US Jobless Rate is really 16%, not 8.1%

on September 17 2012 3:02 PM

The US unemployment rate of 8.1% is probably double that number when you include a all of the other measures of the jobless rate that are not included in the official data.

The state of the US labor market is in focus because the US Federal Reserve said last week that until there are significant improvements in the sector, the central bank would continue to buy mortgage and other assets in order to revive economic growth.

But the problem is that the level of unemployment in the US is probably worse than the Fed beleives it is, with the jobless rate probably closer to 16% when you look at other measures not used to compile the official number.

For example, if you have been unemployed for 12 months, given some other criteria, and you haven't been to the unemployment exchange, you haven't been to interviews, you haven't been looking at job adverts etc., you drop off the official unemployment numbers because you are not viewed as actively looking for employment. But technically, you are not employed.

Then there are statistics at the short-end such as how long you have to be unemployed before you are considered unemployed, and if you get a part-time job when you were looking for a full-time job, you also drop off the statistics. So the stats are quite a lot higher then they appear.

The US unemployment rate fell to 8.1% in August from 8.3%. Still, the jobless rate has remained above 8% since early Y 2009 and has remained high, even with earlier monetary stimulus from the Fed and interest rates close to Zero.

The unemployment numbers will be Key to the direction of financial markets because right now markets are rallying on hopes that the Fed's monetary stimulus will boost economic growth and bring down unemployment.

That expectation may last for a few more months, but with unemployment likely to stay high for much longer than that, the strong rally in stock markets may start be in for a correction, maybe not.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

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