Unemployment Increases

This is not good news:

Unemployment Rate Jumps to 5.5% As Economy Continues to Shed Jobs, by Brian Blackstone, WSJ: The U.S. unemployment rate posted its sharpest one-month increase in 22 years last month, suggesting U.S. consumers already facing a housing slump and soaring gasoline prices now confront even more pressure from a weakening jobs market.

The data, which included a fifth-straight drop in nonfarm employment, should take financial-market expectations of Federal Reserve rate increases as soon as this autumn off the table.

Nonfarm payrolls, which are calculated by a survey of establishments, declined 49,000 in May, the Labor Department said. The decline was broad-based...

The unemployment rate, which is calculated using a separate survey of households, jumped 0.5 percentage point to 5.5%, its highest level since October 2004. The half-point rise was the biggest since February 1986. According to the household survey, employment fell by 285,000 while unemployment rose by 861,000. ...

Update: From Bloomberg:

The unemployment rate, the highest since October 2004, reflected an expansion of the workforce, led by teenagers. ... Some of the increase in youth unemployment may reflect an earlier end to the school year than incorporated in the Labor Department's seasonal-adjustment calculations, economists said.

Young people are ''swelling the labor pool, but they're also leading to a higher unemployment rate,'' said Roger Kubarych, chief U.S. economist at Unicredit Global Research in New York...

Lehman Brothers Holdings Inc. economists estimated the unemployment rate may drop back by 0.1 or 0.2 percentage point in June because of the seasonal-adjustment effect. David Resler, chief economist at Nomura Securities International in New York, said the May rate was as much as 0.3 percentage point higher because of the school-year impact.

Comments

[save_the_rustbelt]

According to George Bush it is all those pesky teenagers, everything else is pretty swell.

1-20-09

[anne]

Again, please remember that we are in the midst of war spending, having had repeated tax cuts, low interest rates, and still we are remarkably weak and have been since the recovery from December 2001.

[pgl]

More of this was from a rise in labor participation than a drop in employment/population as I noted over at Angrybear. But then I had to do an update to include some longer term wisdom from Andrew Samwick.

[mikx]

Unemployment rate that is not counting long term unemployed and/or discouraged workers is a pretty useless number.

In economy that generates very few new jobs for a period of time, there will be few job seekers as most of unemployed will rationally consider it is useless to look for a job.
In such economy unemployment as counted by BLS will be very low, but economy will stink for most participants.

I suspect that US gov likes this unemployment number because it is usually much lower than unemployment numbers for major West European countries.

Gov counts on population not knowing differences between apples (US unemployment figure) and oranges (Euros).

Statistics used as propaganda.

[Bruce Wilder]

The news just keeps getting better and better! The S&P 500 and Dow Jones fell 3%, the price of oil spiked upward; American International Group, the world's largest insurer, plunged 6.8 percent after regulators said they were examining its accounting. American Express Co., Citigroup Inc. and Boeing Co. each lost more than 5 percent.

We are entering an economic crisis after a long period of weakness and decay and stupid waste, waste, waste.

[Miscellaneous Musings]

Inflation makes things tight so more people attempt to enter the labor force, the unemployment rate goes up. The natural rate of unemployment increases due to financial sector/construction workers needing to retrain for alternate careers (do we need any more luxury homes?). Some homebuilders have started building smaller homes, and are weathering the storm much better. That is not an option in zoned land, so the natural rate rises there.

With the Conference Board's inflationary expectation reading at 7.7%, even 6% unemployement now sounds better than an extended 10% later, should inflationary expectations become embedded.

says...

Unemployment is really over 10%.

Kevin Phillips new book is all about how the numbers the Bush admin releases are total BS

[ken melvin]

45K lost plus 200K that should have been added doesn't equal an increase of 0.5 percent. Think of an increase of 1.75%.

[anne]

http://krugman.blogs.nytimes.com/2008/06/06/we-need-a-new-business-cycle-vocabulary/

June 6, 2008

We need a new business cycle vocabulary
By Paul Krugman

Today’s employment report wasn’t as bad as the markets seem to have thought: the big jump in the unemployment rate was due to a jump in labor force participation — maybe by teens looking for gas money? — rather than a large drop in employment. The economy still seems to be in a sort of slow-mo slump: employment gradually falling, labor markets gradually worsening, GDP positive but barely.

So is it in recession? What’s in a name?

Official recession definitions used to correspond closely with labor market outcomes, because we had “V-shaped” recessions: when they were over, everything sprang up quickly. Here’s the employment-population ratio and recession periods from 1973 to 1990:

The way it was [Chart]

Back then, when a recession was over, it was really over.

But here’s the same variable since 1990:

The way it is [Chart]

As far as the job market was concerned, the last two recessions lasted literally for years after they were officially declared over.

Now we have what looks and feels like a recession that, from the point of view of the labor market, started before it officially began.

The point, I think, is that the traditional definition of recession only worked well in the face of a jagged business cycle; if we now have smoother, longer curves — maybe due to better inventory management, or whatever caused the Great Moderation — the question, “Is this a recession?”, no longer means much.

[Organic George]

Again what the employment numbers do not show the illegal immigrants. There is a lot of purchasing power that has disappeared with these off the book employees, so the economic numbers cannot add up to the reality of main street.

As for the teenagers it might be that their cash strapped parents said if you want to spend money you have to get a job. But the jobs they traditionally get have been taken by unemployed or underemployed adults.

