Which Is The True Jobless Rate Correlation? Charting The Schrödinger Unemployment Rate

Tyler Durden's picture


In an essay by Pimco's Tony Crescenzi, using the old and worn out title "To QE or Not to QE", which asks just that question, one of the lines of analysis focuses on the traditional conventional wisdom relationship between the jobless rate and initial claims for unemployment insurance. Tony says that this correlation leads him to believe that the unemployment rate is lower than where it official stands because, "Progress has been made, for example, on the employment front, with the six-month moving average for private payroll gains increasing to 214,000 per month in the six months ended in February 2012 from 160,000 per month in the 12 months prior. Importantly, weekly filings for initial jobless claims have fallen to a four-year low, fully 100k below year-ago levels and in territory consistent with a further decline in the unemployment rate (see Figure 1)."

So far so good, and indeed if one very simplistically tracks merely the unemployment rate to jobless claims, the picture does indeed seem rosier than it currently is. The problem however, is that as always happens in this case, initial claims reflect only a discrete component of the true unemployment situation in the New Normal, which more than anything is characterized by one specific feature: the avalanche like implosion of the labor force, and the departure of millions of people, almost monthly from the labor pool, noted so very often on these pages, and recently forcing even Goldman and JP Morgan to ask whether Okun's law is not in fact broken precisely because of this. As such there is one other correlation that in our humble opinion should be tracked far more closely when trying to anticipate the unemployment rate: that of the unemployment rate but not just to initial claims, but rather to initial and continuing claims, as well as extended benefits and EUCs, which provide a far better picture of those who are truly falling out of the labor pool. And as the chart below shows, when using that far more accurate New Normal correlation, the picture is decided worse. In fact, instead of a sub-7% implied unemployment rate, the true implied unemployment rate is just over 12.5%, precisely in line with our calculations if one assumes a historical labor force participation, instead of using election year gimmicks to paint the economic tape.

Which correlation is accurate: we leave it up to our readers to decide, but note that just like everything else in a centrally planned world, we now have yet another Schrödinger data point- what the propaganda machine wants it to be, and what it really is.

Chart: Bloomberg

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Thu, 03/29/2012 - 16:02 | 2301639 vast-dom
vast-dom's picture

Hey Ty: Schrödinger's analogy may be too limited and too binary. There are too many physics and reality defying bullshit accounting and rationalizing tricks out there -- it's more like multiple alter-bullshit-worlds out there all converging on a singularity that shall be the great market correction.

Thu, 03/29/2012 - 16:30 | 2301753 Spastica Rex
Spastica Rex's picture

There exists a possible world where you are exactly right.

Thu, 03/29/2012 - 16:35 | 2301783 vast-dom
vast-dom's picture

yes and it rarely has much to do with being right or lining up with reality constructs, of late....

Thu, 03/29/2012 - 18:50 | 2302086 WhiteNight123129
WhiteNight123129's picture

How about tracking the population on food stamps as a percentage of the tranche of the population which in old enough to work? You cross a variety of things with this metric, but you can not have this metric explode without concluding that you have either a demographic meltdown and or an unemployment meltdown.

Thu, 03/29/2012 - 21:26 | 2302474 ShankyS
ShankyS's picture

I stopped reading after the first paragraph. How can someone at PimPco be such a crony stool spinning moron? Strike that, my bad. Forget I asked that question. 

Thu, 03/29/2012 - 16:30 | 2301757 ACP
ACP's picture

A black hole, where even the Fed's money can't escape after reaching the event horizon?

Thu, 03/29/2012 - 15:44 | 2301577 NEOSERF
NEOSERF's picture

It costs $40K to keep a criminal in prison annually so assuing it is similar to be roofed, fed, healthcared, transported etc., every citizen that ends up unemployed and on some sort of government assistance puts more pressure on the Fed budget...8 million new unemployed with no savings = $320B each year...this is the "cost" of pretending that unemployment is getting better...

Thu, 03/29/2012 - 15:45 | 2301581 SDRII
SDRII's picture

where is the China RR hike leak..fu$kin% joke

Thu, 03/29/2012 - 15:47 | 2301586 SheepDog-One
SheepDog-One's picture

Can't do that, markets still open and theyre sprinkling pixie dust on it, or angel dust or whatever.

Thu, 03/29/2012 - 15:48 | 2301585 Conman
Conman's picture

Insane, PPT working hard today - got it green!

Thu, 03/29/2012 - 15:48 | 2301590 SheepDog-One
SheepDog-One's picture

Every time I see these criminals step in and sprinkle their angel dust on these bullshit stock markets, I head to ammotogo.com and place an order for a few hundred rounds of ammo.

