A Deeper Look into Friday's Unemployment Numbers

The headlines hit the feeds, WOW! May nonfarm payrolls -345,000, while minimizing a 9.4% national unemployment rate.

Others, not really interested in lagging indicators of a possible recession bottom, questioned Huh?

I mean, really, talk about cheerleading!   A reduction in the collosal monthly rate of job losses over the last year or so is interpreted here as a slow-down in the recession?  How so?  A slow-down in job losses, perhaps, and probably a monthly blip, but an improving recession?    How is that connection established?   I'd say there's about as much substance to that statement as Bush's remark that "We don't torture".

In Jobless rate slows, unemployment up and traders are happy:

There are so many people that have run out their unemployment benefits and have either:

  • Just stopped looking and aren't working
  • They had to take part time work

In these economic times of a prolonged recession, oops better get my words in order her, call it an economic down turn.   Did the powers to be ever really say the R word.   Did we hit enough quarters for them?

Econbrowser (one of the best blogs out there for economics!) says it all with a couple of graphs:

U3 and U6 Unemployment during the Great Depression

A frequent meme propounded in the economic blogosphere is that U6 unemployment, running near 17% now, is a truer measure (and there are good reasons to believe it is), so that means we have unemployment already approaching Great Depression levels of 25%. Left out of the comparison is the fact that U3 and U6 measurements didn't exist during the 1930s. So, is the 25% unemployment peak for the Great Depression a fair comparison to U6 unemployment today?

N. Andrews compared historical versions of unemployment statistics with the modern U3 and U6 versions, published as "Historical Unemployment in Relationship to Today" , has an answer. He writes: