Do you believe the...

inlet13

Go Beavers wrote:

inlet13 wrote:

...and I reply "1+1 does not equal 3". Since time has passed, I'll play along...

Read this link below... even though I don't buy the BLS is doing this on purpose (which the author hints at)... if you read past that and look at the data, this does explain why labor force participation matters:

http://www.zerohedge.com/news/real-jobl ... ation-rate


What I said last month is repeated again in the most recent report..., the labor force participation rate, once again, dropped in this most recent jobs report . This fact (which you didn't quite understand last go around) matters a lot, which was my original point in this thread. The reason it matters is (if things really are getting better, which we all hope they are), more people will want jobs, including many who dropped out of the labor force, they will enter in again and the labor force will grow. Since the unemployment rate is an equation dependent on the labor force (or is a function of it), this increase in the labor force would constrain any decline in the unemployment rate, even if job growth continued at 200K a month. Therefore, large scale changes in unemployment aren't quite "sturdy" or "believable" right now. Even left leaning economists would agree with me on this if they read my argument in context.

Anyway, according to that article (above), our jobless rate is at 11.4% with a realistic (to history) labor force participation rate. That's not good.

All that said, 200K job gains is good or is certainly moving in the right direction. If we got 200K or more a month and kept the labor force participation rate stable or falling, I think we could maintain the 8.5% rate or continue to improve it until the election, which would be favorable to the President. But, my point is that f the economy is really improving and jobs really are being created (and it's not just the falling labor force), ... the unemployment rate will eventually take a hit because as the economy improves more will enter the labor force, and that will weigh against the unemployment rate. Because of this, I think unemployment will be a bit above 8.5%, maybe even closer to 9% by the election. In all honesty, if things blow up in Europe, it could go even higher. I know you don't agree with me, and that's fine. But, I'm not the only one who thinks this...

This guy from the Financial Times basically agrees...

http://www.ft.com/intl/cms/s/0/c917ac0a ... z1itiQpe2L

(google "jobs figures may not rescue Obama" if the link doesn't work)

In the most recent report, it says the labor force participation rate is unchanged:

http://www.bls.gov/news.release/empsit.nr0.htm

I do understand that the participation rate matters, my stance earlier in the thread was that it's decline has been mostly due to natural progression. That's probably why the rate stayed the same this month, as some more re-entered than usually do, and some dropped out due to retirement.

You were predicting that the unemployment rate would jump back up. What if it doesn't and it continues to drop .1% each month? When does what the bls report become valid and reflect a better employment situation? May, August, November? Is it more valid to you if it shows a worsening picture? How do you account for other positive economic reports, such as increased consumer spending?

Here's how it's done, ladies and gentlemen...

I admit that I misread the report, and claimed "incorrectly" that the labor force participation rate fell. I looked at the data vertical and not horizontal,... but, I digress...

I think we just fundamentally disagree about what's causing the change in labor force participation. My real point though is that even liberal economists, including my old boss, believe the labor force will increase substantially once things really turn. That will raise the labor force participation rate and constrain any decline in unemployment.. and (even liberal economists) think this would increase unemployment holding all esle equal. So, that doesn't mean unemployment rate won't go down, it means we'd need a hell of a lot of job growth, like more than 200k a month. Although I know boomers are retiring, I just don't buy they are the cause of the decline in labor force participation over the last few months.

To get to your last paragraph, if the unemployment rate continues to drop .1% each month, that would certainly seem good, and most likely would be good. I'd say the report become "more" valid (never said it was nonsense, just don't think it's as believe-able right at this moment) once the labor force (participation rate) responds and increases to near normal historical levels. For arguments sake, let's say when labor force participation increases (trend-wise) for three-months straight, and moves towards the mean.

The unemployment rate is certainly not more valid if it's worsening, or vice-versa. I just think we need to be real about the fact that this is an equation. It's nothing more. If you change numerators or denominators it changes the answer. Therefore, if there's been un-natural declines in the labor force... we should really ask why. To me, I don't buy the baby boomer excuse... at least right now... because, to me, baby boomers lost too much $ in the crash, they wouldn't be retiring in mass "right now".

