Human Events Blog

September’s confusing unemployment report

The Bureau of Labor Statistics released unemployment numbers for September on Friday.  Sure to dominate the headlines is the modest reduction in the commonly-cited U-3 unemployment rate, which dropped from 8.1 percent to 7.8 percent.  That’s the best number of the Obama era, and while nowhere near the 5.6 percent Obama promised we would be enjoying right now, it’s below 8 percent, so it will get a lot of attention.  For those unfamiliar with the parameters of the New Normal, it used to be said that no President could get re-elected with unemployment higher than 7 percent, but now anything less than 8 percent is the best America can expect.  8 percent unemployment has become the threshold at which champagne corks pop.

And yet… the actual job creation figure for September was a horrifyingly weak 114,000 jobs.  That’s at least 40,000 less than would be needed merely to keep up with population growth.  The more comprehensive U-6 unemployment number, which counts the long-term unemployed, remained fixed at a horrendous 14.7 percent.  So how did the U-3 “marquee” rate come down a few tenths of a percentage point?

Well, part of the “thanks” goes to that perennial feature of Obamanomics, the collapsing U.S. workforce.  211,000 people left the workforce entirely over the past month.  They no longer count for compiling the U-3 statistic.  So, twice as many people stopped looking for jobs as found jobs, and that’s supposed to be good news.

Then we add an upward revision to the job creation numbers for July and August of 86,000 more jobs, which makes September look worse by comparison to August, but it won’t be reported that way.  Actually, the trend line over the last three months is pointing down.  Fewer jobs were created in each successive month.  The job market is getting worse.

It takes a while to compile final statistics – it has been suggested that BLS should take an extra month or two to release any numbers, because the headline-news figures that come out a few days after the end of the month are always significantly revised later.  That’s never going to happen in our data-hungry society, of course.  But it’s fair enough to say that the U-3 rates from July and August were a bit higher than they should have been.

And Bloomberg News explains the rest of the “tumble” to 7.8 percent unemployment nirvana: an incredible explosion of part-time work.  The transformation of the American economy to a part-time and temporary workforce continues apace.  That sort of thing used to bother the hell out of the media, back when someone else was president, and dark muttering about “burger-flipper jobs” filled the airwaves.

“The household survey showed an 873,000 increase in employment, the biggest since June 1983, excluding the annual Census population adjustments,” Bloomberg analyst Alex Kowalski explains.  “Some 582,000 Americans took part-time positions because of slack business conditions or those jobs were the only work they could find.  Joblessness fell most among teenagers, declining to 23.7 percent last month from 24.6 percent.”

(Emphasis mine.)  So a lot of desperate people took part-time jobs to put food on the table, and a lot of teenagers found seasonal work.  Yay!  Let’s hear it for Obamanomics, everyone!  Four more years!

Update: Statement from Mitt Romney that very nicely hits the above points:  “This is not what a real recovery looks like.  We created fewer jobs in September than in August, and fewer jobs in August than in July, and we’ve lost over 600,000 manufacturing jobs since President Obama took office.  If not for all the people who have simply dropped out of the labor force, the real unemployment rate would be closer to 11%.  The results of President Obama’s failed policies are staggering – 23 million Americans struggling for work, nearly one in six living in poverty and 47 million people dependent on food stamps to feed themselves and their families.  The choice in this election is clear. Under President Obama, we’ll get another four years like the last four years.  If I’m elected, we will have a real recovery with pro-growth policies that will create 12 million new jobs and rising incomes for everyone.”

Update: Gird your loins, folks.  This morning, there is a rising storm of questions from serious economists about whether these BLS numbers were fraudulently cooked, to drag the unemployment rate below 8 percent for Barack Obama’s political advantage.  If that proves true, it will be the worst non-fatal scandal of the campaign.

Much of the speculation hinges on whether the definition of a “job” was broadened enough to conjure them out of thin air.  Even accounting for all those part-time jobs, we’re still looking at the largest, most sudden “surge” in jobs in over thirty years.  It’s even bigger than the sort of statistical noise that routinely gets discarded at the end of each year.  Ed Butowsky of Chapwood Capital Investment was on Fox News this morning, and he simply is not buying these numbers:

Update: More food for thought, courtesy of Breitbart News: a lot of the revised job gains are coming from increased public sector hiring, by absolutely broke government agencies.  This is  a sudden reversal of a long-standing trend… and a handy way for the incumbent regime to goose those job numbers, just in time for the election.

Update: The Heritage Foundation suggests the September jobs report is a massive statistical anomaly, rather than the result of political manipulation:

What seems to have occurred with the September household survey is that one time in 100 [when a small survey sample can return a wildly misleading statistic.] The household survey, a relatively small sample, reported an astounding 418,000 jobs jump in the labor force at a time when it has been steadily shrinking, and the survey reported an 873,000 jobs job in employment at a time when the economy is stumbling.

To be sure, there are instances when the household survey’s result can jump, as when the government gears up for the decennial census or when the Labor Department resets the entire series. Aside from these understood anomalies, none of which apply today, the last time the household survey showed such a huge jump in employment was in 1983 during the Reagan-era economic boom. Today’s economy does not look much like the Reagan boom.

The September household survey is one to set aside to wait for a more reliable report next month, which will almost certainly reverse the odd results from September. If it does, then we have both confirmation of the power of statistics and of the weakness in the economy. If the next household survey is like the September survey, however, then we will know the Obama Administration was playing games with the numbers as alleged. The odds against two such anomalous reports back-to-back are not 100 to 1, but 10,000 to one, or about once in 800 years.

If that’s how it pans out, Obama is setting himself up for one of the most devastating political crashes of all time, if he trumpets the September drop in the U-3 unemployment rate.  It will shoot back up in October, possibly way up… and that will be the last unemployment report we get before the election.

Update: Statement from Paul Ryan: “Today is a sad indictment of the diminished expectations under President Obama.  Far too many Americans are still waiting for their chance in the Obama economy.  For those able to find work this month, any job growth is welcome, but this number is once again well below what is needed for America to meet its economic potential.  Two-thirds of those who found work took part-time jobs when they are actually seeking full-time ones.  We should not have to settle for this new normal.  This is not what a real recovery looks like. We need a real recovery, and Mitt Romney has the detailed plan and leadership to provide it.”

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