The mainstream news is citing the decline in unemployment from 9.5% to 9.4% in July as proof that the economy is stabilizing.
But is that true?
Distortions in the Numbers
Well, as the New York Times pointed out in July:
Include [those who have given up looking for a job and those part-time workers who want to be working full time] "" as the Labor Department does when calculating its broadest measure of the job market "" and the rate reached 23.5 percent in Oregon this spring, according to a New York Times analysis of state-by-state data. It was 21.5 percent in both Michigan and Rhode Island and 20.3 percent in California. In Tennessee, Nevada and several other states that have relied heavily on manufacturing or housing, the rate was just under 20 percent this spring and may have since surpassed it.
And see this.
The Times wrote a second article on August 7th pointing out that the unemployment rate had only declined because 400,000 people gave up their search for work and left the labor force. And see this.
Indeed, as the Times notes in a third article, Americans are going to China to look for work.
In addition, economists and financial analysts point out that auto workers who would normally be laid off this time of year have been retained because of changes to the auto industry from the auto bailouts.
For example, PhD economist John Williams wrote on August 7th:
July usually sees a regular pattern of planned automobile production line shutdowns to accommodate retooling for the new model year, but recent disruptions to the auto industry have changed pattern this year. Without the usual pattern of shutdowns, the government's computers nonetheless responded by creating the usual offsetting boost in jobs, not only in the auto industry, but in supporting industries as well. The auto industry itself was alone among durable goods manufacturing industries in showing a reported, seasonally-adjusted monthly gain in July, up by 28,000 jobs.
Williams
also said that certain distortions in unemployment figures are being
caused by the severity of the financial crisis itself, but that - when
these distortions subside in the months ahead - unemployment will
increase. He also notes that official unemployment models tend to
underestimate unemployment during recessions.
Indeed, if the aforementioned distortions are removed, Williams says that July unemployment figures would have actually increased slightly from June. Indeed, Williams says that accurate unemployment figures rose from 17.5% in December to 20.6% in July.
And Dave Rosenberg of Gluskin Sheff notes that tens of thousands of the new jobs in July were created by the government itself:
