No Recovery in Jobs

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The Jobs Report was out this morning and it contained little evidence that an economic recovery was taking place with a loss of 216,000 jobs in August. The headline unemployment rate jumped to 9.7% (a 26-year high), while the alternate figure which includes discouraged and involuntary part-time workers rose to 16.8% (the highest since this number has been published). This was the 20th month in a row that there has been a loss of jobs. U.S. employment in the private sector is now lower than it was in 1999.

Revisions in June and July's numbers indicate an extra 49,000 jobs were lost in those months. It is quite likely downward revisions will take place for the August number as well, which is based on a survey of businesses. The separate household survey (which is much more accurate because it is a large random sample) indicated that 392,000 jobs were lost in August and unemployment rose by 466,000. The only industry group in the private sector to add jobs in August was health care. It has consistently added jobs during the entire Credit Crisis.

Weekly claims to collect unemployment insurance came in at 570,000 this week. This is still well above the 400,000 level that indicates a recessionary economy. A true economic recovery would lower this number well below 400,000 and keep it there. Many American workers are not eligible for unemployment, so when they become unemployed they don't show up in the weekly claims or total numbers receiving jobless benefits. That number has reached 6.23 million and while rising lately has had some dips because a number of unemployed have exhausted their benefits and are no longer included.

As bleak as these figures are, the mainstream media managed to put a positive spin on them because the total job losses came in slightly better than expectations (the unemployment rate was worse though). News articles for some time have indicated that a 'jobless recovery' would be taking place. A jobless recovery is an oxymoron and there is no such thing. This only first appeared after the early 1990s recession was supposedly over. It appeared again in the early 2000s. Why at these times and not before? The government started making major statistical 'improvements' to the GDP numbers and related figures in the 1980s and followed up with more in the 1990s. After this was done, it was possible for the economic statistics to have a recovery despite what was happening in the real world. Only when employment starts increasing and job gains become consistent will the recession actually be over.

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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.