It’s the unemployment rate, stupid

This morning the Department of Labor announced that the U.S. economy lost 20,000 jobs in January.  Note the round figure; this is always a sure sign of an estimated number.  No big shakes there as the DoL’s jobless rate figure is always an estimate that gets revised multiple times before the figure is “official.”  Which brings me to December’s revised figure of 150,000 jobs lost vs. an initially reported number of 85,000 jobs lost.  So basically, the initial unemployment figure was off by an amount equal to the population of my hometown of Santa Fe.  Crazy!  But crazier still is the fact that the economy lost 20,000 jobs in January but the unemployment rate improved by going down to 9.7% from 10.0%!  Huh?  How is that friggin’ possible?  The decline is possible because the unemployment rate only counts people who are actually looking for a job.  So if you have given up finding a job then you are not counted as unemployed.

Analysis: Folks, I have to tell you, this is NOT a good sign.  One, the economy continues to lose jobs.  Two, this means that it is not really adding jobs.  So, three, job seekers are getting frustrated and stopping looking.  This means that there is a building “inventory” of prospectively employed folks.  When the economy definitely improves and businesses begin hiring again they are going to have to ultimately absorb enormous amounts of people to make a dent in the unemployment rate.  Because what will happen is that the folks who “have given up looking” will suddenly start looking for work again.  This will mitigate against the hiring done by businesses in terms of making a dent in that unemployment rate.  So the unemployment rate is likely going to stay ugly for a long time.  Psychologically speaking, this is not a good thing.

Oh, and by the way, the DoL also announced today that its estimate of job losses for 2009 was off by a staggering 600,000.  Basically we are talking about a revision equivalent to the population of my home state of New Mexico.  Ouch!

Meanwhile CNN (Celebrity News Network) misleadingly states as its headline: “Jobless rate falls to 9.7%.”  Nice.  Nice if you like lies of omission.

Importance grade: 10; There is no single more important economic statistic in the world right now than the U.S. unemployment rate.  The U.S. consumer is the backbone of the world’s economy and financial system.  As long as they remain unemployed they remain cautious about spending.

Open comment to President Barack Obama and the U.S. Do Not (Senate) and the House of Vituperatives (Representatives): It’s the unemployment rate, stupid!

Jason

PS – Blogger got rid of its spell check function so I apologize in advance for any forthcoming spelling errors.