As for consumer spending, I think the holidays played a part. I am not surprised we've seen a blip upwards. I'm happy about it, and hope it continues... but, I don't expect it to. By summer, I expect the picture to worsen as far as economic indicators go. I hope I'm wrong, but I don't like what I'm seeing in Europe and globally... I also think the debt issue in the US is bigger than most believe. We'll see...

inlet13

CBO report says:

"Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent"

translation: CBO thinks that the BLS numbers are bogus and real unemployment is roughly 10%.

http://www.zerohedge.com/news/latest-congressional-budget-outlook-2012-2022-released

Go Beavers

inlet13 wrote:

CBO report says:

"Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent"

translation: CBO thinks that the BLS numbers are bogus and real unemployment is roughly 10%.

http://www.zerohedge.com/news/latest-congressional-budget-outlook-2012-2022-released

The "real" unemployment is always higher than the bls numbers, that doesn't make them bogus, they're just measuring unemployment differently. You can't jump tracks between measurement devices in an attempt to make your point. The thread is comparing the bls unemployment numbers against itself, over time.

inlet13

Go Beavers wrote:

inlet13 wrote:

CBO report says:

"Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent"

translation: CBO thinks that the BLS numbers are bogus and real unemployment is roughly 10%.

http://www.zerohedge.com/news/latest-congressional-budget-outlook-2012-2022-released

The author said "bogus", not me. I just was posting his words.

That said, I don't think you get it. First, let's get into semantics - There is no formal definition for "real unemployment", so it can mean different things to different people. The "real" unemployment rate I referred to is referring to the rate had the labor force not tanked. Basically, a labor force adjusted unemployment rate. I think your version of the "real unemployment rate" is referring to U-6 (including underemployed, etc). So, if you used your version, yes, it would always be higher. But, that's not necessarily the case with my version. Just wanted to clear that up.

This thread, or at least my contributions to it, was all about how the labor force matters in the unemployment rate's rises and falls. The majority of my point had to do with the fact that the labor force decline was fueling the substantial fall-off in unemployment. The majority of our discussion here was on that point. This CBO report is underscoring my points in this thread... and broadening them to say specifically what the unemployment rate would be had the labor force not fell, even discounting the portion due to retiring baby boomers (which was a point you brought up). Here's the quote:


Participation in the Labor Force. The unemployment rate would be even higher than it is now had participation in the labor force not declined as much as it has over the past few years. The rate of participation in the labor force fell from 66 percent in 2007 to an average of 64 percent in the second half of 2011, an unusually large decline over so short a time. About a third of that decline reflects factors other than the downturn, such as the aging of the baby-boom generation. But even with those factors removed, the estimated decline in that rate during the past four years is larger than has been typical of past downturns, even after accounting for the greater severity of this downturn. Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent. By CBO’s estimates, the rate of labor force participation will fall to slightly above 63 percent by 2017. The dampening effects of the increase in tax rates in 2013 scheduled under current law and additional retirements by baby boomers are projected to more than offset the strengthening effects of growing demand for labor as the economy recovers further.

Go Beavers

inlet13 wrote:

Here's the quote:


Participation in the Labor Force. The unemployment rate would be even higher than it is now had participation in the labor force not declined as much as it has over the past few years. The rate of participation in the labor force fell from 66 percent in 2007 to an average of 64 percent in the second half of 2011, an unusually large decline over so short a time. About a third of that decline reflects factors other than the downturn, such as the aging of the baby-boom generation. But even with those factors removed, the estimated decline in that rate during the past four years is larger than has been typical of past downturns, even after accounting for the greater severity of this downturn. Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent. By CBO’s estimates, the rate of labor force participation will fall to slightly above 63 percent by 2017. The dampening effects of the increase in tax rates in 2013 scheduled under current law and additional retirements by baby boomers are projected to more than offset the strengthening effects of growing demand for labor as the economy recovers further.

Maybe I'm nitpicking the CBO report, but do they reference data related to their point: "About a third of that decline reflects factors other than the downturn, such as the aging of the baby-boom generation".

Also, they're saying that with past "downturns" in the business cycle, there has been a corresponding downturn in the labor participation rate. But that's not true. The mid-70's recession has a corresponding flat line for lpr, early 80's has a slight tick upward, early 90's recession had a drop, but the economic growth in the late 90's had a flat line.

inlet13

Go Beavers wrote:

inlet13 wrote:

Here's the quote:


Participation in the Labor Force. The unemployment rate would be even higher than it is now had participation in the labor force not declined as much as it has over the past few years. The rate of participation in the labor force fell from 66 percent in 2007 to an average of 64 percent in the second half of 2011, an unusually large decline over so short a time. About a third of that decline reflects factors other than the downturn, such as the aging of the baby-boom generation. But even with those factors removed, the estimated decline in that rate during the past four years is larger than has been typical of past downturns, even after accounting for the greater severity of this downturn. Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent. By CBO’s estimates, the rate of labor force participation will fall to slightly above 63 percent by 2017. The dampening effects of the increase in tax rates in 2013 scheduled under current law and additional retirements by baby boomers are projected to more than offset the strengthening effects of growing demand for labor as the economy recovers further.

