U.S. Unemployment Rate Rises to 13.9%

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The Jobs Report for January was out this morning and even the official figures are grim. While the headline number stated an unemployment rate of 7.6%, the report itself had another unemployment rate of 13.9% buried within in. The 13.9% rate includes discouraged workers, those who have given up looking for work, and those who are working part time (even an hour a month), but want to work full time. Keep in mind these are the government's own figures. You can certainly substantially increase the top line 7.6% if you want something more realistic. The BLS (Bureau of Labor Statistics) itself will be doing so in the future as is.

Upward revisions have been the name of the game for job losses and the unemployment rate for many months now. The first figure which gets all the press coverage isn't as bad as the revision that takes place a month later and that in turn isn't as bad as the revision a month after that. As an illustration, October 2008 job losses were first reported as only 240,000, then a month later as 320,000, and then finally as 423,000. November started out as 533,000, then became 584,000 and is now 597,000. December was initially reported as 524,000 and is now 577,000. Expect it to be higher next month. There is almost 100% probability that the 598,000 lost jobs for January will be a bigger number in February and March. It is already the biggest loss since the 602,000 decline in December 1974 (the peak number for the worst recession since the 1930s).

The monthly revisions aren't the only ones conducted by the BLS either. There is also an annual benchmark revision done at the end of the year. This year's revision found that there were 311,000 less employed people than previously reported. This downward revision means that there were 3 million jobs lost last year, instead of the 2.6 million reported last month. This number exceeds the 1945 figure of 2.8 million jobs lost, which happened because of the closing down of defense manufacturing and decommissioning of millions of soldiers. There is no bigger number since that date until 2008. Any greater number would have take place during the Great Depression.

The bad news in today's Jobs Report were presaged by yesterday's Weekly Jobless Claims, which came in at a deep recession level of 626,000 (the highest since October 1982). The figures in this report indicated 4.8 million people were receiving unemployment benefits, even though the actual figure is 6.5 million. The 1.7 million receiving extended benefits are not included in the first number. It should also be kept in mind that a majority of the American labor force does not qualify for unemployment benefits and thus will never show up in these figures. As bad as the U.S. employment situation appears to be, assume it is much worse than the official figures indicate.

NEXT: Short term, the Market is Looking Better

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.