Break out the bubbly! The Bureau of Labor Statistics has reported that the unemployment rate in the U.S. dropped from 8.5% to 8.3%. According to BLS numbers, U.S. non-farm payrolls grew by 243,000 jobs in January, up from a revised 203,000 jobs in December 2011.
What's that? Not quite ready to party? Join the five million plus Americans that have been out of work for a year or longer. I doubt any of them will be sporting paper hats and tooting noisemakers.
From the news reports you'd think we'd just won WWll. Seems that we're supposed to be celebrating an unemployment figure over 8%. Dancing in the streets over 8.3% unemployment? I don't think so. The news was good for a 150 point gain in the Dow, but then the stock market has managed to 'shake off' a constant stream of disappointments from the Euro Zone among other grim statistics on the economy.
Resolution of the Greek debt crisis that was supposed to come 'just hours ago,' appears as elusive as a python covered in salad oil. But Wall Street bankers and TV news channel pundits sound like 'Mad' magazine's Alfred Newman: “What me worry?”
Sounds like good news for the labor situation, but is the 8.3% figure the whole truth? We hear about the growing payrolls, but we don't hear much about how mass layoffs affect this number.
AMR, parent of American Airlines, which recently filed for Chapter 11 bankruptcy protection, announced on February 2nd that it planned to lay off up to 13,000 workers. Bank of America announced plans to lay off 40,000 or more workers last September. Last August, the U.S. Postal Service announced plans to lay off 120,000 workers. Just last month, MetLife announced it would cut up to 4,300 jobs as a result of shuttering its mortgage origination business. That's good news?
The question is, how do these layoffs factor in to the 'official' unemployment numbers?
The previous reported drop in the unemployment rate from 9.1% to 8.5% conveniently ignored some 300,000 workers who are no longer counted because they stopped looking for work. Some economists estimate that if workers who have dropped out of the labor force were included, the unemployment rate could be higher than 10%. In December, the Bureau of Labor Statistics reported 1,384 mass layoff actions involving 145,648 workers.
Mass layoff events increased by 52 from last November, and associated initial claims increased by 14,021. According to James Gattuso of the Heritage Foundation, the BLS figures are incomplete, however: “ ...including only mass layoffs of 50 workers or more at a time. Those are the layoffs that make headlines, but such mass layoffs are only a small part of the job-loss picture. Many, if not most, layoffs affect fewer than 50 workers at a time. Most small businesses, in fact, do not even have 50 employees in total.”
New York University professor Nouriel Roubini paints an even more troubling picture of real unemployment. In response to a previous 9.1% unemployment figure he said: “ ... the official unemployment rate is 9.1%, but the one that includes discouraged workers who have left the labor force or partially unemployed has gone from 16.2% to 16.5%. And if you add to it the millions of people that you have in jail in the U.S., which is four times the amount of any civilized country as a share of population, then unemployment is probably closer to 20%. And that's just among the average population. For minorities, the youth, or unskilled people that don't have a high school degree, the number is closer to 30%.”
A bigger problem however, may be the absence of real job creation. How and where are jobs being created if both large and small businesses are actually cutting jobs? Mass job layoffs don't make for good presidential sound bites, yet the reports of corporate bankruptcy filings, and the resulting layoffs are broadcast nearly simultaneously along with the reports of declining unemployment.
This simply makes no sense. In fact, the entire picture is so absolutely absurd that it defies description. It's almost like looking at a company's sales and revenues, while ignoring its expenses. If you count only revenues and discount costs, any business would appear to be profitable. You don't need a PhD in economics to know that both income and expenses must be calculated to arrive at an accurate 'bottom line.' Just as a business can't count only income, job gains must be offset by job losses. This seems so obvious as to go without saying. The administration and the media however, expect us to believe otherwise.
I am neither an economist nor a statistician. It's very difficult to reconcile such seemingly conflicting reports, but I do see the real-world impact of the reality of the current economy. The official unemployment figures seem to 'magically' improve almost every month. Yet more and more companies file for bankruptcy, more and more homes fall into foreclosure, and more and more people seem to be unable to find jobs.
Then presidential candidate George W. Bush ridiculed Al Gore's economic figures in a debate as being 'fuzzy math.' The current administration appears to have not only adopted it, but is trying to institutionalize it. I suspect that 'W' is enjoying a good laugh about all this as he counts the head of cattle on his Crawford, Texas ranch. Meanwhile, the millions of unemployed Americans are hardly feeling 'warm' or 'fuzzy.'
Philip Wegener is a Los Angeles based mortgage-industry executive and President/CEO of Central Mortgage Asset Management.
