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Economic Recovery: Green Shoots, or Dandelion Weeds?


Number of employed Americans went up - but so did the unemployment rate.

Go to Google. Type in "green shoots." In one-tenth of a second, you'll find 28,900,000 references. Scrolling through a few pages, you'll find a lot of people talking about the beginning of the end of the recession.

Most readers will be surprised to know that the number of people employed in the US went up (!) in April. But then again, so did the unemployment rate.

Is that green shoot just another dandelion weed in our economic garden?

Are the Green Shoots Really Dandelion Weeds?

When the employment numbers come out, my usual routine is to go to the Bureau of Labor Statistics website and peruse the actual tables. I was rather surprised to see that the actual number of people employed in the US rose by 120,000. That's certainly not been the trend for a rather long time.

So, are things back on track? Is the recession just about over? Is that a green shoot? I don't think so. First, there are actually 2 surveys done by the BLS. One is the household survey, where they call up a fixed number of homes each month and ask about the employment situation in the household. They then take that data and extrapolate it for the economy as a whole. So, while the number of employed rose, the number of unemployed rose a lot faster - by 563,000, to 13.7 million. In addition, there are 2.1 million who are "marginally attached" to the workforce. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months. They weren't counted as unemployed because they hadn't searched for work in the 4 weeks preceding the survey.

According to the survey, headline unemployment rose 0.4% to 8.9% - the highest level since 1983. But if you count those who are working part-time but want full-time work, as well as the "marginally attached," the unemployment rate (called the U-6 rate) is an ugly 15.8%.

For whatever reason, the markets were happy that the headline number of the other BLS survey -- the establishment survey of lost jobs -- was "only" 539,000 - down from a negatively revised 699,000 in March. At least, the thinking was, the numbers weren't getting worse, though it's hard for me to be encouraged by half a million lost jobs.

That may not be the worst of it, however, since 66,000 jobs were temporary workers hired for the 2010 census, and the BLS estimated that the birth-death ratio added 226,000 jobs as a result of new business creation. Really? This will mean that there will likely be a major revision downward at some future point. The number will likely be well over 600,000 in the final analysis.
No positions in stocks mentioned.

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