Big Red Car here. Still smarting from the weak jobs report on Friday. Seems like we cannot even tell ourselves the truth particularly when it is unpleasant and not what we want to hear.
Some “cut the crap” straight talk from the Big Red Car.
A Big Miss
In the prediction of new jobs business this report was a huge “miss” — everyone got faked out. Like an enormous head fake that had us all off our feet trying to block that shot. Haha, Final Four Fever at work on even the Big Red Car? Yes.
The predictions were for about 192,000 new jobs in March. You will recall this blog post<<<link I — the Big Red Car — made. Right?
The reality of the situation is that on Friday morning the Bureau of Labor Statistics announced that only 88,000 jobs had been created in March. Wow, Big Red Car, that is a big damn miss, isn’t it? Yes, my beloved and faithful readers, that is a huge damn miss.
Unemployment, the silver lining? Right?
Of course the BLS also said that unemployment — U-3, the nose candy of the truly uninitiated and clueless — went down from 7.7% to 7.6%.
Oh boy, let’s get out the sparklers and fireworks, right? The economy is recovering, right? Great times are right around the corner, right?
Well, not so fast, says the Big Red Car.
To achieve that improvement, it was necessary to disappear approximately 500,000 potential workers from the Labor Force. To look at it graphically:
As you can clearly see, the Labor Force Participation Rate has declined to values not seen since the late 1970s — over a third of a century ago. This is not a good thing.
Let’s explore what this really means in practical terms. We will work a little problem to show the impact of eliminating workers from the Labor Force and what it does to the phoney unemployment statistics.
Assume the following:
Total labor force in the US: 100 workers
Number with jobs: 90
Number unemployed: 10
Resulting unemployment rate: 10% (10/100 = 10%)
Now we assume that 5 workers have left the labor force — just like the 500,000 assumed to have left the Labor Force in March.
Now the numbers look like this:
Total labor force in the US: 95 workers (100 – 5 = 95) <<< 5 folks have given up looking and are now miraculously disappeared from the Labor Force
Number with jobs: 90 <<< no change here, right?
Number unemployed: 5 (10 – 5 = 5) <<< all of those 5 folks who dropped out of the Labor Forcer were, uhhh, unemployed, right?
Resulting unemployment rate: 5.263% (5/95 = 5.263%) <<< Wow, Big Red Car, the unemployment rate went down even though there are no more jobs. Wow!
Now due to the wonder of numbers — well, more correctly the MANIPULATION of numbers — the unemployment rate seems to have gone down simply by announcing — “uuuhhh, there are five people who have given up looking for a job, right?” No, Big Red Car, that is not right and you know it.
So, beloved reader, the exclusion of folks from the Labor Force seems to make the unemployment numbers improve even though we have no new jobs, right? Wrong!
You cannot give the unemployed folks 99 weeks of benefits and then start throwing them overboard if they are not actively looking for a job. The numbers and life do not work that way. Grow up, America and stop fooling yourself. Cut the crap!