What is Real the Unemployment Rate?

Filed under: Market Comentary

Hint… it’s not what the Fed report says.

Today I want to touch on the unemployment reports that we hear from the government each month – an announcement that always comes out the first Friday every month.

It’s always a big number – since it’s an economic point, it has the likelihood to move the market. So, it’s one that I watch every month. Sometimes it makes sense to lock in rates before the announcement.

Unemployment and Job Creation

One important factor is looking at the actual reported number compared to the anticipated numbers before the report. This month, it came in significantly lower.

The anticipation was that the economy would have added 100,000 new jobs. That came in at 49,000 in the recent announcement. Also, they adjusted last month’s numbers down by about 150,000. It’s clear that we’re not getting the job creation that we’d like to see.

Here’s the interesting point: despite that, we saw the unemployment rate go from 6.7% to 6.3%. So, we didn’t add as many jobs as we thought, and the unemployment rate actually went down.

What’s Happening with Jobs Right Now?

What’s happening is that a lot of people are just stepping out of the job market. The estimated number is that 406,000 people dropped out of the job force. The labor force participation rate is going down.

People stop looking for a job because they don’t feel like they can get employment. The participation rate is the number that becomes a real concern, and it doesn’t show up in the news headlines.

According to Barry Habib and his group, we are seeing a real unemployment rate right now that’s probably closer to 10%. That explains a lot about what we are experiencing.

Watching the Trends

I don’t like betting against the economy, and I want to see us pull out of everything that is happening. I’m an optimist about this stuff. At the same time, we are all seeing the same thing. It doesn’t matter where you are, we are seeing job loss, businesses close, and other signs that don’t line up with a dropping unemployment rate.

It’s something to keep an eye on. Hopefully we will see the labor force participation rate climbing and the unemployment rate dropping for ideal results in the future.

Remember: the headlines aren’t always quite what they might appear. The good news is that we are still in a better spot compared to where we were 8 months ago.

Do you have questions? Reach out to talk to me anytime. I’d love to discuss your financial or mortgage options.

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