Those funny media outlets are at it again

Happy Friday folks,

Today was the release of January unemployment data. Not surprisingly the economy is estimated to have shed 598,000 jobs, bringing the unemployment rate up to 7.6%. This is the highest percentage unemployment rate since September of 1992. However, the media outlets that I follow are all reporting the job losses on an absolute, not a relative (%) basis. That then allows them to make true, but misleading and shocking statements such as:

“Nonfarm payrolls, which are calculated by a survey of establishments, tumbled 598,000 in January, the U.S. Labor Department said Friday, the most since December 1974…”

or…

“Job loss: Worst in 34 years”

I won’t go on because I have been through this game many times before with the media. It’s not that these unemployment numbers are shining and scintillating, but the point is that the stories are being reported in such a way as to make them seem the most extreme. I am certain that the reasoning behind the extreme tenor of the reporting is designed to capture reader interest. Presumably you will actually be compelled to read the story and then go to the page and see the ad that is there and then be strongly compelled to purchase the product being advertised there.

Because the U.S. population and the number of employed in the U.S. grows each year in the country, there is no reason to report job losses on an absolute basis. Only a relative (%)reporting makes any sense with data like this.

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So how do I feel about the job losses? Well they are scary to be sure. The losses are broad based and across many different industries. Having lived in a single-parent household and having gone through a couple of layoffs as a kid, I certainly know how frightening it can be to live through these circumstances. My heart aches for folks without work who want it. However, unemployment now is not the same as unemployment in the Great Depression. Why?

The reason is that now many businesses have extraordinary insight into the daily vagaries of their business. This takes the form of a daily profit and loss statement. Daily reports of sales orders. Daily reports of sales backorders. Daily reports on the cheapness of credit. Etc. Etc. In the Great Depression it might take 6 weeks to have accurate figures of this nature. So decision-making was always way behind reality. Not so today. Thus, businesses are able to respond and very, very quickly to economic turmoil. Layoff notices therefore come fast and furious in the modern era. The cascade of layoff notices is a strong sign that companies are paying attention and adjusting themselves rapidly to the current economic situation. They are sober. That means that the firms are sooner to extend or return to profitability. That means that their stock prices are likely to go up sooner. That means the stock market, in general, is more likely to rise. The stock markets are for most people a barometer of economic health and once they start going up then people will start spending again. When they start spending again then the economy will go up. Blah, blah, blahcetera.

I hope that each of you has a great weekend!

Jason