Commentary by James H. Shott
The headline in The Washington Post trumpeted “U.S. adds 243K jobs in January; unemployment rate drops to 8.3%,” and the story which followed provided the detail. “The nation’s unemployment rate dropped for the fifth straight month to 8.3 percent, its lowest level in three years, the Labor Department reported Friday, with widespread hiring across the economy,” the story said. “The Labor Department recorded gains in many parts of the economy including the restaurant business, accounting, health care and retail stores,” and “the ranks of the unemployed dropped to 12.8 million in January from 13.1 million the month before,” the story continued.
President Barack Obama lost no time making hay in that little bit of sunshine. "The unemployment rate came down because more people found work, and altogether we've added 3.7 million new jobs over the last 23 months," he said. And the San Francisco Chronicle issued this rose-colored account: “With Friday's jobs report punctuating the nation's steadily improving conditions, Mitt Romney and his advisers are confronting an unexpected economic turnaround that threatens to undercut the central rationale for his candidacy.”
Make no mistake: anytime an unemployed American gets a job these days it is reason for happiness. But while the president, the Post and the Chronicle were satisfied with that little bit of information, there is a good bit more that we need to know before popping the corks on the bubbly.
The rest of the story is that while 243,000 jobs were added to the economy, more than four times that many people – 1.177 million– gave up looking for work last month. If you want the unemployment rate to look better, all you have to do is lower the number of people in the job market, and that’s precisely what happened when those people dropped out. Furthermore, in the week ending January 28, the advance figure for seasonally adjusted initial jobless claims was 367,000, and that is 124,000 more than found work.
If 243,000 new jobs caused the unemployment rate to drop by two-tenths of a percent, from 8.5 to 8.3 percent, when you add back into the equation the 1.177 million that dropped out of the job market, the more accurate unemployment rate is around 9.4 percent.
One of the many serious problems getting little attention from an administration focused on putting the best possible spin on things is long-term unemployment. Testifying before the House Budget Committee last Thursday, Federal Reserve Chairman Ben Bernanke called the problem “particularly troubling.”
Economists at the Federal Reserve Bank of San Francisco compared the number of unemployed with the number of job openings in the United States and found that the main reason for the spike in long-term unemployment is that there simply are too few jobs to be had. “It is likely that the recent pattern of massive job losses and a weak jobs recovery is the primary explanation for elevated unemployment duration,” according to the authors, Rob Valletta and Katherine Kuang. Twenty-four million Americans are unemployed, under-employed or have stopped looking for work. Today’s labor force is the smallest since the 1980s.
So, despite all the grand rhetoric emanating from Democrat circles in Washington, things aren’t exactly peachy in Employment Land. The National Center for Policy Analysis reports figures showing a big “fail” from the $787 billion Obama stimulus: “In February 2009, when the American Recovery and Reinvestment Act (ARRA) became law, 12.5 million Americans (8.1 percent of the work force) lacked jobs. In December 2011, with 80 percent of the ARRA's government ‘stimulus’ money spent, 13.1 million Americans (8.5 percent of the work force) lacked jobs.”And the near future holds no better news. The Congressional Budget Office (CBO) forecasts that the unemployment rate will remain above 8 percent both this year and next.
Mr. Obama was also spinning wildly on the nation’s economy. "We're also seeing more optimistic economic forecasts for the year ahead, in part due to the package of tax cuts I signed last month," he said. But the CBO sees things differently. Growth in GDP is forecast to be poor, with real GDP growing by an anemic 2.0 percent this year and just 1.1 percent next year.
With those kinds of results after three years of liberal, big-government policies, perhaps it would be wise to try something different.
During and after the campaign Mr. Obama often reminded us that we were suffering the most serious economic crisis since the Great Depression. Yet, he wasted three years “not letting a good crisis go to waste,” focusing on his ideological dreams, like ruining the nation’s health care system by turning it into just one more government-run nightmare; spending nearly a trillion dollars on a stimulus program for projects “that weren’t as shovel ready as we thought”; throwing away more than a billion taxpayer dollars on green energy companies that have now declared bankruptcy; and blocking every effort to develop domestic energy resources.
Now the president tells us that he is at long last focusing on unemployment, if only out of political necessity. He may have no idea how to help the economy repair itself, but he sure does know how to campaign.
Cross-posted from Observations