Believe None Of What You Hear, Half What You See
James Bibbings, June 12th, 2009
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James Bibbings - Commodity News Center
June 11, 2009 -Some good news hit the wire this morning; Jobless Claims Drop to 601,000; Retail Sales Rise says the Associated Press. Really? Not so fast.
Unemployment - Click Here for Full Government Report
Reading through the press release we find that the Labor Department announced initial unemployment claims fell by 24,000 to a seasonally adjusted level of 601,000. Reading closer you will see that people claiming benefits for more than a week rose 59,000 to more than 6.8 million, the highest level EVER since records have been kept. Does that not make it increasingly apparent, that although initial unemployment may have lessened, ongoing unemployment is actually getting worse?
Continuing through the press release we also find that the Labor Department adjusted its unemployment figures from last week. If you recall, at that time they said that continuing unemployment claims had fallen by 15,000. This decline ended an unprecedented 18 week run of increasing claims, sparked more discussion of an economic recovery, and helped the market to rally. However, today we found out that rally was for not as the Department of Labor has admitted those numbers were inaccurate. Today they recanted their figures and represented that last week claims actually increased by 6,000. What that means is that last week ongoing unemployment actually increased for the 19th straight week, certainly nothing to cheer about. It makes you wonder what they will have to say next week about this week's figures doesn't it.
If you have been reading my writing for any period of time you know that I do not believe the official unemployment number (known as U3) is accurate. There are several reasons I feel this way, but one of the major reasons is that it does not consider people who leave unemployment for underemployment. Accepting underemployment is one very real factor that can make initial unemployment claims drop, especially if ongoing unemployment claims are going higher. I'll digress on this point for today, but to make a long discussion short winded, following what is called U6 unemployment is decidedly more accurate than following U3 unemployment. From the Bureau of Labor Statistics ("BLS"), U6 is currently sitting at 16.4% and is defined by them as including:
"Marginally attached workers or persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule."
In layman's terms U3 does not include workers who have given up looking for work but still want a job, workers who have given up looking for a job all together because they feel they can't find one or were kicked off unemployment, or workers who have taken a lesser job that they normally would not hold because they cannot find suitable employment; U6 includes these people. All in all, U6 suggests a very different employment picture than U3 and today's headlines should be looked at with extreme caution. Especially since the Department of Labor has a history of "fudging numbers" and has represented that ongoing unemployment has continued to increase.
Lastly, let us not forget that a person cannot collect unemployment insurance forever. At some point in time a person's unemployment benefits eventually run out. That time frame varies from state to state, but most will only pay for 26 weeks. After that time, if unemployment runs out, under U3 a person is no longer considered unemployed. Does that make any sense?
