For once, Wall Street did not make the mistake of judging a book by its cover, when the Jobs Report was released Friday. Expecting that approximately 170-180 thousand jobs were created in January, the stock market promptly dropped when the Bureau of Labor Statistics announced only 113 thousand jobs had been created. This follows the awful 75 thousand created in December, which set off the month-long slide on Wall Street last month.
However, to quote one analyst, this jobs report was simply "weird."
There are two techniques for counting the number of unemployed. One is that employers are required to file certain reports with the government each month. This is the number most often cited by the press. The other technique is called the household report, in which standard polling techniques of calling a representative sample size of phone numbers and asking if they have a job. This second technique tells a different story, i.e., that the job market actually improved significantly last month.
In addition, the labor force participation rate tells us how many people have given up and are no longer looking for a job. It has been trending down since the recession began in 2008. Four out of ten able-bodied workers have given up. But, last month, that also improved. This participation rate greatly influences the normal rate of unemployment that the press reports. As people come back into the labor force, it causes the rate of unemployment to drop, and that is exactly what happened last month, as it dropped to only 6.6%.
Lastly, the dreaded U-6 level of unemployment, which includes the unemployed and those forced to work part-time instead of full-time, dropped to "only" 13%. It has been stubbornly high for a long time. Take a look at these long term trends:
So, for once, Wall Street didn't run too far with the mere headline number of 113 thousand but actually opened the cover and found there is some good (even if weird) news buried deep inside the jobs report.
But, why don't the American people believe the job market is improving?
However, to quote one analyst, this jobs report was simply "weird."
There are two techniques for counting the number of unemployed. One is that employers are required to file certain reports with the government each month. This is the number most often cited by the press. The other technique is called the household report, in which standard polling techniques of calling a representative sample size of phone numbers and asking if they have a job. This second technique tells a different story, i.e., that the job market actually improved significantly last month.
In addition, the labor force participation rate tells us how many people have given up and are no longer looking for a job. It has been trending down since the recession began in 2008. Four out of ten able-bodied workers have given up. But, last month, that also improved. This participation rate greatly influences the normal rate of unemployment that the press reports. As people come back into the labor force, it causes the rate of unemployment to drop, and that is exactly what happened last month, as it dropped to only 6.6%.
Lastly, the dreaded U-6 level of unemployment, which includes the unemployed and those forced to work part-time instead of full-time, dropped to "only" 13%. It has been stubbornly high for a long time. Take a look at these long term trends:
The trend line is clear, albeit much too slow. This slow pace sounded the alarm on Wall Street that Janet Yellen of the Fed might come to the rescue by slowing the taper of quantitative easing and maintaining our "sugar-high."a little longer.
But, why don't the American people believe the job market is improving?
