This morning we got the official unemployment report for April. The Labor Department reported that the unemployment rate fell a notch from 8.2% in March to 8.1% in April. The pre-report consensus was for an unchanged number of 8.2%, so on that account today’s number was slightly better than expected.
Unfortunately, the way the Labor Dept. got to the 8.1% number was ugly. First, non-farm payrolls rose only 115,000 in April versus the pre-report estimate of more than 165,000 new jobs. Second, the so-called “participation rate” (those working or actively looking for work) fell to a 30-year low of 63.6%. This is because more people left the workforce, or stopped looking for work, than expected.
There are 12.5 million Americans who are out of work or are under-employed. The U-6 unemployment number (which includes marginally attached workers, those working part-time for economic reasons and those who have stopped looking for work) remained at 14.5%. While today’s headline number showed a net 115,000 new jobs created, the total employment level for the month actually fell by 169,000. I doubt you’ll hear that number in the media today.
The bottom line is that while you may hear positive accounts about this morning’s national unemployment rate dipping to 8.1% on the nightly news, a look at the internals of the report shows that it was quite a different picture. The stock market certainly didn’t like what it saw, selling off immediately after learning that the economy produced only 115,000 new jobs in April.
Today’s report followed yesterday’s weekly initial unemployment claims for the week ending April 28. The initial claims report estimates how many people filed for first-time state unemployment benefits in the previous week. The number yesterday was 365,000 applicants, down from a revised 392,000 the previous week.
The media heralded yesterday’s report as great news since it was down 27,000 from the revised 392,000 from last week. But let me tell you that these weekly initial claims reports have lost a lot of credibility over the last year. Here’s why.
The weekly initial claims report, like today’s official unemployment report, is produced by the Labor Department based on various surveys they take. The initial claims report released each Thursday is revised the following Thursday based on new information received by the Labor Department.
So, for example, yesterday’s initial claims report for the week ended April 28 also included a revision of the number released a week earlier for the week ended April 21. The original number of initial claims for the week ended April 21 was 388,000. Yesterday, however, that number was revised upward to 392,000.
Why does this matter? The trend over the last year or so is that the original initial claims number tends to be revised upward just about every week. For reasons unknown, the Labor Department has been releasing a lower initial claims number on Thursdays, only to revise that number up on the following Thursday.
Let me be more specific. The last 15 consecutive weekly initial claims reports have been revised upward the following week. See a pattern here? Yes, we do. The mainstream media makes a big deal out of the Thursday initial claims report, and a lot of people pay attention to it. But very few pay attention to the revised number for the previous week.
Over the years, I have taken most government reports at face value. Yes some are overstated, and some are understated, but overall I have not felt there was much if any political bias among the various government reporting agencies. Yet the initial claims reports over the last year or so, with their frequent upward revisions a week later, suggest that there could well be a trend of bias in the original reporting.
I don’t expect that much will be made of this, if anything, since the mainstream media is clearly in President Obama’s camp. But I want my readers to know what is going on. If you care to keep track of this issue, start tracking Yahoo’s Weekly Economic Calendar.
This report will show you all of the daily economic reports, along with the pre-report consensus, and the revisions to last week’s/month’s original announcements. It won’t take you long to start detecting some trends in how these reports are announced and then revised later on.
I will stop short of suggesting that the Obama administration is influencing these reports to its advantage, but I will venture to say that every possible effort is being made to get the national unemployment rate below 8% before the election in early November.
Why? No American incumbent president has ever been re-elected when the nation’s unemployment rate has been 8% or above. Just something to think about.
Have a great weekend everyone!
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