NFP: Disappointment (??) Analysis Part 2
Continuing our discussion of the Abelson/Dunne/Henwood analysis —
No one trying to argue that the economy is weak wants to talk for very long about the spectacular unemployment rate of 4.6%. Those who think this is a high number have not studied history and did not take the labor econ class where "frictional unemployment" was discussed.
The Dunne-Henwood duo skip quickly from the overall employment rate, and select from among the (several) measures that the BLS has created to capture the so-called "discouraged" workers. They chose measure U-5, which adds discouraged workers and those "marginally attached" to the unemployed in calculating the rate. They report that this number went from 5.3% in May to 5.8% in June.
Now let’s put aside the question about how well we are measuring this in the first month of the survey reporting period or what the error rate might be for this much smaller subgroup. The more important issue is the ABSENCE of discussion of any basis for comparison or any long-term trend. Careful readers of statistical information should be alert to the dog not barking in the night. When a writer does not mention a long-term comparison, there is often an agenda.
So let’s take a look. Here is the measure that they chose (BLS U-5) going as far back as they report the data.
Please notice that the cited uptick is the small blip on the far right of the chart. The overall chart shows what David Malpass has described as unsustainably low levels from the so-called "bubble era" and the current robust level of job growth as measured by the household survey.
Let’s take a closer look at the "discouraged workers." Some analysts provide a very superficial view of labor force participation without looking at the reasons. The simple fact is that at any given time, many people voluntarily choose not to work. The result is that the labor force is constantly changing. This is normal.
Let’s look at why some people do not participate.
If you click to enlarge this table, please notice that about 80% of those who are not working, or who work part-time, are doing so voluntarily for non-economic reasons. Second, please note that the number of people working part-time for economic reasons is about the same as it was a year ago, even though the labor force has expanded.
Let’s get real here, folks!! These numbers do not get any smaller. Anyone who cites data on labor force participation, discouraged workers, or the like, without looking at any history should lose his license.
More problems with the Barron’s article in Part 3.