Fake Jobs Numbers Would Look Better Than This

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When the Bureau of Labor Statistics (BLS) reported on Friday that the unemployment rate had fallen to 7.8% in September, some observers wondered if the numbers had been "cooked" for political purposes. They can relax. Fake jobs numbers wouldn't look as bad as these.

Two numbers in the BLS "Employment Situation" report attracted concern: the reported 873,000 increase in total employment, and the 0.3 percentage point reduction in the unemployment rate. These figures suggest a rapidly improving labor market, which would be very convenient for President Obama right now. However, as soon as one delves deeper into the BLS numbers, the reality of continued economic stagnation becomes clear.

As the White House has said repeatedly (and correctly), it isn't good to read too much into any one month's employment numbers. So, let's look at the third quarter of 2012 as a whole.

During the third quarter, total employment (Household Survey) increased by 559,000, or 1.57%. This was up considerably from the gain of 381,000 jobs in the previous quarter.

However, a minimum requirement to consider that a person has a "decent job" is that they have a full-time job if they want one. Accordingly, we can subtract the number of people involuntarily working part time for economic reasons from total employment to get the number of decent jobs.

As it happens, the number of people forced to work part time jobs when they wanted full time jobs increased by 403,000 during the third quarter of 2012, which means that the number of decent jobs increased by only 156,000.

Given that the working age population increased by 617,000 during the third quarter, this means that, on the margin, only 25% of new working age Americans were able to find a decent job during the quarter. And, there were actually 1000 fewer decent jobs at the end of the third quarter of 2012 than there had been six months earlier.

This analysis confirms popular perception. The reason that so many Americans believe that the job situation is getting worse, rather than better, is because it is.

This definition of a decent job can be validated by looking at the 1992 election cycle.

As his presidential campaign progressed, President George H. W. Bush and his people wondered why the electorate did not believe that the economy was improving, even though total employment had bottomed out in May 1991, and was rising (albeit slowly). However, the total number of decent jobs did not stop falling until December 1991, less than a year before the election. And, the percentage of the working age population that had decent jobs was no higher on Election Day of 1992 than it had been eleven months earlier.

Perhaps the most accurate way to judge the health of the job market is to look at the percentage of the working age population with decent jobs, as well as the number of decent jobs that we would need to add to reach full employment.

Bill Clinton was the star of the 2012 Democratic National Convention. The purpose of his appearance was to try to transfer some of his political magic to Barack Obama, and his speech did a creditable job toward that end.

Clinton's high esteem with the electorate stems from the fact that, during his second term, America reached full employment, and with little or no inflation.

In April 2000, the percentage of the working age population with decent jobs reached 63.2%, up from 58.1% when Bush 41 left office. This ratio was still very high, at 62.9%, when Clinton left office. At that point, America was only 0.7 million decent jobs away from what we can call "decent-job full employment" (DJFE).

America fared terribly with respect to decent jobs under George W. Bush. The decent job employment ratio fell from 62.9% to 57.6% during his term in office. When Bush 43 handed the reins to Barack Obama, America was 13.2 million jobs away from DJFE. This, more than anything else, is the reason that Bush 43 is so reviled today that he was not welcome at the 2012 Republican National Convention.

Obama has doubled down on Bush's failed "weak dollar" policy, and has added a number of bad economic ideas of his own (e.g., "stimulus", Obamacare, an out-of-control EPA). As a result, America has lost more ground on the jobs front during Obama's presidency.

At the end of the third quarter of 2012, America was 19.7 million jobs away from DJFE, with only 55.1% of working age Americans possessing decent jobs. This represents a movement in the wrong direction amounting to an additional 6.5 million jobs since Bush 43 left office.

Even Obama's so-called "economic recovery", which began in July 2009, has seen the nation move 1.7 million jobs farther from DJFE. The third quarter of 2012 alone accounted for 234,000 of this number.

In a sense, no one should be surprised that the job situation got worse, rather than better, during the most recent quarter. It seems unlikely that real GDP (RGDP) grew much faster during the third quarter of 2012 than the 1.3% annual rate during the previous quarter, during which the nation moved 505,000 jobs away from DJFE. There is simply no way to achieve reasonable growth in the number of decent jobs without faster RGDP growth.

During the first three years of the Reagan recovery (1Q1983 - 4Q1985), RGDP growth averaged 5.8%, and the number of decent jobs increased by 11.2%. In contrast, during the first three years of the Obama recovery (3Q2009 - 2Q2012), RGDP growth averaged only 2.2%, and the number of decent jobs increased by only 2.5%.

During the first presidential debate on October 3, Mitt Romney had it exactly right. There is no way out of America's jobs crisis without much faster economic growth. And, there is no way to get faster economic growth without reversing Obama's anti-growth economic policies.

OK, but if RGDP grew so slowly during the third quarter, how did we manage to add 559,000 jobs, including 156,000 decent jobs?

What occurred last quarter is actually what one would expect to be happening right now.

With Obamacare looming, small businesses have a huge incentive to (say) replace one full-time worker with two part-time employees. This process serves to increase the total number of jobs, but it reduces the number of decent jobs. Also, with people exhausting their unemployment benefits and their savings, they have little choice other than to take the part-time jobs being spawned by Obamacare.

Morally, and in terms of their jobs skills and careers, it is better for people to work than not to work. However, there is no way to persuade the electorate that having hundreds of thousands of people being forced to take part-time jobs as a result of slow RGDP growth and Obamacare means that the job market is getting better.

Conspiracy theorists need not worry that Obama is manipulating the jobs numbers. If he were, he would make them look a lot better than this.

 

 

Louis Woodhill (louis@woodhill.com), an engineer and software entrepreneur, and a RealClearMarkets contributor.  

 

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