Michael Lombardi: As I have been pointing out to my readers, the “official” unemployment numbers issued by the government are misleading because they do not include people who have given up looking for work and those people with part-time jobs who want full-time work.
In January, there were 3.6 million individuals in the U.S. economy who were long-term unemployed—out of work for more than six months. (Source: Bureau of Labor Statistics, February 7, 2014.)
Those who are working part-time in the U.S. economy because they can’t find full-time work stood at 7.3 million people in January.
Add these two numbers into the equation and the real unemployment rate, often called the underemployment rate, is over 12%. Meanwhile, the official unemployment rate from the Bureau of Labor Statistics sits at 6.6%—that’s the number you will hear politicians most often quote.
But if there’s a group of policymakers that looks past the “official” unemployment numbers, it’s the Federal Reserve.
At her speech before the Committee on Financial Services, U.S. House of Representatives in Washington, D.C. last week, Fed Chief Janet Yellen said, “Those out of a job for more than six months continue to make up an unusually large fraction of the unemployed, and the number of people who are working part time but would prefer a full-time job remains very high. These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market.” (Source: “Semiannual Monetary Policy Report to the Congress,” Federal Reserve, February 11, 2014.)
Like all economists, Yellen knows that when an individual has a part-time job then their income isn’t as high, so they pull back on consumer spending. This also results in a greater reliance on government assistance programs, because these people often cannot afford to pay for even the most basic needs—none of which is good for economic growth. That’s why food stamp usage in the U.S. economy has risen to a record-high.
Unfortunately, the news for the jobs market hasn’t been bullish going into 2014. Take The Home Depot, Inc. (NYSE:HD), for example. The giant home improvement retailer said it would be hiring 80,000 part-time positions in preparation for spring. (Source: The Home Depot, Inc., February 12, 2014.) A preferable announcement would say, “We are hiring for full-time work.”
With the jobs market in the U.S. economy continuing to be ever so fragile, consumer spending in the U.S. economy is declining. In January, retail sales in the U.S. economy declined 0.4%, and the previous month’s numbers were revised lower, from a 0.2% increase to negative 0.1%. (Source: U.S. Census Bureau, February 13, 2014.) December and January are usually good months when it comes to consumer spending. This year, it’s been different. This is something definitely worth considering.