Something Fishy: Unemployment Rate 9.4%

I read the unemployment report, and to be honest, it sounds more than a little fishy to me. Unemployment has been holding steady for quite a while, ranging between 9.5% and 9.9% for the past year. In November, the unemployment rate was 9.8%. If it actually DID fall 0.4% in a single month, that would be an amazing rate of job growth... all things considered.

But this is fishy, because something doesn't add up. We know that we need to create 125,000 new jobs a month just to keep the unemployment rate where it is, in order to compensate for an expanding job market as new people begin looking for work. So, if the unemployment rate FELL 0.4%, that means we must have added, what... 500,000 jobs in December! Wow, this is impressive... half a million new jobs in December???

Wait, no. Only 103,000 new jobs were reported in December. Huh. So, if we added fewer jobs than needed to keep the unemployment rate stable, how did we see such a massive drop in the unemployment rate?


Here's my answer... I don't know.

Look, read the jobless report for yourself. You don't have to read far in order to reach your first inconsistency. Here, I'll quote the portions that bear on this question.
http://www.bls.gov/news.release/empsit.nr0.htm

The unemployment rate fell by 0.4 percentage point to 9.4 percent in December, and nonfarm payroll employment increased by 103,000, the U.S. Bureau of Labor Statistics reported today.

The number of unemployed persons decreased by 556,000 to 14.5 million in December, and the unemployment rate dropped to 9.4 percent.

Among the marginally attached, there were 1.3 million discouraged workers in December, an increase of 389,000 from December 2009. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.3 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

How can we add 100k jobs but have the number of unemployed people drop by half a million?

The normal way this kind of thing happens is that the size of the workforce, the number of people out of a job and trying to find work, actually dropped. The normal way this happens is that, over time, people become "discouraged" and stop looking for work. Once that happens, once they stop looking for work, they are no longer considered part of the workforce, and that number decreases.

But look at the last paragraph. It says the number of discouraged workers was 1.3 million, and you'll find that the SAME number of discouraged workers as shown in the NOVEMBER report. So that hasn't changed.

So that's the dilemma... Where did those 500,000 workers GO?

And my answer is simple: I don't know. I'm sure we'll see analysis shortly explaining this, but right now, from my own reading of the data, I just don't know.

And BECAUSE I don't know, I have to wonder if this drastic reduction in the unemployment rate is politically motivated. An invention. A lie.

While it IS possible that the revised November numbers explain things, I'm leery of accepting that blindly. I would like somebody in charge to explain to all of us how the number of discouraged workers can remain the same as the previous month, but we nevertheless lose 500,000 from the workforce.

It is my opinion that something is wrong, here. We're missing SOMETHING. If not, then we're being lied to.