Tuesday, March 13, 2012

After February’s jobs report, some straight talk about unemployment

By James H. Shott

President Barack Obama told workers at an aircraft-parts manufacturing plant in Virginia that "More companies are bringing jobs back and investing in America. And manufacturing is adding jobs for the first time since the 1990s." "The economy is getting stronger" he said.

The Labor Department revised the figures for job growth up by 61,000 in December and January, even though unemployment remained at 8.3 percent. Cumulative job growth for the three months through February was the fastest pace since early 2006.

Reuters trumpeted the job figures as great news for Mr. Obama: “Employers added more than 200,000 workers to their payrolls for a third straight month in February, a sign the economy was strengthening. … Friday's Labor Department report, which showed nonfarm payrolls increased 227,000 last month, also bolstered President Barack Obama's chances for re-election.”

The glee continued to flow: “The jobless rate held at a three-year low of 8.3 percent even as people flooded back into the labor force to hunt for work, and 61,000 more jobs were created in December and January than previously thought.”

Hooray and hallelujah! After three long years, at last the economy has begun to recover from the Obama Recovery. However, even the media cheerleading for the president cannot change reality.

President Obama boasts of 4 million jobs having been created during his tenure. That’s an impressive number. But it is substantially less impressive when we know the rest of the story. Consider that during the downturn an estimated 8-10 million jobs were lost, so after three years more than half the jobs – approximately 5.2 million – are still missing in action.

Further, if you have a tingle running up your leg after hearing the president’s job creation number, looking at the Initial Claims for Unemployment Insurance will sober you up quickly. For the unemployment rate to be affected positively, fewer than 400,000 new jobless claims must be filed each week. Since March of last year, 30 of those 52 weekly reports showed new jobless claims exceeding 400,000, ranging from a low of 354,000 to a high of 478,000. Weekly new jobless claims since last March averaged 401,300, and the total number of new jobless claims for 52 weeks is 20,866,000. That means that during the last 52 weeks, nearly 21 million Americans lost their job and filed for unemployment insurance for the first time, and some of them are still jobless.

“Some economists say the real reason for the recent fast drop in unemployment isn't that there are suddenly so many new jobs — it's that far fewer people than expected are looking for work,” writes Tim Mullaney in USA Today. “Nearly three years into the recovery, the unemployment rate has tumbled even though new job gains are far smaller than in past recoveries. Americans could see the unemployment rate continue dropping to — or even breaking through — the psychologically important 8 percent mark by Election Day with far fewer net gains in jobs each month,” he notes. He goes on to explain that Mr. Obama may benefit from a politically beneficial unemployment rate as the election approaches, even though there will be substantially fewer jobs in America this year than four year ago.

Since the manner of calculating unemployment was changed in the 1990s, only those who are looking for work count as unemployed, and those who have given up looking are not counted, even though many are likely at some point to start looking again. The unemployment rate is the number of unemployed as a percentage of the labor force, which includes only those working or actively looking for work. A smaller number of those categorized as “unemployed” renders a lower unemployment rate.

Another important statistic is the labor force participation rate, which is the percentage of the civilian population not in penal or medical institutions, and included only 63.7 percent of Americans in January of this year, the lowest rate in 30 years. Near the start of the recession, that rate stood at 66 percent. “If employment stays the same, a lower participation rate drives down the unemployment rate. If employment gains rise and the participation rate falls, the unemployment rate falls even more,” the USA Today story noted.

The story goes on to say that if “the participation rate had stayed at 66 percent, the economy would have needed 5.1 million more jobs to reach today's unemployment rate. And if the labor force had grown about as fast as mainstream economists expected, job gains since early 2010 would have been too little to reduce the jobless rate from the 9.8% level reached in February 2010, when net job losses from the recession finally ended.”

So, while the jobs picture does reflect some positive change, it is not so much a picture of a beautiful beach scene as one of a pig wearing lipstick.

As the election nears, we have to be aware of all the factors affecting the employment problem, not just the unemployment rate, given that it is a manipulated number that omits much of the story of how many Americans are suffering because they can’t find work.

Cross-posted from Observations


  1. This comment has been removed by a blog administrator.

  2. Not that anyone reads this blog, but I'm Tim Mullaney and you clearly didn't read my story very carefully. The number of private sector jobs will rise about 1 million to 1.5 million in Obama's first term (the spread depends on whether your begin counting in Jan 2009 or Feb. 2009, the month of the swearing in or O's first full month in office). GWB was down about 1.4M private sector jobs.

    I'm curious and humorously flattered by recent GOP attempts to use my work to justify their own policy preferences and view of the world. You may or may not have an accurate view of the world. Your view of what I actually wrote is clearly wrong, and I would know.

    1. From: CKAinRedStateUSA

      "You may or may not have an accurate view of the world."

      That may or may not be a true statement.

      But I think that all we can say is that each person has his or her view of the world. And that view is informed by many factors.

      Potentially, we may share others' views or we may not share their views.

      Just curious, though: When were you were appointed the arbiter of who does and who does not have that accurate view?

      By the way, perhaps you should una** that high horse on which you ride and take a more realistic view of who you are.

      One thing you might notice is that with such a smarmy remark as "Not that anyone reads this blog," you identify yourself as the typical Democrat/progressive/liberal/leftist who, when really pressed to say something of value, can't.

      Then, your default is the execrable put-down.

      By the way, I read your USAToday piece.

      One thing above all struck me: You've penned Obama's strategy of getting unemployment numbers to less than 8 percent.

      And that's by driving more people into despair, due to the lack of job creation in the private sector, due to the regulatory stranglehold on businesses and the continued demonization thereof by Obama.

      Soon, when the number of those who've given up becomes sufficiently high, game's won.

  3. I see you believe the way to convince people that you are "all that" is to insult the host, Tim, but you might be surprised at how many people visit Barb's site. After all, you did.

    The fact that the data I cited from your "work" supports a different scenario than the one you like doesn't mean much, in the grand scheme of things, Tim. To you, it leads to one conclusion, to others it suggests something entirely different.

    You used data that illustrates how weak Obama is on the jobs issue. It's not the first time I've cited similar data; there's plenty of it out there. I was a little surprised to find it in a mainstream publication, though. Perhaps you'll be more careful next time.

    Whether that is reason for you to feel flattered ... well, I guess that's up to you.