: "They are employed, and will get paid, but they are hardly a harbinger of economic vigor and recovery. Private payrolls increased only 41,000, a number statistically no different than zero."

Second look behind the headlines: You are counted as unemployed only if a) you're out of work and b) you've looked for work recently. If you've given up looking for work or are working part time but want to be working full time, you are not included in the official 9.7 number. If you add both of those groups onto the official unemployment number, the larger -- and I'd argue, truer -- May unemployment rate was 16.6 percent.

That's a scary-big number but it is a significant decrease from April, when the rate was 17.1 percent and well off its recent high of 17.4 percent, hit in October. This suggests that the discouraged workers who have given up looking for work are moving off the sidelines and into the labor force. They have not all found jobs yet, but they're trying again because they feel that the job-finding climate is sufficiently better and that it's worth their time to look for work. (We won't address the issue here of unemployed Americans who still think it's not worth their time to look for work. We'll just say it and move on.)

The number of long-term unemployed -- those who have been out of work for 27 or more weeks -- remained essentially unchanged from April, at 6.8 million. And the number of part-time workers who would rather be working full time dropped by 343,000 in May, suggesting they got full-time jobs.

Third look behind the headlines: Unemployment for black teenagers continues to be a big problem. The unemployment rate for blacks of both sexes, ages 16 to 19, was a stunning 38 percent in May, up from 37.3 percent in April. For teenagers of all races, the May unemployment rate was 24.4 percent, up from 23.5 percent in April. These are typically the first employees hired in good times and the first fired in bad times.

Takeaway from the May unemployment numbers: It looks like the government's best answer to unemployment is creating a perpetual Census.

By Frank Ahrens  |  June 4, 2010; 3:15 PM ET
Categories:  Data , Unemployment  
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