Mixed Bag on Unemployment Data

The media is going to tout the Bureau of Labor Statistics reports out today, claiming that the unemployment rate dipped to 9.4%. Experts had expected the rate to increase to 9.6% from the 9.5% rate in July 2009.

However, things are not all what they seem to be.

The Bureau puts out more than just seasonally adjusted rates.

They also put out the unadjusted rates, and those rates tell a different tale.

They show that the unemployment rate remained at 9.7% in July (the same as June). Moreover, the number of unemployed plus discouraged workers remains well over 10% and shows no sign of slackening. Seasonally adjusted figures for unemployed plus discouraged shows a drop from over 10% to 9.8%, but that would sync with the seasonally adjusted unemployment rate as well.

This is a mixed bag, but naturally everyone will focus on the seasonally adjusted figure as proof that the recession is over or at least starting to subside.

The problem with this analysis is that businesses aren't ramping up production and retailers aren't increasing inventories because they don't want to be caught with excess inventory that would have to be sold at clearance prices. That further means that consumers wont find the big bargains they usually expect heading into the back-to-school season. Then, there's the shift in purchasing behavior to coincide with sales tax holidays in various states around the country. That shifts sales and businesses and consumers both take that into account.

UPDATE:
Moreover, job losses continue, just at a lower rate. With businesses having already cut to the bone, there isn't much left to cut in terms of employment. That would explain the slackening increase in unemployment, but the problem is that the economy isn't creating jobs. The number of unemployed around the nation continues rising, just not nearly as bad as it did just a few months ago. That's not good news.

UPDATE:
Innocent Bystanders is interpreting the data so you don't have to cull through all the raw information. The only way that the unemployment rate could drop is if the labor pool decreases even more. That's not a good thing at all. It continues to show a contracting economy.

Oh, and the Obama Administration's economic forecasts continue to be way off, even with this marginally good news (as seen in the associated chart). We would have been better off had the Administration done nothing (and we'd be a trillion dollars richer for it at that).

UPDATE:
Now, the Administration says that 10% is quite possible at some point during the rest of the year. I can't imagine why they'd come to that conclusion. Then again, they already know the rate is over 10% given the unadjusted figures, and the only reason that the rate appears to have dipped is that hundreds of thousands quit the job search because the economy is in the doldrums.