February 06, 2012
BY: Robert Hallberg, Topics: Economics
Last weekâs unemployment report appeared to have offered some encouraging news. The unemployment numbers dropped to 8.3% and the economy added 243,000 jobs in January. These jobs included 70,000 professional and business service jobs, 31,000 in healthcare, 13,000 in accounting/bookkeeping, 10,000 in mining, and 7,000 in architecture and engineering. Manufacturing and constructions also added another 50,000 and 21,000 jobs respectively.
Compared to prior reports the composition of these jobs was of much higher quality than the previously created service sector jobs and temp jobs. However, before we breakout the Champaign and celebrate, let take a closer look at these numbers.
At the first glance it certainly it looks like the unemployment situation is improving. However, this report excludes some 1.2 million discouraged long-term unemployed workers that have stopped looking for work. A better measure of the unemployment situation can be found by looking at the ratio of employed persons versus the entire population, or the so called labor force participation rate.
This ratio will show that the work force is still shrinking as people are dropping out of work force faster than new jobs are being created. The economy needs at least a steady creation of 200,000 jobs per month just to keep up with population growth. The chart show the labor force participation rate, which is still trending downwards without a sign of stabilizing.
The official unemployment report published by the labor department does not include a vast inventory of workers that have given up, and are unable to find full time employment. Some of these people include students who are going back to school and others include people who are discouraged and have just simply stopped looking for work.
By changing the way these numbers are reported the government has managed to paint a much rosier picture than what reality have to offer. However, there are still free market economists that report the unemployment rate with more realistic numbers.
ShadowStats is a reputable firm that provides alternative economic data. In the chart below they show the seasonally-adjusted SGS Alternate Unemployment Rate, which reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.
The statistics from ShadowStats shows the real extent of the problem with an unemployment rate that is almost three times as high as the official rate reported by the labor department.
Although corporations are showing profitability this report suggest that there hasnât really been an economic recovery since the panic of 2008 and the situation does not look like it is improving. America and most of the west have become overregulated and over taxed and a lot of the good quality jobs are no longer available. They have gone overseas and they will not come back until costs come down and the environment for doing business becomes friendlier with lower taxes and less regulation.
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