The jobless rate dropped to 9.7% in January from 10% in December– an unexpected turnaround. But the jobs picture is much shakier than that headline number suggests: seasonal adjustments to the numbers account for much of the rate change. Further, the nation still lost 20,000 jobs last month. Calculated Risk notes that on a percentage basis, this recession has produced the most severe job losses since WWII.
Over at Credit Writedowns, Edward Harrison explains the nitty gritty of the seasonal adjustment to the unemployed number.
…In December 2009, there were 15.267 million people unemployed on a seasonally-adjusted basis. This ticked down to 14.837 in January 2010, a fairly large drop of 430,000. Meanwhile the unadjusted numbers go the other direction – massively. In December 2009, the number of unemployed persons was 14.740 million. This rose 1.4 million to 16.147 million. Therefore, we saw a swing of over 1.8 million between what the unadjusted and the seasonally adjusted data are saying about who’s unemployed. The number of people employed increased by over 500,000 on a seasonally-adjusted basis, while it decreased by over 1.1 million on an unadjusted basis. That’s a swing of 1.6 million.
Bottom line: the unemployment rate downtick has nothing to do with people dropping out of the workforce, it is an statistical aberration due entirely to seasonal adjustments in the household survey in the number of people employed and unemployed.
A few other items to note in the report: The Bureau of Labor Statistics released its annual revisions, which showed job losses were much more severe in 2009 — by 600,000. On the plus side, temporary hiring continues to expand; hourly wages rose; and the workweek expanded by one-tenth of an hour, a sign that employers may be turning part-time workers into full-time workers.
We will have to wait until February to really know if the unemployment picture is improving in a more meaningful way.