Maybe I'm nitpicking the CBO report, but do they reference data related to their point: "About a third of that decline reflects factors other than the downturn, such as the aging of the baby-boom generation".

Also, they're saying that with past "downturns" in the business cycle, there has been a corresponding downturn in the labor participation rate. But that's not true. The mid-70's recession has a corresponding flat line for lpr, early 80's has a slight tick upward, early 90's recession had a drop, but the economic growth in the late 90's had a flat line.

To my knowledge, they don't reference the data. I'm pretty sure they probably used percentages to scale that out.

Your second point, they probably used averages there too. You might be right about certain exceptions though. Whenever they use statistical techniques to try to isolate this sort of thing, it can be validly argued.

inlet13

I'll admit that I'm shocked by the 8.3% unemployment today. The job creation was very good. I need to look at the report some more, but this is a good sign.

And, honestly, to me, it means the odds just jumped of an Obama re-election.

inlet13

Unfortunately, when I first glanced, I did not realize that the labor force fell by 1.2 million people, this is not as good as I first though, in fact, it's just plain shady.

http://www.zerohedge.com/news/record-12-million-people-fall-out-labor-force-one-month-labor-force-participation-rate-tumbles-

know1

Not sure, but my company has grown from 80 employees to 125 over the last 12 months. We decided not to participate in the recession.

polaris_x

inlet13 wrote:

Unfortunately, when I first glanced, I did not realize that the labor force fell by 1.2 million people, this is not as good as I first though, in fact, it's just plain shady.

http://www.zerohedge.com/news/record-12-million-people-fall-out-labor-force-one-month-labor-force-participation-rate-tumbles-

is this different than how it's been calculated before?

cincybearcat

inlet13 wrote:

I'll admit that I'm shocked by the 8.3% unemployment today. The job creation was very good. I need to look at the report some more, but this is a good sign.

And, honestly, to me, it means the odds just jumped of an Obama re-election.

Agreed.

inlet13

polaris_x wrote:

inlet13 wrote:

Unfortunately, when I first glanced, I did not realize that the labor force fell by 1.2 million people, this is not as good as I first though, in fact, it's just plain shady.

http://www.zerohedge.com/news/record-12-million-people-fall-out-labor-force-one-month-labor-force-participation-rate-tumbles-

is this different than how it's been calculated before?

It's not calculated differently in previous months, but the numbers are different. The equation is getting skewed by the plummeting labor force, which is making the unemployment rate fall faster than it could/would otherwise.

In other words, the job creation is not really the thing driving down the unemployment rate. It's the fact that people are exiting the labor force (so their not being counted). The shady thing is this ridiculous decrease in the labor force. Is it possible that this really happened? In my opinion, no.

All that said, the "unemployment number" is shady. That's not to say the "employment number" is not good. I still stand by the fact that that number looks good.

polaris_x

but shady would mean that they are fudging the number ... if the number is calculated the same way as it has been for a while - how is it shady!? ... is it not the same way it has been calculated during bush, clinton, etc?

bjo1015

How does someone exit the labor force and therefore is no longer calculated? Do they just stop looking for a job, so they don't get counted?

inlet13

polaris_x wrote:

but shady would mean that they are fudging the number ... if the number is calculated the same way as it has been for a while - how is it shady!? ... is it not the same way it has been calculated during bush, clinton, etc?

I'm not implying that they are "fudging" the number. I said it was "shady", and what I meant was it's "odd" or "questionable". What I am implying is it's questionable that 1.2 million people dropped out of the labor force in one month, the highest ever recorded in history. That's certainly odd; particularly, after it's been occurring repetitively month after month, but no where near this level.

The reality is, these aren't real concrete numbers associated with each employed and unemployed individual. They are estimates. In other words, it's not like they are tracking everyone and that's how they come up with these statistics. These are surveys. As you know, there can be problems with surveys. The problems can be intentional or unintentional. I'm saying this looks strange, and "may" indicate a problem. It's certainly odd, given history.


