The unemployment report on Friday was simply a disaster.

Based on the government’s payroll survey, the economy shed 85,000 jobs in December, many more than analysts had expected.

Worse, based on its separate household survey, the government reported that the job losses in December were 589,000 — over SIX times more.

So which of the two figures is more accurate regarding the true number of jobs lost last month — 85,000 or 589,000 jobs?

According to John Williams’ Shadow Government Statistics, it’s clearly the latter. Strip out the faulty seasonal adjustments from the government payroll survey, he says, and it would ALSO show job declines of about 500,000 in December!

Result: Williams estimates that official unemployment is actually closer to 10.2 percent (instead of the 10 percent reported).

In addition…

The government also publishes a broader measure of unemployment, which has now risen to the Depression-era level of 17.3 percent. This includes discouraged workers who have given up looking for a job for up to a year, plus part-time workers seeking full-time employment.

If you include ALL workers who have given up looking for a job (as the government used to before the Clinton administration changed the definition), Williams estimates that the TRUE, all-inclusive unemployment rate is now close to 21.9 percent!

Where is all that government stimulus money going?

And most shocking of all, we are suffering this chronic high unemployment despite the greatest government stimulus of all time.

Between monetary and fiscal stimulus packages and programs, Jim Grant, editor of Interest Rate Observer, estimates that the U.S. government has already poured in amounts equivalent to at least 30 percent of GDP. That’s over three times more than the stimulus in the first years of the Great Depression … and TEN times more than the average stimulus during eight U.S. recessions following World War II.

The big problem: Instead of going into job creation as intended, most of this Washington funny money is flowing into other assets, including U.S. stocks.

This helps explain why so many stocks can continue rising despite the economic malaise. In fact, writes Mike Larson on his Interest Rate Roundup blog post, instead of discouraging stock investors, Friday’s bad unemployment number may merely encourage the Fed to keep its money-printing engines running that much longer.

Source: Martin D. Weiss, Ph.D. Money and Markets newsletter January 11, 2010

Technorati Tags: business, unemployment, unemployment rates

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