US Economy Hits Brick Wall

The latest Gallup Survey shows U.S. Unemployment at Highest Level Since May

Unemployment, as measured by Gallup without seasonal adjustment, increased to 9.4% in mid-September from 9.3% in August and 8.9% at the end of July. This finding makes it far more unlikely that there will be a significant decline in the U.S. unemployment rate prior to the midterm elections.

Unemployment Rate - Not Seasonally Adjusted



Underemployment thus remains unchanged at 18.6% so far in September compared with late August, though up from 18.4% at the end of July. Underemployment peaked at 20.4% in April and has yet to fall below 18.3% this year.

Underemployment - Not Seasonally Adjusted



Gallup classifies American workers as underemployed if they are either unemployed or working part time but wanting full-time work. The findings reflect more than 18,000 phone interviews with U.S. adults aged 18 and older in the workforce, collected over a 30-day period. Gallup's results are not seasonally adjusted and tend to be a precursor of government reports by approximately two weeks.

As might be expected given declining consumer confidence and continuing negative news about the job market nationally, the percentage of underemployed Americans who are "hopeful" that they will be able to find a job in the next four weeks fell to 43% in mid-September from its 2010 high of 47% at the end of August.

No Unemployment Rate "Hail Mary" Likely

With only three weeks left until the government's final unemployment report before the midterm elections, Gallup's underemployment measure suggests that an immediate, measurable improvement in the nation's job situation is unlikely. Further, Gallup modeling of the unemployment rate component implies that the government will report little to no change in the nation's 9.6% unemployment rate in September, or possibly even a slight increase to 9.7%.

Overall, Gallup's behavioral economic data suggest that former Federal Reserve Chairman Alan Greenspan was right when he noted early this summer that the U.S. economy seemed to hit a wall in June. Economic confidence and consumer spending have declined since the end of May. At the same time, unemployment and underemployment have stagnated at very high levels.

The discrepancy between the Gallup survey and the BLS survey can partially be explained by the fact Gallup does not seasonally adjust numbers but the BLS does. Moreover, the BLS discards "marginally attached workers" (those who want a job but did not look in the last month), but Gallup does not.

Please see article for additional charts.

Because employment has hit a brick wall, as expected, I also expect to see a slaughter in November with Republicans picking up 45 seats or so in the House, enough to take the podium away from Nancy Pelosi. Thank God!

Bear in mind, I am not a Republican. Rather I am a Libertarian backing candidates who closely align with those philosophies. I wrote in Ron Paul in the last presidential election.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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