Sept. 13 (Bloomberg) -- Lakshman Achuthan, chief operations officer of the Economic Cycle Research Institute, talks about the U.S. economy. Achuthan speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." Julian Callow, chief international economist at Barclays Capital, also speaks.
In the interview above, Julian Callow at Barclays made the statement he did not think the US was in recession because the unemployment rate was trending down.
Callow is clearly not digging into the numbers and/or Callow simply fails to understand how the household survey even works (and it is the household survey that established the unemployment rate).
Yes, Virginia, It's a Recession
Ironically, two consecutive horrendous household surveys following months of weak regional Fed manufacturing surveys was enough for me to say on September 7, 2012 Yes, Virginia, It's a Recession.
Quick Notes About the Unemployment RateIn response to that weakness the Fed responded with Panic! and I repeated my statements on employment and unemployment.
- US Unemployment Rate -.2 to 8.1%
- This month the number of people employed fell by 119,000.
- In the last two months, the number of people employed fell by 314,000!
- In the last year, the civilian population rose by 3,695,000. Yet the labor force only rose by 971,000.
- This month the Civilian Labor Force fell by 368,000.
- Last month, those "not" in the labor force increased by 348,000 to 88,340,000, another record high.
- This month we set another record high with a whopping 581,000 dropping out of the labor force. If you are not in the labor force, you are not counted as unemployed.
- In the last year, those "not" in the labor force rose by 2,723,000
- Over the course of the last year, the number of people employed rose by 2,347,000.
- Participation Rate fell .02 to 63.5%;
- There are 8,031,000 workers who are working part-time but want full-time work, a decrease of 215,00. This one the only bright spot in the report.
- Long-Term unemployment (27 weeks and over) was 5.033 million a decline of 152,000 (likely an artifact of the decline in the labor force).
- Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.
Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness.
I am going to reiterate my belief that the household survey tends to lead and today's panic suggests the Fed believes that as well.Household Survey Data
Here are two key Household Survey figures.
- In the last two months employment dropped by 314,000.
- In the last two months the labor force fell by 518,000 while those not in the labor force rose by an amazing 929,000!
click on chart for sharper image
In the last year, the civilian population rose by 3,695,000. Yet the labor force only rose by 971,000.
Those not in the labor force rose by 2,723,000 to yet another record high 88,921,000.
That is an amazing "achievement" to say the least, and one that has the Fed in panic mode.
That Makes Three of Us
- John Hussman announced on September 10, 2012 in Late-Stage, High-Risk "I continue to believe that the U.S. joined an unfolding global recession, most probably in June of this year."
- Lakshman Achuthan stated on September 13, 2012 he thought the recession had started (not just one was coming)
- I stated the same thing on September 7, 2012 but that does not necessarily make me first. I have not seen everything this group has said, and there could be others as well.
Regardless, it's a small group, and if I am wrong I am in good company. We may not know for another six months. It's in the hands of the NBER.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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