Real Jobless Rate's 11.4% W/ Realistic Labor Force Participation Rate + 42K courier jobs- 'quirk'

[stockholmer]

http://www.zerohedge.com/news/real-jobless-rate-114-realistic-labor-force-participation-rate

One does not need to be a rocket scientist to grasp the fudging the BLS has been doing every month for years now in order to bring the unemployment rate lower: the BLS constantly lowers the labor force participation rate as more and more people "drop out" of the labor force for one reason or another. While there is some floating speculation that this is due to early retirement, this is completely counterfactual when one also considers the overall rise in the general civilian non institutional population. In order to back out this fudge we are redoing an analysis we did first back in August 2010, which shows what the real unemployment rate would be using a realistic labor force participation rate. To get that we used the average rate since 1980, or ever since the great moderation began. As it happens, this long-term average is 65.8% (chart 1). We then apply this participation rate to the civilian noninstitutional population to get what an "implied" labor force number is, and additionally calculate the implied unemployed using this more realistic labor force. We then show the difference between the reported and implied unemployed (chart 2). Finally, we calculate the jobless rate using this new implied data. It won't surprise anyone that as of December, the real implied unemployment rate was 11.4% (final chart) - basically where it has been ever since 2009 - and at 2.9% delta to reported, represents the widest divergence to reported data since the early 1980s. And because we know this will be the next question, extending this lunacy, America will officially have no unemployed, when the Labor Force Participation rate hits 58.5%, which should be just before the presidential election.

Labor Force Participation since 1980:


Reported and Implied number of Unemployed:


Difference between Reported and implied unemployment rate:


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Related Stories:

Massive Beat? Not So Fast - Morgan Stanley Warns 42,000 "Jobs" Bogus Due To Seasonal Quirk

http://www.zerohedge.com/news/massive-beat-not-so-fast-morgan-stanley-warns-42000-jobs-due-seasonal-quirk

Enamored with the 200,000 number? Don't be - the reason why the market has basically yawned at this BLS data is that as Morgan Stanley's David Greenlaw reports, 42,000 of the 200,000 is basically a seasonal quirk, which will be given back next month, meaning the true adjusted number is 158,000, essentially right on top of the expectation. From David Greenlaw: "some of the strength in this report should be discounted because of an seasonal quirk in the courier category of payrolls (Fed-ex, UPS, etc). Jobs in this sector jumped 42,000 in December, repeating a pattern seen in 2009 and 2010 (see attached figure). We should see a payback in next month's report."



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Average Duration Of Unemployment: Second Highest Ever At 40.8 Week

http://www.zerohedge.com/news/average-duration-unemployment-second-highest-ever-408-week

The NFP report confirms the picture we have all known to grow and love - the people "entering" the labor force are temp workers, those with marginal job skills, and making the lowest wages. For everyone else: better luck elsewhere: the number of people not in the labor force has soared by 7.5 million since January 2007, and the average duration of unemployment is 40.8 weeks - essentially in line with last month's record 40.9. Bottom line - if you are out of a job, you are out of a job unless you are willing to trade down to an entry level "temp-like" position with virtually no benefits or job security.



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[eridani]

1. Imagine what it would be if you counted those unnecessarily institutionalized--

--by the prison-industrial complex as unemployed.

[nadinbrzezinski]

2. Will you stop looking at the u6?

[bhikkhu]

3. That's some pretty creative spinning there

...I assume they are taking the 3-4% variation in the labor participation rate over the last 30 years and applying it to the unemployment rate - adding or subtracting from the mean to create a higher or lower "implied" unemployment rate...which after complaining about the BLS fudging numbers is rather amusing.

So what they are saying is that Reagan understated unemployment, while Clinton and Bush reported it as worse than it really was, and now Obama is understating it again...because, well, just because you can stick a couple of different graphs together and that's how it comes out. If you can't make good news sound quite bad enough (and the repugs on the campaign trail have been loudly trying their best), apparently a barrage of confused statistics is the next best thing!

[ProgressiveEconomist]

4. Yhis estimate is WORTHLESS

IMO. The reason is stated in the OP: "we used the average (labor force participation) rate since 1980.

But this is preposterous. It ignores the huge demographic development this year:

75 million Baby Boomers were born between 1946 and 1964. Yhe oldest of them startied turning 65 in January 2011, at the rate of 8,000 to 11,000 PER DAY (see http://pewresearch.org/pubs/1834/baby-boomers-old-age-downbeat-pessimism ).

Since unemployment rates even for ages 62 to 65 are far below 50 percent, most retirees leave the labor force from EMPLOYMENT, not from unemployment. So trying to cerrrect unemployment rates for allegedly wrong lavor force participation rates is stupid.

There is nothing wrong with BLS estimates of labor force participation. Yhe BLS has used the same methodology for generations. Their labor force estimates reflect long-anticipated very real demographic changes which began in the last several years.

[DCBob]

5. There is too much emphasis being put on recent changes in the labor participation rate..

Here's a better graph showing longer term trends...



Note that the labor participation rate (blue line) historically has been much lower and has been increasing since the 60's presumably due to more women working and to the baby boomer effect and that effect seems to have peaked around year 2000. The economy has had some effect on this but for the most part its just changes in demographics that would have happened regardless... imo.