Thu, 03/29/2012 - 15:55 | 2301615 stocktivity
stocktivity's picture

Ahhh yes...more guns and ammo...that's the answer...hee hee

Thu, 03/29/2012 - 16:00 | 2301633 SheepDog-One
SheepDog-One's picture

Well thats not 'THE answer' to anything, but its a good start. When these maniacs finaly lose control and it spins into chaos at least you can have a chance fend off the stupid rioting Neandersheeple.

Fri, 03/30/2012 - 10:21 | 2303376 zuuma
zuuma's picture

Dept of Homeland Security(TSA) is buying 450 MILLION hollow point bullets.


Hollow points are banned by the  Hague convention for armies.

That's THEIR answer.

Thu, 03/29/2012 - 15:57 | 2301618 SilverTree
SilverTree's picture

I got 5 spam cans of surplus 7.62 x 54R @ .25c a round for my Mosin.


Zombies beware.

Thu, 03/29/2012 - 16:32 | 2301766 Spastica Rex
Spastica Rex's picture

I love Spam. Wish I could afford to eat it more often.

Thu, 03/29/2012 - 15:58 | 2301623 SilverTree
SilverTree's picture


Thu, 03/29/2012 - 15:54 | 2301593 HD
HD's picture

You can't print jobs.  Ben's whole focus will be keeping bonds in check. Every EU country slowly but surely has lost control of their bond market - and it's coming for the US.

Holding the market at 1400 isn't going to get Obama reelected - but soaring food and fuel prices will give the election to Mittens. The fed has no good options left. Now they are looking for scapegoats.

Thu, 03/29/2012 - 15:56 | 2301619 SheepDog-One
SheepDog-One's picture

Good point, IF they have ramped up stocks in the belief that gets their puppet Obama back in, thats a total wash now with gas and food prices thru the roof. I expect them to do something drastic now.

Thu, 03/29/2012 - 16:00 | 2301634 HD
HD's picture

IRAN  I ran so far away...trying to get away.

Thu, 03/29/2012 - 16:42 | 2301800 Spastica Rex
Spastica Rex's picture

+1 Flock of Seagulls

Thu, 03/29/2012 - 15:51 | 2301601 CharlesH
Thu, 03/29/2012 - 15:55 | 2301613 Dr. Engali
Dr. Engali's picture

This market is so predictable it's boring. The market used to be exciting.

Thu, 03/29/2012 - 15:58 | 2301622 SheepDog-One
SheepDog-One's picture

Yea now here we sit with markets near all-time highs, totaly manipulated, and a collapsed real economy with $5 gas and crazy food prices. Somethings going to snap back bigtime.

Thu, 03/29/2012 - 16:34 | 2301778 Shizzmoney
Shizzmoney's picture

Somethings going to snap back bigtime.

Yeah, the people.

I mean, at some point, we have to start going gorilla and losing our shit to change stuff.  The passive, ask nicely way, ain't working.

Or we all "Go Galt" at once at stop working at our jobs, stop paying our taxes, our bills, and burn the dollar bills en masse.

But that won't happen.

Thu, 03/29/2012 - 16:44 | 2301810 Spastica Rex
Spastica Rex's picture


I love that video. Not convinced that this is how things will fail, but it's fun to think about. I guess it's matter of time scale.

Thu, 03/29/2012 - 15:59 | 2301625 slaughterer
slaughterer's picture

Predictable, and--actually--easy to trade.  I do not find it boring at all. 

Thu, 03/29/2012 - 15:59 | 2301632 Conman
Conman's picture

Yup I was telling my bud in the morning, no way they let it finish red today - count on it.

Thu, 03/29/2012 - 16:08 | 2301667 Dr. Engali
Dr. Engali's picture

Sure it's easy to mint coin but, I like to make money on the turns too. It's no fun if the market doesn't turn.

Thu, 03/29/2012 - 16:00 | 2301631 Everybodys All ...
Everybodys All American's picture

That's because you could make money buying and/or selling. Now you just get crushed if you short this type of system. Yeah system. It's not a market any longer.

Thu, 03/29/2012 - 16:00 | 2301629 goforgin
goforgin's picture

The problem with chart is that we do not have an accurate relationship of continuing claims with claims and the official unemployment rate. With few exceptions continuing claims were always based on 26-weeks of unemployment insurance. This has changed in the recent past, so I don't think that the assumptions on the real unemployment rate necessarily make sense or reflect what is going on based on current data relationship.


Thu, 03/29/2012 - 16:00 | 2301635 markbark
markbark's picture

I always find it hard to figure whether Crescenzi is Pimco's incompetent version bullsh*tting Joe LaVorgna or just an out and out insididious crooked liar... I lean towards the later...

Thu, 03/29/2012 - 16:02 | 2301638 SheepDog-One
SheepDog-One's picture

So what has the DOW clawed back today, 100 points? Over what? 

