The mainstream media is once again breathlessly reporting that the nation’s unemployment rate has posted its largest one-month increase in 22 years (since February 1986) with today’s data release from the Department of Labor / Bureau of Labor Statistics. 

For the record the nation’s unemployment rate did increase to 5.5% as reported by DOL / BLS today, jumping 0.5% from 5% last month.  For reasons outlined below we’re probably more concerned with the 5th straight drop (albeit small) in total nonfarm employment, down 49,000 jobs on the household survey in May.  For those of you that follow this information routinely, you know that all the figures reported today are subject to revision as the data is studied more carefully,

Reading around a bit this morning, we’ve noted commentary that makes a bit more sense of the data in a couple of regards.  One, there’s always a challenge in estimating unemployment at this time of year due to the entry of students into the job market, and there’s a bit of “catch up” being played here given declining total nonfarm employment. 

Here are a few select quotes from some folks much smarter than us opining on the issue-

This is a pretty weak report.  And you can’t dismiss a five-tenths of a jump in the unemployment rate, even if you figure there’s some flukiness to the data…That flukiness referred to teenagers, who tend to enter the job market in May as schools let our the for the summer; the result is a bloated labor pool.  –Ethan Harris, Lehman Brothers

The major factor behind [the jump in the unemployment rate] was the increase in the rate of unemployment among 20-24 year olds. The rate of unemployment in this cohort increased from 8.9% to 10.4%. Over the past 10 years the data has not see any jump in the unemployment rate in this cohort from the April-May reporting period. This does look to us like another problem with seasonal adjustments due to the early arrival of young people into the labor force in May, that the normally occurs in June. We would expect that the “teen angst” at the BLS to subside over time, which should lead the bureau to correct this in subsequent months, which would provide a slightly downward revision to the overall rate of unemployment. –Joseph Brusuelas, Merk Investments

It seemed a little strange that the unemployment rate had been unchanged over the first four months of 2008 despite four consecutive monthly declines in the payroll survey’s measure of employment. Thus, we suspect that much of the big rise in the unemployment rate seen in May is merely a catch-up to where it should have been heading all along… The unemployment rate will probably continue to bounce around in coming months, but is likely to drift up toward 6.0% on an underlying basis.–David Greenlaw, Morgan Stanley

I suspect that the unusually large increase exaggerated the deterioration in the unemployment rate that occurred in May but probably reflects the weakness that has developed since the end of last year. Part of the jump in the unemployment rate appears to be attributable to the seasonal surge in students seeking summer employment. Three factors could have magnified the increase. First, the trend toward an earlier end to the academic year means a relatively larger share of college (and high school) students will enter the job market in May than in past years. Second, with this year’s May job survey extending into the second half of the month, a larger portion of this year’s summer job seekers entered the job market than usual. Third, the weaker economic environment combined with demographic forces has boosted school enrollments so that a larger number of students were “liberated” from their studies in May. Together, these factors probably boosted both labor force participation and unemployment enough to add 0.1% to 0.3% to the overall jobless rate. –David Resler, Nomura Securities

Time will tell, of course, and things are necessarily rosy, but they’re certainly not as desparate as the media would have you consider today.  

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