Unemployment rate rises as more join ranks of unemployed

The Bureau of Labor Statistics' August jobs report on Friday contained some tepid good news: The private sector added 67,000 jobs. The news is only half good since the economy needs to add over 100,000 jobs each month just to tread water with population growth. It becomes even less optimistic when one considers what happened in the public sector.

Due to a winding down of the census, combined with a continued loss of state and municipal jobs, the public sector shed 121,000 jobs in August. This trend is bound to continue well into 2011 as states and municipalities scramble to make ends meet.

The loss of public sector jobs contributed to the increased unemployment rate, which rose in August from 9.5 to 9.6 percent. Another factor pumping up the unemployment rate is the increased labor force participation rate, which rose due to a greater number of people actively looking for work; that number rose from 14.6 to 14.9 million.

Inexplicably, the number of long-term unemployed fell dramatically as the number of long-term unemployed (those out of work for 27 weeks or more) fell by 323,000 to 6.2 million. The median length of unemployment fell as well, from 22 weeks in July to 19.9 weeks in August.

Screeech! Wait a minute! I smell a rat!

The economy lost jobs, but the number of long-term unemployed fell. How does this happen, especially when the labor force participation rate rose? That makes no sense whatsoever unless companies and governments started hiring the long-term unemployed on a pretty large scale... which seems kind of unlikely. More likely is that they just stopped being counted.

And so another official government report on unemployment turns out to be basically worthless as a gauge of reality... sigh.