The unemployment data was still bad

The BLS report (http://www.bls.gov/news.release/empsit.nr0.htm) came out today with a surprising .1% drop in the unemployment rate to 9.4% (U-6 is at 16.3%), which many here and elsewhere are proclaiming is a turnaround in the employment situation. While this may be the case, other data in that same report leave me doubting that we are going to see any meaningful improvement in the employment situation for some time.

The first piece of bad news from today's report is that the labor force participation rate declined by .2% to 65.5%. This number is showing us that people are dropping out of the job market entirely (these people are not picked up by U-6), thus the improvement we saw in U-6 of .2% is likely made up for by people that have given up to the extent that they no longer want employment at all. This is bad for economic confidence and will again be a drag on the employment situation, as many of these new dropouts of the labor force will attempt to re-enter it once times look better.

The second piece of bad news from the BLS report today was that the employment-population ratio fell by another .1% in July. This number measures the number of employed people vs. the number of all working age people and thus measures employment without any categorical statistical bias (ie U-3, U-6). According to wiki (http://en.wikipedia.org/wiki/Employment-to-population_ratio) 70%+ is good, 50% is bad and with the US at 71.5% in 2005, we have fallen 12% since then. Not very good.

Finally, the number of long-term unemployed (27+ weeks) rose 584,000 in July to over 5 million. That is a 13% jump in one month and is very concerning for future economic health, as these people are going to start rolling off the unemployment benefit rolls soon and will have to further cut spending if they cannot find employment soon.

So overall, the report today was better than expected, but still not very good when one examines all the data provided.

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Comments

truly

I get the feeling people are so desperate for a "return to normalcy", some sort of emotional need for all of this nasty to simply disappear, that need is distorting what's the statistics really are saying.

manfrommiddletown just put up a post on this...

So everyone, how about a "picture is worth a 1000 words".

Considering adding some graphs, statistics, charts, and format your posts please. (see the user guide for help on formatting posts).

Graphs, comparison to past recessions, comparison to the Great Depression...

precisely when does the unemployment rate really put the tip in GDP to get a double dip?

These are questions running around in my own brain, so I suspect other EP readers are wondering about the same thing.

and here's another question: ok, this is all bad. Myself, I must have put up 100 posts at this point trying to push for massive incentives to revitalize U.S. manufacturing, start up investments, infrastructure, innovation....

i.e. kick some fire under the production economy because frankly I just don't believe more retail sales clerks, Wal-mart workers or making more profits off of sick people (currently 1/6th of the economy) is going to kick in real GDP.

We need a jobs program and one that isn't "busy work" but one that will actual spawn real industries. In addition, one that will not spawn more bubbles.

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participation rate, other economists survey

This is a good overview post, over at Economix on what other economists view today's report to mean.

I note this comment (which is repeated)

the fall was attributable to a fall in the participation rate from 65.7% to 65.5%, which resulted in the labor force falling by 422k (the household measure of jobs fell by 155K). If the participation rate had stayed unchanged from June, the unemployment rate would have hit a new cycle high of 9.7% instead.

Which affirms manfrommiddletown's observations.

The post is a nice selection of commentary since we know the MSM loves to spin the headlines.

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Green Shoots Dependent on Despair

It's really amazing that it requires the participation in the labor force to drop to see a lowing in the unemployment rate.

It actually requires hundreds of thousands of people to get swept under the rug and discounted.

We are now in a situation where a "drop" in unemployment was actually driven by despair, and the news media is having an absolute green-shoot-gasm over it.

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wow I stopped the bleeding from my paper cut!

Now what about the sixteen major bullet holes in my body leaking more blood? Now I hate to be the guy taking a lawn mower to these green shoots, but 9.4 or 9.5, it's still crap. I will say this, there was talk in the report of wages rising. That remains to be seen in upcoming reports on wages, labor unit costs, etc. Still, the economy could be "improving", but I say improving like I say we stopped a patient in an emergency room from bleeding to death, they're still in the e-room.

This is why I can't understand the big deal over cash for clunkers? The stupidest thing I've seen. Please spare me the arguments for it like the recycling bit or "hey they can open up idle plants now!" I've heard just about all of them, and I still think the scheme stinks. You cannot run an auto industry on taxpayer subsidy. Auto sales were rising, you didn't need this. But I'm wondering if these sales are merely a reflection of the scrappage rate, replacements and such. Yet even here, there is no guarantee of sales increase in the next quarter. If it takes a clunker deal to actually make the sale, now, then the automakers are still in trouble.

How do you get companies to re-employ? I was watching CNBC and MSNBC, and some talking heads (note, not one news channel had a business executive head on today, just the pundits). There was talk about how in California there was a firm in the solar industry. Indeed, CNBC at times today were more bearish than this site! They highlighted how only just yesterday and the week before they cited how "growth" in companies were coming from cost management (i.e. layoffs and firings). There was no prospect of top line growth for many companies.

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death by a thousand cuts

I agree with you and probably what is worse, before this financial meltdown/recession even happened, I think the focus was more on the structural problems and the shrinking middle class than now.

I also agree Cash for Clunkers is insane...we are giving taxpayer dollars to foreign corporations so Americans can take on more car payments...what?

(Not that GM, Ford, Chrysler are truly American cars either)...

Yet all of the news are these two topics and it's like the pretty bad numbers before all of this now are "good"..

I hate to say this but if we have + GDP in Q3, we've got a major problem going on that will stop all of the major restructuring, from regulation to trade to labor that a lot of people thought they were voting for and want.

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