On February 2, 2021, the U.S. Labor Department reported monthly unemployment numbers for January and said that nonfarm payrolls increased by 49,000 and the unemployment rate was only 6.3%. The increase in jobs and such a low unemployment rate was championed by some in the financial markets as a reason to buy stocks. On CNBC, as the report came out, economics reporter Steve Liesman stated the numbers and also some of his concerns, but the market futures shot up as he spoke, showing that traders focused on the headlines and job growth talk.
These headline numbers do not reflect economic reality, because they are created by not counting people who lost their jobs and have been out of the workforce so long that they no longer are getting unemployment and are not looking for a new job, because they don’t believe any are available for them or are working part-time, but would rather have a full-time job. The Labor Department calls these people “discourage workers” and does not count them in their headline unemployment statistics. When you factor in these people the real unemployment rate is 11.7%.
The Labor Department also altered the way the numbers were counted this month to help create new headline numbers, which help pump up stock market players. You have to go through the entire official release to fully understand what they did, but it helped to increase the job loss numbers in prior months and boost January numbers, which makes it look like the job situation is getting better than it really is.
The 11.7% rate is a disaster, and historically unemployment rates over ten percent have created intense social stress in the United States, such as seen during the Great Depression and thirty years of labor strife from the 1870’s to 1900’s, typified by such as events as the Great Railroad Strike of 1877 and Coxey’s Army of 1898.
The millions of jobs lost and not replaced yet is why the US economy would collapse completely without the stimulus aid being given to people. However, the virus situation appears to have finally peaked and more jobs and growth should be ahead of us, but the past year has caused incredible damage to the US economy, which will have ramifications going forward. Most Americans expect inflation to impact them before this year is over. This is the cost of stimulus and programs launched last year, such as Federal Reserve bond buying, to bailout giant corporations.
The headline unemployment rate gives a totally misleading picture of economic reality in the United States.