May unemployment report

This morning's BLS numbers show the unemployment rate jumping a surprising half-point to 9.4 percent even though the number of jobs lost came in at its lowest figure--345,000--since last September. The seeming discrepancy is explained nicely by the NYT's Peter Goodman and Jack Healy:

The jobs report presented a statistical puzzle. On the one hand, the net decline in jobs was much smaller than expected and the lowest figure since September. The economy lost an average of more than 700,000 jobs a month during the first three months of the year....

At the same time, the unemployment rate leapt to its highest rate in more than a quarter-century, reinforcing fears that joblessness will probably reach double digits.

This disconnect is a reflection of the way in which the government collects jobs data. The number of jobs comes from a survey of employers, while the unemployment data is derived from a survey of households. In April and May, the number of people who told surveyors they were actively looking for work increased by more than one million. These people would have previously been excluded from the unemployment calculation as not being part of the labor force.

According to the BLS's handy "Alternative measures of Labor Underutilization" table, the broader U6 rate of unemployment and underemployment--a much better reflection of the workaday experience of people on the margins of the job market--jumped from 15.8 to 16.4 percent. Long-term unemployment grew substantially. The release notes that "the number of long-term unemployed (those jobless for 27 weeks or more) increased by 268,000 over the month to 3.9 million and has tripled since the start of the recession."

Floyd Norris adds historical perspective:

The government says that 4.5 percent of the work force has been out of work for 15 weeks or more. The worst previously seen — at least since 1948, when the government began counting people that way — was 4.2 percent, in December 1982.

Put another way, 21 percent of those who are unemployed have been out of work for at least 15 weeks. That is also a record, exceeding the 19.6 percent proportion seen during the 1958 recession.

Since employment peaked in 2007, the number of total jobs is down by 4.3 percent, and the number of private-sector jobs is down by 5.4 percent.

Those figures exceed the peaks since 1950 of 4.2 percent and 5.2 percent, respectively, set in that 1958 recession.

The WSJ's Real-Time Economics has a roundup of preliminary reactions from economists.

The most acute: "The improvement was spread across most sectors with the notable exception of manufacturing, where the 156,000 drop was similar to April’s. But retail, construction and finance losses all slowed. What’s happening here is the end of the post-Lehman panic, which hugely accelerated the pace of losses. But it would be very dangerous to extrapolate this into absolute job gains; why would companies hire? Unemployment horrific, wage gains tanking. Less bad, yes; good, no."--Ian Shepherdson, High Frequency Economics

Also see: Calculated Risk plots current unemployment trends vs. the worst-case scenario used in the bank stress tests. Guess which is higher so far.

Must-reads of the week

Barry Eichengreen--author of a widely hailed book on the gold standard's role in the Great Depression--and Kevin O'Rourke have updated their April article, "A Tale of Two Depressions," which argues that, to date, this crisis has been as bad or worse than the onset of the '30s Depression (though they do add that the government response has been helping).

Daniel Gross at Slate chronicles the running battle between Paul Krugman and Niall Ferguson over Treasuries rates, which is really a fight about whether printing so much money is going to make the United States go bust. 

James Kwak at Baseline Scenario writes about the Indiana pension funds that are holding up a Chrysler bankruptcy deal.

More: NYT, Slumping economy tests aid system tied to jobs; EPI, The wage implosion; DealBook, Politics and the crisis slow the drive to privatize; Baseline Scenario, Legacy loan program called off; Robert Weissman, Crashing GM: Bankrupt thinking; Mike Whitney, Bond market blowout.