Understanding The Unemployment Numbers

I'm certain you've seen the headlines that the unemployment rate has dropped to 9.7%.  While it would be great if this were really the case, there is, as usual, another story behind the headlines.  Hot Air explains step by step:

For once, the AP uses its favorite adverb correctly:

The unemployment rate dropped unexpectedly in January to 9.7 percent from 10 percent while employers shed 20,000 jobs.

The Labor Department says the rate dropped because a survey of households found the number of employed Americans rose by 541,000. The job losses are calculated from a separate survey of employers.

The report also included an annual revision to the estimates of total payrolls, which showed there were 930,000 fewer jobs last March than previously estimated. The department also revised down its estimates for April through October of last year, adding another 433,000 job losses.

However, November's numbers got a boost from 11,000 jobs created to 64,000 jobs created.  The net losses in December went from 85,000 to 73,000.  Another indicator doesn't look as good, though.  Tax collection on payroll dropped sharply in January, in the same way as last year (via Dog Soldier):

Taxes are another indicator of payrolls, specifically withheld income taxes. The daily Treasury Department statement tracks withheld income taxes. In January, income taxes withheld dropped about 9.4% from December, about the same as the drop from December 2008 to January 2009. December withholdings are sometimes inflated due to end-of-year bonuses. That the decline from December to January this year was the same as last argues that the direction of payroll jobs will track year-year.

Moving out of the double-digits on unemployment will be a political boost for Barack Obama, but the improvement is less dramatic than that.  The civilian employment level finally increased by 111,000 people, the first increase in several months, but over 1.5 million left the job force in 2009.  Furthermore, the hiring mostly took place in the government sector

And, as we've gone over before, government jobs don't equate to productivity or economic growth.  So, what's the story behind the headlines?  Here you go:

In January, the number of persons unemployed due to job loss decreased by 378,000 to 9.3 million. Nearly all of this decline occurred among permanent job losers.  (See table A-11.)

The number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up in January, reaching 6.3 million. Since the start of the recession in December 2007, the number of long-term unemployed has risen by 5.0 million. (See table A-12.)

In short, the numbers got jiggered.

The 'discouraged' (long-term) unemployed dropped off in huge numbers, either because they reached the end of their benefits or because they simply stopped looking.  That doesn't mean they aren't still unemployed, however.  In addition, the Obama administration reduced the number of total jobs out there (which is a best-guess estimate no matter who is doing it), which results in a decrease to the percentage of Americans who don't have a job.

The bottom line is that we are seeing more and more jobs lost, and more and more Americans without a job.  Tinkering with the reporting numbers doesn't change that fact, nor constitute an actual recovery.  It merely covers up the truth for political purposes.

It will be a fantastic day for America when the unemployment rate finally starts going down for real.  Today is not that day.

There's my two cents.