Contrarian Chronicles
The jobs picture is even worse than it seems
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The closer you look at the numbers, the more you realize unemployment is higher than the headlines tell you. And despite what the experts say, inflation is out there, and we’re feeling it already.
[ME: take 5.6% and divide by 0.65 participation rate
you get the 8.4% true unemployment rate, just quick calculation]
By Bill Fleckenstein
Given my contention over the last year that our economic "recovery" would not be self-sustaining -- because it would be incapable of generating jobs -- I'd like to spend a minute on the February employment report.
This report, released March 5, is the third consecutive employment report that has disappointed nearly everyone. And it puts an exclamation point behind the idea that we are not creating jobs in this country.
A look under the hood is not pretty
In fact, if you take a peak beneath the surface of the employment report, it's far worse than the headline number. (The supporting data are available here.)
Using the seasonally adjusted total unemployment rate of 5.6% and adding to it "discouraged" workers, the rate grows to 5.9%. Factor in other groups of people who are underutilized in the work force, you can ratchet the number all the way up to 9.6%. And, for the sake of comprehensiveness, if you use the non-seasonally adjusted numbers, that rate would swell to 10.9%. So, those are the numbers, and I'll leave readers to draw their own conclusions.
Persons unemployed 15 weeks or longer. 2.2%
Job losers and persons who completed temporary jobs. 3.0
Total unemployed. (Official unemployment rate) 5.6
Total unemployed plus discouraged workers. 5.9
Total unemployed, plus discouraged workers, plus all other marginally attached workers. 6.7
Total unemployed, plus all marginally attached workers, plus total employed part-time for economic reasons, plus all marginally attached workers 9.6
Marginally attached workers are neither working nor looking for work. But they want to work and have looked for jobs. Discouraged workers have given up looking for jobs. Workers employed part-time for economic reasons want full-time jobs but have to settle for part-time.
Source: Bureau of Labor Statistics employment situation report for February
The inescapable conclusions for me, therefore, are:
True unemployment in this country is not 5.6% but something a fair bit higher.
There are many people who are under-employed.
There’s a big block of people who have given up.
What's particularly scary is how pathetic job growth has been, despite all the interest-rate cuts (nominal rates are near zero, and real rates are essentially below zero), the two Bush tax cuts and now the refunds from the last cut. Despite it all, we still can't get enough jobs created.
Of course, we're not creating jobs, not just because of outsourcing (which is an issue) but due to the real problem -- the core of what's behind much of our troubles today. That’s the misallocation of capital that occurred in the late 1990s mania, and the response to it. That has created wild times in housing and drunkenness in borrowing.
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