Fri 2?3/12 1:25 PM Good Employment News Boosts Stocks

The unemployment figures continue to march steadily in the right direction. The number of new hires was much higher than expected and the rate dropped again to 8.3%. US stocks are up better than 1% today and bonds and gold are up again as well. It has been a great start to the year and there are so many skeptics that have withdrawn their money over the last three years that there is still plenty of fuel for a very good year, both here and overseas.

I often complain about the unemployment numbers because of the seasonal adjustment, which many think was huge this month, and the birth-death model which estimates, not counts, how many jobs were created in small business. I also have a beef with the way the unemployment rate is calculated.

Look at the following chart that shows the total number of Americans not in the labor force. See the huge spike last month? Are we supposed to believe that 1.2 million people suddenly dropped out of the labor force in one month and that this is good? There is no way.

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The number of people in the labor force is important because it is half the calculation for the unemployment rate. You take the number of people listed as unemployed and divide by the number of people in the labor force, i.e. available for work and/or working. When you reduce the number of people available for work, the percentage of unemployed drops automatically. You can see why that was reported. Add that to the way the Bureau of Labor Statistics estimates the number of jobs added and you have an employment report that is hard to take very seriously.

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