So many economist keep looking for a glimmer of light in the economy, instead of accepting the fact that there is now more "tunnel" than "light".

[Bruce Wilder]

"better inventory management"??!?

Say, what?

How about globalization?

The definition of recession in business cycle theory is a period of contraction in the general level of business activity. If business activity, in general, is picking up, without drawing local labor resources into the circular flow, one has to have an explanation for what it means for business activity to "expand". How can business activity "expand" meaningfully without drawing resources into employment?

Business activity "expansion" could entail increasing trade and foreign investment. And/or, increasing use of illegal immigrants.

A high level of employment of illegal immigrants in construction is the easiest explanation I can latch onto for why employment statistics for construction have responded in apparently muted slow motion to the cliff-dives of residential construction.

But, the shift of manufacturing to China and Mexico could also be a factor. As business activity and investment steps up at the end of a recession, it steps up first, and primarily, overseas. When contraction comes, it comes first and primarily at home.

Whatever the nominal unemployment rate -- and I think we should regard the unemployment rate, like the CPI, with presumptive skepticism, until there are transparent reforms -- I don't think we should overlook the obvious hardships in Ohio and Michigan, or the stagnant course of wages. A nominally "low" unemployment rate, with no increase in real wages was never good news.

[ken melvin]

U6 is more realistic.

[mikx]

says...

Unemployment is really over 10%.

Kevin Phillips new book is all about how the numbers the Bush admin releases are total BS

BLS is independent and serious gov agency. Jorge Busherino and his cronies may try to influence the numbers and in fact may succeed a bit, say by going from 6% to 5% unemployment figure as DEFINED by BLS.

There is no way they would be able to hide 5% of labor force, by trimming 10% to get 5%.
Don't know what Phillips is talking about, but probably he looks up and/or computes unemployment number compatible with France/Germany/etc.

And all previous administrations, Dems and Repubs, used the same definition of unemployment.
Your Jorge Bush Derangement syndrome clouds your mind.

[mikx]

A high level of employment of illegal immigrants in construction is the easiest explanation I can latch onto for why employment statistics for construction have responded in apparently muted slow motion to the cliff-dives of residential construction.

In theory it should not affect the unemployment figure. BLS has all kinds adjustments to come up with supposedly correct number.

If illegals are employed off the books, their employment/unemployment status still should come up via adjustments in household survey.

In fact this time it was household survey that dropped significantly while payroll (on the books) business employment didn't do as badly.

[piglet]

The "economy" is officially still "growing", but for most people it felt like "recession" for several years already. PK may be right to say we need a new vocabulary, but more than anything we need new thinking. What critics have been saying for years is now obvious: economic growth doesn't make us better off any more. Living standards are stagnating or going down for most Americans despite impressive GDP numbers (as officially registered) because the distribution is becoming more and more unequal and economic gains are now going exclusively to the privileged few at the top (it may also be a factor that those official numbers are rigged in many ways, but still, increasing inequality is unmistakably taking its toll).

It is the wrong answer now to cry for more economic growth. Even if we somehow managed, it wouldn't solve the underlying problem. We don't need (and can't afford) more "economic activity"; we need more justice.

[Patricia Shannon]

http://news.yahoo.com/s/ap/20080606/ap_on_bi_go_ec_fi/economy;_ylt=Aqg.Tx_B63xRrcNuyOB2DqyyBhIF

Friday's Labor Department report was filled with sobering numbers:

• Employers eliminated 49,000 jobs in May, the fifth straight month of nationwide losses.

• The number of unemployed people grew by 861,000 — to 8.5 million.

• Job losses for the year reached 324,000.

[ken melvin]

Mikx - official unemployment has a way of distorting reality during both bad and good times. E/P or U6 are meaningful.

says...

>> And all previous administrations, Dems and Repubs, used the same definition of unemployment.

HAAAAAAAAAAAAAA

Notice the lack of any backup for that BS.

It was clearly spelled out in Phillips book that you are 100% wrong (see link).

http://proctoringcongress.blogspot.com/2008/
04/kevin-phillips-denotes-40-years-of.html
_____________________________

clip -

A newspaper excerpt of Phillips’ new book, “Bad Money: Reckless Finance, FailedPolitics and the Global Crisis of American Capitalism,” details how, since JFK, every American president except Carter (at least, Phillips did not mention him in the excerpted piece) has jacked with how we calculate unemployment, the Gross National/Domestic Product (remember, one of those changes was to move from GNP to GDP), the inflation rate, or two or more of the above.
______________________________

I don't suppose you even heard of Bush's new Birth / Death adjustment thats been inflating job creation numbers by 40%.

Not to mention other stats that he has come up with that are lies.

[bob]

The man that runs the Shadowstats website (a big he-man Clinton hater) is saying that the real unemployment rate is about 13.5%

[Bob]

>> Not to mention other stats that he has come up with that are lies.

Rethinking the 'Strong Jobs Recovery' Scenario

http://www.thestreet.com/_tscana/markets/economics/10258387.html

[Real Person from the Real World]

"Pesky Teens and young people" - unemployed? Also, older people competing with younger people (and losing out to them) AND with imported foreigners. So what now? Inter-generational conflict? more "illegal" immigrant bashing over the bottom end jobs, while we import legal immigrants to enrich piddly foreign vendors trying to engorge themselves on foolish US companies?