Wednesday, August 12, 2009

Jobs Lost but Unemployment Down... Huh?

In 2004, the alternative rock band Modest Mouse released their hit album, Good News for People Who Love Bad News. It's one of those album titles I'll never forget no matter how rarely I hear the band. What's that got to do with employment? Hold on, I'm getting there.

At the end of last week, the Department of Labor released a report titled The Employment Situation - July 2009. The mainstream media has largely heralded the report as good news based in part on a decline in the unemployment rate. The rate dropped from 9.5% in June to 9.4% in July. That is great news! Right?

The news wasn't all great though as it turns out employers eliminated 247,000 jobs in July. Wait a second, how do you lose jobs and have a decrease in the unemployment rate? The secret is that the unemployment rate includes a seasonal adjustment and excludes what the report calls "Discouraged Workers."

Discouraged Workers are defined as:"persons not currently looking for work because they believe no jobs are available for them." Or as I define the term: People who think their job search is so hopeless, they've given up.

On page 19, Table A-12 includes a stat it labels U-4 defined as "Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers." When not seasonally adjusted this rate actually increased from 10.1% in June to 10.2% in July.

What stats do you prefer? Should we make seasonal adjustments? Should we stop counting those who have given up hope? That's really a judgment call. The fact remains, however, that more people were unemployed in July than in June. I'm hoping for positive signs in this down economy as much as anyone but I'm afraid this may just be "Good News for People Who Love Bad News" (I told you I'd work it in!).