Unemployment at 9% = "Feigned Precision"

Today's report of the October unemployment rate dropping from 9.1% to 9%, while an apparent slight improvement, really doesn't mean anything.

The creation of 80,000 new jobs for the month was reported as well, less than what's necessary to reduce the unemployment rate over time.

To add to the confusion, the jobs created number and the unemployment rate are taken from two separate surveys (establishment and household), so there is no way to effectively reconcile the two surveys' results.

{In future posts we'll describe all this more thoroughly and how we can discern for ourselves what's actually happening with employment prospects for the U.S. economy.}

Now let's briefly examine what the reported addition of 80,000 jobs in October means for our economy. It's not good news, since a monthly growth of less than ~125,000 jobs won't bring down the nation's unemployment rate.

We'll need to add from 150,000 to 200,000 new private sector jobs monthly to achieve a significant reduction in unemployment accompanied by real gains in the U.S. economy.

Accordingly, the most important statistic in each monthly jobs report is the number of private sector jobs created.

In October the number of added private sector jobs was 104,000. After subtracting public sector jobs cut of 24,000, we arrive at the 80,000 reported number of net new jobs.

However, there is a great deal of unreliable "noise" in the monthly jobs created number. Hence, these monthly reports represent "feigned precision" at best.

As evidence of this monthly feigned precision reporting, upward revisions today for the previous September and August reports were substantial. September was increased from 103,000 to 158,000 and August was revised upward from 57,000 to 104,000.

So what's the takeaway from today's report?

U.S. economy gains 80,000 jobs in October accurately interprets its meaning as follows:

"Yet while the latest government data paints a picture of an improved economy, the U.S. is still adding jobs at a historically slow pace following the end of the brutal 2007-2009 recession. The nation has 6 million fewer jobs now than it did before the downturn.

The U.S. would have to add around 250,000 jobs a month for more than two years to bring the unemployment rate back down to its pre-recession level of about 6%. And it takes at least 100,000 jobs a month just to match the natural growth rate of the labor force.

So far this year, the economy had gained an average of 125,000 jobs a month — a sluggish pace of hiring offers little hope to millions of jobless Americans that they find work soon."

That sums it up well. Our economic recovery remains weak at best, and there will be a very long road ahead to get unemployment down.

To get the most out of each monthly report (which is reported the first Friday of each month at 8:30 AM in the Eastern time zone), just focus on the number of private sector jobs added each month.

When it reaches 200,000 or more consistently, or approximately double the current rate, then we'll be making real progress.

And a number of 250,000 to 300,000 will mean that the nightmare is over and that employment levels are rapidly returning to normal.

That, however, will be a long time coming.

Thanks. Bob.