FINALLY, we should get some honest figures on the health of the nation’s job market.
On Friday the Labor Department will report the July payroll survey and the month’s unemployment rate.
Wall Street thinks that the nation lost another 75,000 jobs this month, with the headline unemployment rate rising to 5.6 percent.
Unemployment was at 5.5 percent in June, showing a tremendous jump from 5.0 percent in May.
And 62,000 jobs disappeared in June. In fact, the number of jobs in the US has declined every month this year.
But as I’ve been explaining in this column for years, the number of jobs that are lost or gained each month has a lot to do with tricky statistics.
Friday’s number, while not perfect, will be the first monthly job report this year that isn’t defiled by ridiculous assumptions.
But each month the Bureau of Labor Statistics, which keeps track of the nation’s employment health, assumes that there are loads of newly formed companies that couldn’t be reached by its phone surveys.
So the BLS guesses at how many jobs these newbies created. This assumption is called the Current Employment Statistics Birth/Death Ratio.
These crazy assumptions caused the economy to look a lot stronger than it probably was during the springtime.
Even though the economy lost jobs in March, April, May and June, the numbers weren’t as big as the experts expected.
Those optimistic assumptions should almost disappear with Friday’s number.
Last year the government added a modest 26,000 phony jobs to its count in July – far below, say, the 317,000 birth/death jobs tacked on in this past April.
So Friday’s number – whether it’s better or worse than expected – is, at least, going to be more honest.
That gets me to the misleading unemployment rate.
If you really want to know what percentage of the US workforce is out of work, struggling or underemployed, you need to look at something called the U-6 unemployment rate produced by – but never emphasized by – the government.
This includes people who are only working part time because they can’t find full-time jobs.
The category also counts as unemployed some people who have given up looking for work because they became discouraged.
Last month U-6 stood at 9.9 percent – compared to the 5.5 percent unemployment rate you see in the press.
U-6 has been growing rapidly for more than a year and certainly is a better explanation – along with things like rising gas prices – for why consumers are feeling especially glum.
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On Thursday we’ll get the first look at the gross domestic product for the second quarter.
And thanks to the economic stimulus checks from Washington the figure will probably stay in positive territory.
Experts are expecting annualized growth of between 1.6 percent to 2 percent.
After this number comes out the foolish debate will rage once again over whether or not we are in a recession.
But the more interesting aspect of Thursday’s GDP report could be the revisions.
The so-called “benchmark” revisions could show that the economy was weaker during last year’s fourth quarter and this year’s first three months.
Could those figures be revised into negative numbers?
Not likely since there’s a presidential election coming up.
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Score one for Washington.
Short selling in Fannie Mae and Freddie Mac has ground to a halt because of new rules from the Securities & Exchange Com mission.
S3 Technologies, a data firm that tracks such things, says short sales in Freddie Mac and Fannie Mae – the quasi governmental mortgage companies – is down 98 percent in recent weeks.
The SEC recently imposed a 30-day rule against so-called naked short selling of financial stocks.
A short sale is a bet that a company’s stock will decline in price. In order to take advantage of that decline a person can borrow stock from someone else and sell it.
If the price declines as he hopes, the stock borrowers can buy the stock back at a cheaper price and return it to the owner – making a profit along the way.
In a naked short sale – which is an illegal but widespread practice nonetheless – people will sell “borrowed” stock without ever really taking possession of the securities.
Since the short seller never has to go through the trouble of finding stock he can borrow shorting can be much more prevalent and damaging to the company’s share price.
Naked short selling was blamed for the rapid decline in Fannie Mae’s and Freddie Mac’s stock, as well as the shares of many other financial companies.
John Standerfer, vice president of S3, said small investors have virtually stopped shorting Fannie Mae and Freddie Mac.
“It has become virtually impossible now for retail customers to short shares,” he said. “There simply are no shares available to borrow against the shorts.”