In our relentless attempt to get at the Truth, we often spill pixels showing how government data makes things appear rosier than they are in the real world.
This morning’s data may have made things appear worse.
Providing a glimmer of hope that the U-3 unemployment rate isn’t as bad as it appears, an unexpected surge in teenagers and 20-25 year olds is responsible for a chunk of the unemployment jump.
Also possible — a seasonal adjustment that was expected in June failed to pick up more teens applying for jobs in May. Rex Nutting of Marketwatch notes that some of this is "Statistical noise":
government cautioned that the scope of the increase in the unemployment
rate in May could be a statistical distortion. Month-to-month changes
from April through July can be hard to adjust seasonally.
"There is a substantial
flow of workers, particularly young workers, into the labor force
during these months," said Phillip Rones, deputy commissioner of the
Bureau of Labor Statistics. The unemployment rate for teenagers surged to 18.7% from 15.4%. A broader measure of unemployment that includes so-called discouraged workers rose to 9.7% in May from 9.2%.
Here’s a chart of teen workers employment:
click for bigger chart
UPDATE June 6, 2008 11:07am
Real Time Economics notes two factors — the first being the jump in Teen unemployment; the second factor being a catch up to already existing employment pressure. Morgan Stanley, Nomura Securities, and Insight Economics all noted that the "unusually large increase" may have exaggerated the deterioration in the unemployment rate that occurred for last month, but "probably reflects the weakness that has developed since the end of last year."
Insight Economics adds that "In the post World War II period, every time the unemployment rate has jumped by a full percentage point in the course of a year, the economy has slipped into recession."
That is consistent with my economic perspective.
Jobless rate soars to 5.5% in May
Biggest rise in unemployment in 33 years; payrolls fall 49,000
MarketWatch, 9:19 a.m. EDT June 6, 2008
Economists React: ‘Teen Angst’ or Playing ‘Catch-Up’ in Jobless Rate?
June 6, 2008, 10:39 am