THis is just retarded now, insults anyone with any intelligence.

Thu, 03/29/2012 - 16:08 | 2301668 espirit
espirit's picture

Good news=Bullish

Bad news=Bullish

No news=Bullish


Thu, 03/29/2012 - 16:23 | 2301722 lunaticfringe
lunaticfringe's picture

Go long everything. The bankers need to dump that shit they've been buying. This market is so sick that it is beyond belief.

Thu, 03/29/2012 - 16:10 | 2301672 beaker
beaker's picture

So why aren't the fucking Republicans trumpeting this?  Are they that stupid?

Fri, 03/30/2012 - 06:30 | 2302917 Sathington Willougby
Sathington Willougby's picture
No, but the voters are.
Thu, 03/29/2012 - 16:21 | 2301716 lunaticfringe
lunaticfringe's picture

In the new world order...All news is good news. Meteor colliding with earth? Buy home builders.

Thu, 03/29/2012 - 16:24 | 2301726 JohnKozac
JohnKozac's picture

"Electronics retailer Best Buy said Thursday it's closing 50 stores and cutting 400 employees as it wrangles with how best to proceed in an evolving market for its products."


Where will Little Johnny buy his iJunk?

Thu, 03/29/2012 - 16:57 | 2301849 Westcoastliberal
Westcoastliberal's picture

Even this number is suspect.  That's 8 employees per store getting the ax.  Do you REALLY think they'll only cut 400 total?  More like 1,500.

Thu, 03/29/2012 - 20:13 | 2302294 Maos Dog
Maos Dog's picture

Lol I was thinking the same thing, I think there 50 stores in the southeast alone that can go...

I must admit I like shopping at Best Buy, being the only one in the store makes for a more personal shopping experience



Thu, 03/29/2012 - 16:33 | 2301775 Pintail
Pintail's picture

personally, I prefer the employment to population ratio which is at historic lows.


Thu, 03/29/2012 - 16:55 | 2301842 Westcoastliberal
Westcoastliberal's picture

As a small businessman I can testify things are much worse than a year ago, there has been zero improvement and in fact I've seen many local businesses close up shop. More panhandlers than ever on the street and I personally know 6 or 7 people out of work and can't find a job; others moved back in with parents because they can't find a job that supports independent living.

The government's whitewash of the facts isn't just insulting, it's downright tragic.  And don't get me started on the gov's manipulation of the markets.  I agree with some of the other posters here that the percentage employed against the population is what we should be looking at.  Then minus out all the part-time jobs that don't pay shit.  Earning $8 an hour when your former "real" job paid $100K plus bennies ain't gonna cut it.

Thu, 03/29/2012 - 17:22 | 2301917 Element
Element's picture

More than a million persons protest during general strike in Spain:


Arrests, clashes amid general strike in Spain

By Lisa Millar

Updated March 30, 2012 07:55:18

"... Tens of thousands of protesters have swamped Spain's streets to support a general strike, venting their anger over labour reforms and deep spending cuts. Thursday's strike was called to protest against strict new labour laws and more austerity measures, and nearly 1 million people took part in Madrid alone. ..."


Thu, 03/29/2012 - 18:04 | 2302010 Snakeeyes
Snakeeyes's picture



Look at unemployment in Europe versus the US. And look at the stagnation of employment to population in the US.


Nice recovery!

Thu, 03/29/2012 - 20:30 | 2302339 gookempucky
gookempucky's picture

 Tony Crescenzi= full of shit----------------------------takes creation of 200k jobs just for those coming online each month = net net ZERO.   BLS=buffalo liver soup with a little more bullshit thrown in.

Tony try taking a ride across this countryvia rural hiways (not in your limo) and  I'll tell you why Home Depot/Lowes are still in business---give you a hint--its called PLYWOOD FUCKING WINDOWS.


Thu, 03/29/2012 - 22:54 | 2302634 non_anon
non_anon's picture

Schrodinger's cat has been raped or has it?

Thu, 03/29/2012 - 23:27 | 2302668 lamont cranston
lamont cranston's picture

In my other (married) 70s-80s life, I had a black lab named Food Stamp, because the man I bought him from said she (yes, she) weas eating him out of house & home. 110 lbs. in 87. Whew. Dont pick on mah dawg. 

She always had work, following our 3 cats around when they would catch mice and small snakes along the creeek. Kinda like a cheerleader, she understood to stay the hell away when real serious work was on tap. Then took credit. As James Brown sed, "Spotted Snake."

This whole stabilization crap is BS. Cat be out the bag and w are all screwed.

This relates to Osama Care. No way it gets past the SC in its form, they'll back off and tryagain in a few years after MIttens be out. 

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