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The S&P500 rallied 2.6% on Friday largely on seemingly tremendous employment data that showed:

“Total nonfarm payroll employment rose by 2.5 million in May, and the unemployment rate declined to 13.3 percent, the U.S. Bureau of Labor Statistics reported today.” If one reads further down in the report it appears that the BLS itself admits that the data was inaccurate and that the unemployment number should have been 16.3%.

Drilling down in Friday’s report, the BLS writes,

“However, there was also a large number of workers who were classified as employed but absent from work. As was the case in March and April, household survey interviewers were instructed to classify employed persons absent from work due to coronavirus-related business closures as unemployed on temporary layoff.”

And here is the problem!!

“However, it is apparent that not all such workers were so classified. BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue…..If the workers who were recorded as employed but absent from work due to... had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported.

Lance Roberts CIO of RIA Advisors writes, “In other words, if the survey interviewers had followed instructions, the unemployment rate would have been 16.3% even using their own data, which suggests the number of unemployed is closer to 26 million.”

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