Saturday, January 9, 2010

Headed In The Wrong Direction

The unemployment percentage is derived from the household survey not the non-farm payroll number. Many wondered why unemployment stayed at 10.0% while there was a net job loss was 85,000 for December. The short answer is that the numbers are derived from two different surveys. But, ponder this:

"About 661,000 people stopped looking for work in the US in December. If they had not done so, the unemployment rate would have gone up to roughly 10.4 per cent."

- Michael Feroli, JPMorgan economist

It's understandable that many people wouldn't bother looking for work in December. Let's assume those people are now looking. We would expect unemployment to lurch upwards to 10.3 to 10.5% in January 2010. DC's reaction to that would be to spend more money in their usual wrong-headed pseudo-Keynesian manner. If they do more borrowing and spending expect unemployment to rise dramatically further. Drink up lads.