A Number We Trust

The Bureau of Labor Statistics non-farm payroll (NFP) report is often a market mover. But should it be?

Both non-farm payrolls and the unemployment rate can be very misleading. After all, as we’ve mentioned before, the Bureau practices “fuzzy math.”

Before I show you today’s chart, let’s agree on a couple of true/false questions:

1) If fewer light switches are in the ON position, then more light switches are in the OFF position. True or false?

2) If fewer people are working, then more people are not working.
True or false?

They’re both trick questions. What about the light switches that have dimmers? What about the people the BLS counts as neither “employed” nor “unemployed.”

Ahhh. There-in lies the rub.

Today’s chart shows two statistics. The orange line is the unemployment rate. This is the familiar metric that says, “8.2% of our population is currently unemployed.” The line is plotted inversely, meaning it goes up when the unemployment rate goes down.

The blue line is the percentage of the population that IS employed – call it the “employment rate.” This metric says, “58.5% of our population is currently employed.”

These two metrics seem like two sides of the same coin. And most of the time they act that way. Usually, when the unemployment rate goes down… the employment rate goes up.

See larger image

But that all changed when we emerged from the 2007-2009 recession.

As you can see, the employment rate has been flat. In 2010, 58.5% of the population was employed. In 2012, 58.5% of the population is employed.

Yet, somehow, the unemployment rate has improved since 2010. It’s dropped from 10% to 8.2%.

So which metric do we trust?

We’re not fooled. We’d certainly feel more confident if the employment rate was improving. Regardless, the number of new jobs being created is too small to have any significant, positive impact on our economy.

Harry Dent’s Most Disturbing Prediction in Years

Harry Dent, one of the most respected economists in the industry, has uncovered a disturbing market event that could soon devastate millions of investors. In short, he has undeniable proof that one of the market’s safest and most popular investments is about to get slaughtered… and it will have dire consequences for those who don’t prepare right away.

For full details on the event Harry’s dubbed as the “Safe-Asset Slaughter”… and to ensure you escape the coming carnage, I urge you to watch this special presentation.

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Categories: Economy

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.