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Friday, January 10, 2014
Those December '13 Numbers
The Bureau of Labor Statistics released its reckoning on the December 2013 employment numbers.
The positive spin concerns the decline of the U3 unemployment rate to 6.7%, a five year low. It is the lowest calculated U3 rate since the start of the recession in late 2008. In October 2008, the U3 rate was 6.5%. The rate should come with a footnote explaining the change in definitions used in the calculations that took place during Obama's first term.
It does appear as good news. However, don't let yourself be myopic. Step back and examine why that number dropped.
The largest contributor to that drop in the U3 unemployment rate is obvious. The total number of people willing to work, looking for work, working, or wanting to be part of the available workforce declined substantially. A drop of a tenth of a percent (0.1%) is a huge change to the labor force. December numbers report a drop twice that amount at 0.2%. The participation rate is now at 62.8%, demonstrating a drop of just over 0.8% over 2013. It means over 493,000 more people gave up in December. It means almost 2 million people gave up in 2013 alone.
BLS reports that the total number of underemployed due to economic reasons remains the same about the same. What the figures do not calculate is the number of people employed full-time at jobs they are over-qualified to fill. For example, a person with a Masters in Psychology - Early Childhood Development working as a diaper-changer at a daycare facility for a $10.00 per hour wage. The circumstances concerning such forms of underemployment are not calculated or reported by the BLS.
The current U6 based upon the current BLS definitions is 11.7%. That is down 0.3% from November, again due to the decline in the labor force.
Some wish to spin the low U3 rate as now at its lowest level since October 2008. For that reason, we'll use the November 2008 data for comparisons. The U3 in Nov. 2008 was 6.8%, slightly above the current reported U3.
If the participation rate were the same, 65.8% instead of the current 62.8%, then the current U3 would be closer to 11.1%. The U6 would be closer to 15.9%. That 3.1% drop in people willing to work, look for work, or currently working is huge. It makes the 6.8% unemployment of Nov 2008 look prosperous when compared to the anemic 6.7% U3 rate of today.
It means things are far from getting better.