Tea Leaf: 8.2 percent or 11.3 percent unemployment?

Published: Wednesday, April 11 2012 2:00 p.m. MDT

The substantial decline in the nation’s labor participation rate continues to “understate” the painful level of unemployment, when compared to just four years ago. An estimated 66 percent of potential workers were either employed or seeking employment in 2008.

That share in March 2012 was down to 63.8 percent. Simply applying a 66 percent rate to the March data would suggest an unemployment rate of not 8.2 percent (as reported), but a much different 11.3 percent rate.

We have noted before that if we could somehow get three million more people to leave the estimated labor force, national politicians could brag of a 6.4 percent unemployment rate — but does that mean anything?

I leave this to your interpretation

Other employment details

The nation’s “underemployment rate” — that which includes the officially unemployed, those working part-time who would prefer to work full-time, and those discouraged workers who are not formally seeking a job but would accept one if offered, declined from 14.9 percent in February to 14.5 percent in March. A 400,000 decline in those able to move from (involuntary) part-time jobs to full-time jobs (8.1 million to 7.7 million) — a very positive development — primarily accounted for the drop.

Average hourly earnings for all employees on private nonfarm payrolls rose by five cents (0.2 percent) to $23.39. The rise of 2.1 percent during the past 12 months trails the 2.9 percent consumer inflation rate of the past year.

Challenges ahead — and some clarity

The desire for strong job gains over the balance of the year will be met with significant challenges. Five consecutive sessions of the Dow Jones Industrial Average losing ground validates this view.

The European fiscal situation promises to get worse before it gets better, with the focus now quickly shifting to Spain. In addition, greater scrutiny is now entering new locales such as the Netherlands. French financial challenges are again raising more eyebrows.

U.S. economic growth has now been positive for 11 straight quarters. That being said, the current economic recovery is the weakest since the 1940s. Growth forecasts for this year still center near 2.4 percent after inflation — simply pathetic given the unprecedented and massive amount of fiscal and monetary stimulus at play in the economy.

One element of clarity? Rick Santorum’s suspension of his Presidential campaign will place additional pressure on two other candidates to see the obvious. How many of the three will actively get behind Mitt Romney as November approaches remains to be seen.

Jeff is the only economist in the world to have earned the CSP (Certified Speaking Professional) international designation, the highest earned designation in professional speaking. He is also economic consultant to Zions Bank.

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