One of the more widespread agreements on Wall Street these days is that the employment situation in the US is improving and will continue to do so going forward. Jobless claims are in a steady decline and at post-recession lows while the unemployment rate is at a five-year low.
While most employment indicators are moving in the right direction, one less widely followed indicator has been going the other way. The chart below compares Gallup’s 30-day rolling average of its daily unemployment rate tracking survey to the ‘official’ unemployment rate from the BLS. Over the last month, Gallup’s unemployment rate has risen from 7.7% up to 8.9%. This is its highest level since March 2012 and 1.5 percentage points above the most recent reading from the BLS. While the unemployment rate from Gallup is not seasonally adjusted like the BLS, going back to 2010 when the survey began, the spread between these two indicators has never been this wide, and there has not been a similar one month surge at this point in the year, or for that matter, any other point in the year.
In the chart below we show three other periods since Gallup began running its unemployment survey in 2010 where the spread between the Gallup rate and the BLS rate (Gallup minus BLS) widened significantly. As you can see in the chart, in the aftermath of the Gallup spikes, we've seen the BLS unemployment rate either trend sideways or only decline modestly. With the most recent significant spike higher in the Gallup unemployment rate survey, will the "official" BLS unemployment rate go through another multi-month period of sideways action? We know Mr. Bernanke says the Fed monitors everything, and if they monitor this indicator, it has to be raising the Fed chairman's eyebrows.
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