According to the Labor Department, the U.S. added 163,000 jobs
in July. Also according to the Labor Department, the U.S. lost
195,000 jobs in July. So the U.S. economy is either doing OK or
it's falling apart big time. Or maybe something between the two is
happening. Confused? You should be.
Two separate surveys are used for the employment report. In one,
they ask businesses about the amount of hiring they've done in the
previous month and in the other the ask people whether or not they
have a job. The amount of jobs created for the month is determined
by the business survey and the unemployment rate from the survey of
households. As more than one article on the July employment report
pointed out today, "economists say the business survey is more
reliable". So if you think you're unemployed, but an economist says
you have a job, the economist is right.
The unemployment rate ticked up to 8.3% according to the
household data. The two surveys have frequently not seemed to match
in the past with minimal job gains resulting in drops in the
unemployment rate. The Labor Department explained that this
occurred because millions of people have left the U.S. labor force
since the "recovery" began in 2009 (150,000 more left in July).
Even though these people are unemployed, they are not counted as
unemployed and this makes the unemployment rate look better. Why
millions of people would stop looking for work during a "recovery"
has never been answered. Usually, this type of behavior takes place
during depressions.
The Labor Department did not discuss the massive discrepancy
between its two employment surveys in its press release. Instead it
gave a rosy assessment of all the jobs created last month. This
included 25,000 new jobs in manufacturing, even though the recent
ISM Manufacturing report (a private survey) indicated U.S.
manufacturing activity shrank last month. So an industry that is
losing business is hiring lots of new workers. That certainly makes
a lot of sense all right.
One possible explanation for the discrepancy was that
"inappropriate" statistical adjustments were made to the numbers in
the business survey. While one should never rule out gross
incompetence when discussing the output of the government
statistical offices, a more cynical person might think that there
was a purposeful effort to produce better numbers than actually
exist because it's an election year. After all, those pesky
downward revisions months later never get any notice from the press
and the ugly truth can always be told later when no one is paying
attention (and after they've voted).
Daryl Montgomery is Author: "Inflation Investing - A Guide for
the 2010s" and Organizer, New York Investing meetup.
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