8.6% Unemployment

http://www.nytimes.com/2011/12/03/business/economy/us-adds-120000-jobs-unemployment-drops-to-8-6.html?nl=todaysheadlines&emc=tha2

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"It is very dangerous to go into eternity with possibilities which one has oneself prevented from becoming realities. A possibility is a hint from God. One must follow it." (Soren Kierkegaard)

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I want to contain my enthusiasm about the .4% drop in the new unemployment report. It's nice that it went down (from 9%) and not up but that's about it. Show me some big time capital spending from the Top 500 here in the U.S. on projects "in" the U.S., and maybe I'll start to get excited.

The short answer to why the rate dropped is that 300,000 plus people stopped looking for a job. That's not a real good reason for excitement about why an unemployment rate drops.

Then there's the upbeat 120,000 jobs were created (last month) data. All that does is barely keep up with monthly new entrants into the workforce (usually 125,000 to 135,000).

Usually, these data are revised at least twice after they are initially reported so the good news could, indeed, be revised right out, but we'll see.

I'm thinking as I post this about, "Do these economists really have any idea what they're evaluating?" Back a few years ago, I was struck by an interview with Dr. James K. Galbraith (yes, he is the son of a very famous father), a very prominent member of the faculty at the Lyndon B. Johnson School (University of Texas), who said that, of the 15,000 or so professional economists in the U.S., maybe 10 or 12 predicted the worldwide financial crisis (I can think of only one: Nouriel Roubini).

The Bureau of Labor Statistics "U-6" unemployment rate is a much broader category and covers people who have given up looking for a job, are working part-time but want full-time employment, etc. The U-6 dropped .6% last month. That is much more significant and, if it doesn't get "revised" out of existence this month, could mean something. It has been 16.5%. It's now 15.6%.

The reason for that new number (15.6%) is the "big drop" last month in the "number of people working part-time and would prefer full-time work" category. That's an awkward name for a category but it's got an important reason for its drop: that new lower number could reflect people having their hours increased or part-time workers moving on to full-time work.

If this trend continues in the U-6 unemployment rate, it's significant.

Floyd Norris pointed out in the NY Times this week, "As it is, there are many who reacted to the job numbers as Michael Darda of MKM Partners did this morning (12/2):

'While the economic data have been better of late, we remain concerned that we are seeing a bounce back from a series of supply shocks earlier in the year that may not be sustained against the foliage [is that an economic term?] of tighter financial conditions, a deep recession in Europe and a sharp slowdown in China and emerging market countries [too many "ands"]."

If I'm reading the "foliage" right, something good could be happening.