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Unemployment: What’s Next?

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    August 20, 2012

    Unemployment was up in 44 States, down in two states, down in D.C, and unchanged in four others. There has been no improvement nationally this year.

    Bloomberg reports U.S. Joblessness Rise Broad-Based as 44 States Show Gain
     The jobless rate climbed in 44 U.S. states in July, showing last month’s increase in unemployment was broad based.

    Alabama and Alaska registered the worst performance, with joblessness advancing by 0.5 percentage point in each, figures from the Labor Department showed today in Washington. Payrolls grew in 31 states last month, led by California and Michigan.

    Unemployment jumped to 8.3 percent in Alabama from 7.8 percent in June, and climbed to 7.7 percent in Alaska from 7.2 percent, today’s report showed. Nevada, where the rate rose to 12 percent from 11.6 percent, remained the state with the highest level of joblessness in the country.

    Rhode Island, at 10.8 percent, was second, followed by California at 10.7 percent.

    North Dakota had the lowest unemployment rate in the nation, even as it rose to 3 percent from 2.9 percent the prior month.

    Two states, Idaho and Rhode Island, showed a drop in their unemployment rates. Joblessness was unchanged in four states.

    Unemployment in New York rose to 9.1 percent, the highest since 1983, and payrolls dropped by 3,700 workers.

    The jobless rate has exceeded 8 percent for 42 consecutive months, the longest stretch in the post-World War II era.

    New Jersey Unemployment at 35-Year High

    The New York statistics above tie in nicely with what I said early this morning in New Jersey Unemployment Hits 35-Year High of 9.8%.

    National Unemployment Rate

    Note that three years into an alleged recovery, the unemployment is still higher than the peaks in 8 of the last 10 recessions.

    National Unemployment Rate Detail

    There has been no improvement in the unemployment rate in 2012.

    Headline Jobs Number vs. Household Survey

    Please remember the reported headline jobs number has no bearing on the unemployment rate. Rather the unemployment rate is determined by a phone survey. That’s why its important to dig into the reported monthly jobs numbers.

    This is what I had to say on August 3, in Headline Jobs +163,000, But Household Survey Shows -195,000 Jobs; Unemployment +.1 to 8.3%

     Quick Notes About the Unemployment Rate 
    • US Unemployment Rate +.1 to 8.3%
    • In the last year, the civilian population rose by 3,683,000. Yet the labor force only rose by 1,655,000.
    • This month the Civilian Labor Force fell by 150,000.
    • This month, those “not” in the labor force increased by 348,000 to 88,340,000, another record high. If you are not in the labor force, you are not counted as unemployed.
    • In the last year, those “not” in the labor force rose by 2,027,000.
    • Over the course of the last year, the number of people employed rose by 2,770,000.
    • Participation Rate was steady at 63.8%.
    • There are 8,246,000 workers who are working part-time but want full-time work, an increase of 36,000
    • Long-Term unemployment (27 weeks and over) was 5.185 million a decline of 185,000.
    • Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

    Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness.

    The key point above is those “not” in the labor force rose by over 2 million.

    Reasons for Artificially Low Unemployment Rate

    Not only is the unemployment rate artificially low, but it is no longer falling. And since it has stalled, we had three anemic retail sales reports followed by a reported rise last month.

    I think that latest retail sales report will be revised away, and I also believe the US is back in recession. If so, expect the unemployment rate to head back up and retail sales to weaken further. [rate]

    Mike “Mish” Shedlock
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    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.