Jump in the Unemployment Rate – Bad News but Not THAT Bad
The latest from the BLS is bad news:
The unemployment rate rose from 5.0 to 5.5 percent in May, and nonfarm payroll employment continued to trend down (-49,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today.
I must be getting lazy as CalculatedRisk covered this report at 8:43 AM as he focused on the sharp increase in the unemployment rate. If you are wondering how a 49 thousand decline in the payroll survey is consistent with such a large jump in the unemployment rate, let’s note that the household survey showed a 285 thousand decline in reported employment leading to a reduction in the employment-to-population ratio from 62.7 percent to 62.6 percent. But the bigger news is that the labor force participation rate rose from 66.0 percent to 66.2 percent.
Update: Andrew Samwick notes:
we will likely hear this “spun” by those in office as having some good news in it, in that an improvement in the economic outlook may draw more people into the labor force to look for work. While that is true, and that may be happening, it is not appropriate to spin the increases in the labor force participation rate (here, from 66.0 to 66.2% of the population) as good news without also acknowledging that decreases in the labor force participation rate–of which there have been many–were bad news.
An excellent point! Back in December 2000 – the labor force participation rate was 67.0%. An since the unemployment rate was 3.9%, the employment to population ratio was 64.4%. While I’m not saying we need to get back to a situation where the employment to population ratio exceeds 64%, but this 62.6% figure is not good.
Here’s a question for you – will Lawrence Kudlow tell us in the next couple of days that the household survey and its unemployment rate is the best metric for the health of the labor market? My guess is that he will not.
Update II: I checked a couple of places where bad news is generally treated as “not so bad”, which is how NRO’s Corner treated this:
The major headline from today’s report will be the spike in the unemployment rate to 5.5% in May from 5% last month. This is the largest increase in any month since 1986. There was also a 0.4 point increase in April 1995. However, it is important to note that we were not in recession in 1986 or 1995 and both spikes represented mid-cycle peaks for the unemployment rate. Some analysts will point out that the jobless rate is up 0.8 percentage points in the past six months, which has never before happened except in recessions.
Shorter Ramesh Ponnuru – a significant increase in the unemployment rate is not bad news unless everyone cries “recession”! Meanwhile, the White House notes:
Nonfarm payroll employment decreased by 49,000 jobs in May, and the unemployment rate rose to 5.5 percent. Although the unemployment rate remains below the averages for the past three decades, these numbers are disappointing.
Less than the 30-year average! Ain’t life grand?!
OK, time to find my Dido recording of Thank You:
It reminds me that it’s not so bad, it’s not so bad