Headlines Can Be Deceiving

Today, the January Jobs Report indicated that the economy created 243,000 jobs in January and the unemployment rate dropped to 8.3%. That sounds good and most of the “experts” were screaming that this more proof that the economy has turned around and job growth will continue. What they didn’t do is look beyond the headline.

First, I was startled when I heard the headline numbers. Here is the context behind the numbers. Last week, Chairman Bernanke said the economy was soft and lowered his GDP growth estimate, extended the zero interest rate program through 2014 and implied that he was ready to intervene with more money creation if necessary. That doesn’t sound like the environment for “surging” new job growth.

So here is some information behind the headline.

1.A record 1.2 million people fall out of the labor force (these are people who are no longer looking for a job.)

2.This means that the percent of the population that would like to work dropped to 63.7%. The long-term, historic percent is 65.8%. This is important because this is the number they use to determine the unemployment rate. This is 5 million people less looking for work than is normal; and with 5 million less people you get a much lower unemployment rate. And baby boomers are not retiring like many assume, In fact, their participation rate in increasing.

3.Part-time workers increased by 699,000 and full time jobs increased by 80,000 jobs. So about 10 percent of jobs were full time.

I am not saying there is a conspiracy to improve the numbers. It is the way the math model works. But it does demonstrate that you must look beyond the headlines to get the real story.