Friday's Unemployment Rate Report Likely to Understate
The government's final unemployment report before the midterm elections is based on job market conditions around mid-September. Gallup's modeling of the unemployment rate is consistent with Tuesday's ADP report of a decline of 39,000 private-sector jobs, and indicates that the government's national unemployment rate in September will be in the 9.6% to 9.8% range. This is based on Gallup's mid-September measurements and the continuing decline Gallup is seeing in the U.S. workforce during 2010.
However, Gallup's monitoring of job market conditions suggests that there was a sharp increase in the unemployment rate during the last couple of weeks of September. It could be that the anticipated slowdown of the overall economy has potential employers even more cautious about hiring. Some of the increase could also be seasonal or temporary.
Further, Gallup's underemployment measure suggests that the percentage of workers employed part time but looking for full-time work is declining as the unemployment rate increases. To some degree, this may reflect a reduced company demand for new part-time employees. For example, employers may be converting some existing part-time workers to full time when they are needed as replacements, but may not in turn be hiring replacement part-time workers. Another explanation may relate to the shrinkage of the workforce, as some employees who have taken part-time work in hopes of getting full-time jobs get discouraged and drop out of the workforce completely -- going back to school to enhance their education, for example, instead of doing part-time work. It is even possible that some workers may find unemployment insurance a better alternative than part-time work with little prospect of going full time.
Regardless, the sharp increase in the unemployment rate CLICK HERE