This morning the Labor Department announced that unemployment fell to 10.0% from 10.2% as job losses were far lower than expected. But the government’s unemployment calculation is famous for hocus-pocus. Let’s take a look at the real data:
As you can see, the employment level actually rose nicely for the first time since April. And, of course, the government continues to rely on the phenomenon of “the mysteriously vanishing labor force” to embellish the unemployment rate, claiming that the civilian labor force fell by another 98,000 workers in spite of the fact that the population grew by nearly a quarter of a million people in the same month.
So a more accurate reading is that unemployment has fallen by 0.1% to 11.6%. (The broader measure of U6, if the government was honest about it, continues to hover around 20.8%.)
Clearly, the stimulus spending is having an effect on employment. It had to. The real question is what happens when that stimulus spending ends. As I reported earlier (see 3rd Quarter GDP Up, Erosion in Underlying Economy Continues), all of the gain in GDP in the 3rd quarter (and then some) is directly attributable to the stimulus spending. If that spending is factored out, the underlying economy is actually still contracting at an annual rate of 4%.
We may soon find out what happens. Just this past week, the Federal Reserve has ended its program of buying up U.S. Treasuries, and bond yields have begun rising again. More on this in a subsequent article.