I’m predicting that, by Election Day, 2012, the unemployment rate will be in the mid-7′s but that thoughtful people will look at that as a negative. Yes, there’s a hint of sarcasm with that statement but it’s based on the fact that part of Friday’s job report isn’t getting the attention it should. Rick Santelli’s got it right with this report:
Here’s CNBC’s transcript of the video:
CNBC’s Rick Santelli: You know what I said at 8:30 Eastern? We want a million jobs an hour. That’s what we want. What we got looked like a good report. I said, ‘Let’s get the calculator out,’ and I did. And so did a boatload of my sources and big blogs that many people read like Zero Hedge. The labor force participation rate, if you look at non-seasonally adjusted, a fresh low going back to April of ’83. If you look at seasonally adjusted, a fresh low participation rate going back to December of ’81. What does that mean in English? Shrinkage. Shrinkage. 1.2 million people are now not considered unemployed anymore. They just have left the system. So, we need to concentrate on the internals, and eventually we want to watch the fixed income market to see if some of this sets in as people do their ciphering.
Listen, if I talk about a stock that had a great report, but I don’t point out the fact that there was a one-time tax credit that did it, am I doing my viewers a service or a disservice? Listen, when you look at the body counts on the establishment survey, we created jobs. That’s a good thing. There’s my perk. But I’m sorry, if you look at the other side, you look at the household survey, yes, we had this big seasonal adjustment. You can go to the BLS, you can see their economic release, you can see their situation summary. And we can see that ‘not in labor force’ moved from about 86.6 million to 87.8. There’s your 1.2 million. And we do see the asterisk, there’s been an adjustment on population. That’s the way it goes. We make an adjustment. The last 12 months needed to be adjusted. It is what it is.
Creating 243,000 jobs is a positive thing that can’t be spun as anything but positive. For those families, it’s a good day. Here’s hoping they can pay off their debts and start setting their financial house in order. Here’s hoping that they start laying the foundation for a prosperous life.
Another thing that can’t be spun, albeit this time as a negative, is the fact that 1,200,000 people quit looking for work. That’s anything but a positive. For those 1,200,000 people, they’re still facing terrible times. Their mortgages are still under water and they’re facing foreclosure. Their debts are still stacking up. They’re having difficulty making ends meet.
They’re no way to spin that as positive. Still, that’s precisely what this administration is attempting to do:
The unemployment rate fell 0.2 percentage point to 8.3%, from a high of 10% in October 2009. The drop in unemployment over the month was entirely due to employment growth, as the labor force participation rate remained constant, once new population weights are taken into account. The unemployment rate has fallen by 0.8 percentage point in the last 12 months. Private sector payrolls increased by 257,000 jobs and overall payroll employment rose by 243,000 jobs in January. Despite adverse shocks that have created headwinds for economic growth, the economy has added private sector jobs for 23 straight months, for a total of 3.7 million payroll jobs over that period. In the last 12 months, 2.2 million private sector jobs were added on net. Nonetheless, we need faster growth to put more Americans back to work.
Before I get to the statistics, can’t the White House find someone capable of putting out their message without using that big of paragraphs? They should start a new paragraph with “Despite adverse shocks…”
As for the “unemployment rate [falling] by 0.8 percentage point in the last 12 months”, much of that has to do with the fact that people know that there aren’t jobs out there for them. As a result, they’ve quit looking for work. This is the key part of Santelli’s analysis:
The labor force participation rate, if you look at non-seasonally adjusted, a fresh low going back to April of ’83. If you look at seasonally adjusted, a fresh low participation rate going back to December of ’81. What does that mean in English? Shrinkage. Shrinkage. 1.2 million people are now not considered unemployed anymore. They just have left the system.
I haven’t done the math but I’m betting that the unemployment rate would be north of 10% if they measured the rate by using the January, 2009 labor participation rate. In fact, it might be substantially more than 10%.
If you factor in the people who’ve quit looking for work, it’s quite possible that the unemployment rate hasn’t moved noticeably since the stimulus was passed. With that type of ‘performance’, what’s the logic behind staying the course with this administration?
This administration’s policies have been disastrous. They keep touting how many private sector jobs have been created since the recovery started. What’s interesting is that that number is consistently more than the total number of jobs created.
That’s because we’re running trillion dollar deficits. Those deficits are a direct result of the real unemployment, the one that’s driven by the 2009 participation rate, not today’s participation rate.
Until the participation rate starts improving and job growth starts increasing, the U.S. economy will be stuck in neutral. That’s hardly anything to smile about.