Monday, August 10, 2009

Unemployment Didn't Fall - Numbers Lie

247,000 people lost a job in July, yet the unemployment rate fell from 9.5% to 9.4% and everyone celebrated (stock market up over 1%). The recession is over can be heard from nearly every media outlet, yet few seem to see that this report was not good. The report was better than the previous month, but unemployment did not actually fall. So how did the unemployment rate fall by .01%? 422,000 people in July gave up looking for work, thus they were no longer reflected as "looking for a job". These people for the most part still WANT a full time job, they just haven't been able to find one and have for one reason or another stopped looking. Using the broadest measure of unemployment about 16% of Americans are out of work or working part-time (but want full time work).

Do these numbers sound like cause to celebrate? I will admit that it is better to have 247,000 lose a job than over 500,000 - the rate of unemployment decline has fallen (for now) and that is good news. However, the celebration took place over the unemployment rate dropping - which it didn't - they just shifted the numbers.

Scott Dauenhauer CFP, MSFP, AIF