May 10, 2010
For years I have questioned the official unemployment numbers put out by the federal government. Naturally, I’m not the only one who had questioned that, but it doesn’t take a genius to see the discrepancy. It’s sort of like the census — if no one is at home when the census taker knocks on the door, it’s difficult to know how many people live there. And that’s the problem with knowing who and who isn’t employed. If you don’t “answer the door”, no one knows you’re unemployed.
If you’ve ever been unemployed and applied for unemployment benefits, you will know that there is one thing you must do: Show proof that you’ve been beating the streets looking for work each and every week you apply for benefits. If you have no new paperwork from a prospective employer verifying that you were there asking for a job, you don’t officially qualify for unemployment benefits.
In addition, once you run out of benefits the Bureau of Labor Statistics has no official way of knowing you are unemployed.
An article by Frank Ahrens points to this discrepancy:
Critics say this [unemployment] number (9.7 percent) is inaccurate because it doesn’t include two key categories: people who want to work full time but can only find part-time work, and those who have grown so discouraged, they’ve given up looking for work.
If you add those two categories on top of the official unemployment rate, the number you got for March was an eye-popping 16.9 percent. That’s the U-6 number. It’s down from its recent high of 17.3 percent in December. Troublingly, however, it has increased over the past two months, even as the official rate has stabilized.
Both the White House and Wall Street keep pointing to the “falling” unemployment numbers. The White House, because they want to exploit that as “victory” of the way they’re running the country. Wall Street because it’s “proof” that the recession is over, therefore investors should be investing their hard earned money and people should start spending again. But occasionally, something or someone lets the cat out of the bag.
This morning on CNBC, in one of their infamous “Trader Talk” segments, they spoke with Art Cashin; one of their ‘go-to’ guys at the New York Stock Exchange. (Cashin is the director of UBS’s operations on the NYSE floor, and is highly respected.) Although the segment was not about unemployment, Cashin brought that into the mix during the talk. His comments probably were a sting to both Wall Street and the White House. But it won’t make big headlines, so they have little to worry about.
Speaking about last week’s unemployment report, Cashin said the following:
“The non-farm payrolls made great headlines and cheered up people in Washington, but they were specious (pleasing to the eye but deceptive). 188,000 of [290,000] was a guess by the Bureau of Labor Statistics. We’ve had 450,000 initial unemployment claims for eight straight weeks. Ok? That’s 1.8 million new jobs lost over a month. You’ve got to keep your eyes on the referee — this game’s not on the up and up”.
(Cashin’s comments come right at the end of the video. Of course, as you watch and listen to the video below, you must not miss Erin Burnett’s very nervous laugh right at the end. It’s these kinds of facts she and Wall Street are not pleased to have aired.)
The key word in Cashin’s report is “initial”. These are people who are filing for unemployment for the first time. Although the number was deliberately played down, unemployment rose from 9.7 percent to 9.9 percent. Had the temporary jobs for census workers been taken out, the unemployment rate would be much higher. At the current rate of job looses, we would add nearly 22 million to the unemployment lines each year.
So for us common folks, we’d better not become starry-eyed by our favorite “spin” networks. This disaster that Wall Street heaped upon us and the rest of the world is no where near over. But as long as they can continue to pile on their wealth at taxpayer expense, the longer they will play this “now you see it, now you don’t” game.
Never underestimate the difficulty of changing false beliefs [with] facts.
Economist Henry Rosovsky