This does a good job of breaking down what the unemployment rate would look like, if the labor force hadn't shrank (11.5%):

http://www.zerohedge.com/news/implied-u ... -year-high

polaris_x

ok ... thanks ...

Go Beavers

inlet13 wrote:

Unfortunately, when I first glanced, I did not realize that the labor force fell by 1.2 million people, this is not as good as I first though, in fact, it's just plain shady.

http://www.zerohedge.com/news/record-12-million-people-fall-out-labor-force-one-month-labor-force-participation-rate-tumbles-

You should go to the source rather than having filtered through some guy who wishes he was in The Clash. Here's from the bls report: "After accounting for the annual adjustments to the population controls, the employment-population ratio (58.5 percent) rose in January, while the civilian labor force participation rate held at 63.7 percent. (See table A-1. For additional information about the effects of the population adjustments, see table C.)"

I think what the guy in the link is referring to is the updated population estimates using the census data from 2010. Here's the link to the bls report:

http://www.bls.gov/news.release/empsit.nr0.htm

It talks about the adjustment under table A, a little more than halfway down.

To me, it's good news. Some here were predicting that there would be a flood of people returning to the work force 2 or 3 months ago after hearing that companies were hiring, which would jump the unemployment rate back up. That doesn't seem to be happening.

Go Beavers

inlet13 wrote:

polaris_x wrote:

but shady would mean that they are fudging the number ... if the number is calculated the same way as it has been for a while - how is it shady!? ... is it not the same way it has been calculated during bush, clinton, etc?

The reality is, these aren't real concrete numbers associated with each employed and unemployed individual. They are estimates. In other words, it's not like they are tracking everyone and that's how they come up with these statistics. These are surveys. As you know, there can be problems with surveys. The problems can be intentional or unintentional. I'm saying this looks strange, and "may" indicate a problem. It's certainly odd, given history.

To add to that, the survey has been done since 1940. It covers 60,000 households and every month, 1/4 of the households are changed. So they're tracking those households, which is felt to be a representative sample to be able to extrapolate to the general population. Each household is interviewed each month. I think it's a valuable tool, especially looking at the data against itself, that it produces over time.

inlet13

Go Beavers wrote:

You should go to the source rather than having filtered through some guy who wishes he was in The Clash. Here's from the bls report: "After accounting for the annual adjustments to the population controls, the employment-population ratio (58.5 percent) rose in January, while the civilian labor force participation rate held at 63.7 percent. (See table A-1. For additional information about the effects of the population adjustments, see table C.)"

I think what the guy in the link is referring to is the updated population estimates using the census data from 2010. Here's the link to the bls report:

http://www.bls.gov/news.release/empsit.nr0.htm

It talks about the adjustment under table A, a little more than halfway down.

I did go to the source. First, I find it odd that they don’t mention the 63.7% is a 30-year low. They should at least acknowledge it.
Second, I am confused, by their words “held at 63.7 percent”. According to their own data…
http://data.bls.gov/timeseries/LNS11300000
…the labor force participation rate “dropped” from 64% to 63.7%. That’s a huge drop. Maybe their referring to an adjustment where it didn’t, but from a quick read through I didn’t see where this was.
The seasonal adjustments and those who dropped out of the labor force make this a bit odd to me.
Here’s my take:
The job gains are good. We need jobs and we got them. That said, the unemployment rate is extremely shady. Due to the fact that the labor force shrank so much. Ricky S agrees:
http://video.cnbc.com/gallery/?video=3000071275

Go Beavers wrote:

To me, it's good news. Some here were predicting that there would be a flood of people returning to the work force 2 or 3 months ago after hearing that companies were hiring, which would jump the unemployment rate back up. That doesn't seem to be happening.

That's not happening because of the decline in the labor force participation rate. If this adjusts, the unemployment rate could rise "for good reason".

inlet13

*120K jobs gained.... falling 80K short of consensus.
*yet, unemployment rate somehow falls from 8.3% to 8.2%, despite the very weak job growth..

..... why? well, ummm....

http://research.stlouisfed.org/fred2/series/LNS15000000

The number of people out of the labor force is now at all-time highs. As I said repetitively throughout this old thread.

and...

http://data.bls.gov/timeseries/LNS11300000

The labor force participation rate is at all-time lows.


Next, up... the clunkering for QE3.... Just wait. Got to love the BS parade.