Smoke, Mirrors, and Unemployment

According to calculations by the U.S. government, the unemployment rate was a huge drop to 9% in January. The number headlines indicated that perhaps the worst is over and that America is hiring again.

According to U.S. government calculations, the unemployment rate had a huge drop down to 9% in January. The headline number indicated that maybe the worst is over and that America is hiring again. A look at a couple of numbers inside the report took the air out of the report pretty quickly and raised the question of how much smoke and how many mirrors the government is using to cover up a dismal job landscape.

The number that jumped off the page first was that the U.S. economy only added 36,000 jobs in January.  Expectations had been for an increase of about 145,000 jobs. Had the new jobs number been reached is it reasonable to expect that the unemployment rate would have dropped to 7%? Ummm, no.

So what gives? Well, here’s where the magic happens. The unemployment number plummeted not because of the paltry 36,000 new jobs, but because over 500,000 people disappeared from the labor force. They were actually categorized as no longer looking for work but let’s not split hairs here. Hey maybe they all became independently wealthy and we’ll start to see the benefits of the “trickle down” theory.

It’s understandable that the government is trying to inspire some confidence after several grueling years for the job market but there’s not even a thin line between inspiring and blowing smoke.

If you’re still not convinced, here are a few more stats showing that what’s real and what we hear from the government are two separate things when the topic is unemployment.

• The US needs about 150,000 jobs added per month to stay even with population growth.
• Polling from Gallup indicates that the unemployment rate actually rose to 9.8% in January.
• Gallup also had "underemployment" (those that are unemployed plus those that are working part-time but want full-time employment) at 18.9% in January
• Zero Hedge has the number of Americans that are not in the labor force (504,000 were added to this list in January) but that would like a job right now at an all time high. Counting these people would put the unofficial unemployment rate at 12.8%.
• The U.S. Labor Department recently announced that job growth during 2010 was much weaker than previously announced and made a downward revision of 215,000 jobs for the year. (and the unemployment rate keeps going down)

Whether the US Government is trying to inspire confidence or just trying to keep the masses from protesting in the street, the real unemployment picture is worse than advertised and is affecting million of Americans. A dose of reality combined with honest dialog on how to get Americans back to work would be a good start.

Article Tags: Unemployment Rate

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