Some data have suggested the US labor market might be improving. For example the household survey, used to calculate the unemployment rate, has shown job creation last quarter, leading to a drop in unemployment rate to 9.7%. Weekly claims have also significantly decreased from the top of last year.
But other data are showing different picture. Yes the unemployment rate has decrease. But only on a seasonally adjusted (SA) basis. The non-seasonally adjusted (NSA) data are still showing an increase (at 10.6%):
Why should we look at the NSA data? Because the Bureau of Labor Statistics has to make assumptions about the seasonal impact. And as we discussed previously (link), the current crisis might have temporary altered some of those effects.
Secondly, the labor participation rate (ie. ratio between employed + unemployed and the overall size of the national population of the same age range) for men has significantly decreased:
Finally, the employment to population ratio (same ratio with only the employed) for men is at an historically low level:
Why does it matter? Because in a deleveraging economy, cash-flow is key to determine the speed of the adjustment. On the US households side, employment is the first source of income. So it is the variable to watch, especially if you believe there won’t be another asset bubble any time soon, propping up US household wealth.
