Jobs Report: Carping, Criticism, and Conspiracy Theorizing
As you may have heard, U-3 unemployment took a steep drop in September, from 8.1 percent to 7.8 percent. This is the first time unemployment has dipped below 8 percent since February 2009, the first full month of Barack Obama's presidency, and matches the 7.8 percent rate that held when Obama was sworn in.
Bloomberg's Alex Kowalski reports that the increase in employment will provide tons of neat stuff in terms of a Keynesian boost in aggregate demand. (Kowalski also uses the familiar adverb "unexpectedly" to describe the job numbers, but for the first time in recent memory to describe a strengthening job market.)
The economy added 114,000 workers last month after a revised 142,000 gain in August that was more than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for an advance of 115,000. The jobless rate dropped from 8.1 percent and hourly earnings climbed more than forecast.
Improving employment prospects that lead to stronger wage growth provide workers with the wherewithal to boost their spending, helping cushion the economy from a global slowdown.
The job numbers can be considered positive only in the context of a miserable half-decade of economic growth, and they are obviously convenient for President Obama, who suffered a humiliating defeat in his debate with Republican challenger Mitt Romney Wednesday. Does that mean the numbers are cooked?
Former General Electric CEO Jack Welch seems to think so. "Unbelievable jobs numbers.." Welch tweets. "these Chicago guys will do anything..can't debate so change numbers."
This doesn't make a whole lot of sense: If the Obama administration was gaming the numbers, why didn't they do it before? And the BLS, while it is a division of the government and thus subject to political pressure, is staffed generally by career apparatchiks whose work, as I noted in a print column a while back, is extremely thorough and, by government standards, pretty transparent. Granted the Obama team's recent hanky panky with the Lockheed layoffs does not inspire much confidence in their ability to refrain from squeezing economic data, but if there's been an effort to cook the numbers we should see more smoke.
Here's a good rebuttal to Welch's claim from Lawrence Mishel of the Economic Policy Institute, who points out that the most damning case against the Bureau of Labor Statistics' claim — that the economy only added 114,000 jobs in September, seemingly not enough to account for such a precipitous drop — doesn't mean much. Single-month discrepancies of this type are not uncommon. (Related: These monthly numbers are subject to frequent revision, so the steep drop may look less impressive over time.) Labor force participation is also up, so this is not another case of large numbers of workers just leaving the work force. And unemployment claims have been rising lately. So if we leave out the conspiracy, we still have a puzzlement: Where are all these newly employed workers working?
The answer can probably be found in a combination of the unadjusted nature of the monthly data, and the fact that, this drop aside, the jobs picture is still an ugly piece of modern art. At the American Enterprise Institute, James Pethokoukis says you don't need to smell any rats to know that the labor economy still stinks:
Only in an era of depressingly diminished expectations could the September jobs report be called a good one. It really isn't. Not at all…
Yes, the U-3 unemployment rate fell to 7.8%, the first time it has been below 8% since January 2009. But that's only due to a flood of 582,000 part-time jobs…
Over the past 12 months, average hourly earnings have risen by just 1.8 percent. When you take inflation into account, wages are flat to down….
The broader U-6 rate — which takes into account part-time workers who want full-time work and lots of discouraged workers who've given up looking — stayed unchanged at 14.7%. That's a better gauge of the true unemployment rate and state of the American labor market.
The shrunken workforce remains shrunken. If the labor force participation rate was the same as when President Obama took office, the unemployment rate would be 10.7%. If the participation rate had just stayed steady since the start of the year, the unemployment rate would be 8.4% vs. 8.3%…
The 114,000 jobs created would have been a good number … but for 1962, not 2012. The U.S. economy needs 2-3 times that number every month to close the jobs gap (which is the number of jobs that the U.S. economy needs to create in order to return to pre-recession employment levels while also absorbing the people who enter the labor force each month.)…
We are still on pace to create fewer jobs this year than last year.
In any event, it would be several summers of recovery too late for Obama to take credit for what is still a high unemployment rate. The Keynesian economic rescue packages, which started before Obama took office, have been in place for many years to no (or actually negative) discernible effect. The members of Obama's economic brain trust are almost totally gone, replaced by humbler figures promising much less. To say Obama can take credit for the improvement in unemployment is like saying the plot to kill Hitler worked because eventually he died.