Obama Grasps At Employment Straws

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Supporters of President Obama should mail some straw to the White House. That way, if Obama wants to grasp at straws, he'll have something to use other than last Friday's Bureau of Labor Statistics (BLS) Employment Situation report. This report, which Obama bragged about as representing "steady progress", was actually terrible.

The media tends to focus on the BLS "Establishment Survey", which produces the "Payroll Employment" numbers. This report showed an increase of 200,000 jobs from November to December. However, the Establishment Survey has become more and more skewed by questionable seasonal adjustments, and by the BLS's "Birth-Death Model", which assumes that lots of net jobs are being created by small companies that the BLS can't detect.

The BLS "Household Survey" is more statistically valid, and it provides a more accurate picture of labor market conditions. This report showed that total employment rose by 176,000 in December. This is only a little more than half the increase reported for November, and it is 25% less than the average monthly increase for the second half of 2011 as a whole. Taking a quarterly view, the increase in total employment during 4Q2011 was 683,000, which was less than the 722,000 jobs gain in 3Q2011.

These numbers hardly paint a picture of an accelerating economic recovery. At December's rate of labor market improvement, America would reach full employment (i.e., an employment-to-population ratio of 64.7%, the level of April, 2000) in October 2026.

Ominously, the civilian labor force, which comprises those Americans working or looking for work, fell by 50,000 in December. This comes on the heels of a 120,000 decline in November. The first harbinger of a real economic turnaround would be an increase in labor force participation, and this is not occurring.

For all of 2011, the labor force rose by only 274,000. At full employment, the labor force would have increased by more than 1.1 million during 2011, reflecting the 1.7 million rise in the adult population.

By rights, "The Discouraged American Worker" should be Time magazine's "Person of the Year". During the first three years of Obama's presidency, the labor force fell by 0.7 million. In contrast, it rose by 3.5 million during the first three years of Bush 43's presidency, when America was also recovering from a recession. The labor force rose by 5.9 million during the first three years of Bush's second term.

December marked the 30th month of Obama's economic recovery. During this time, the reported unemployment rate fell from 9.5% to 8.5%. However, this "improvement" was entirely an artifact of workers giving up and dropping out of the labor force. In fact, if labor force participation had remained constant at the 67.5% level that obtained at the end of the recession (June 2009), December's unemployment rate would have been reported at 10.9%.

During Obama's recovery to date, total employment has increased by 787,000. In contrast, during the first 30 months of the Reagan economic recovery (which started in December 1982) total employment increased by 8.9 million jobs. At this point, in percentage terms, Obama is 12.1 million jobs short of matching Reagan's jobs creation performance. This provides a stark contrast between Reaganomics and Obamunism.

And, what about simply recovering all of the jobs lost during the recession? At December's rate of growth in total employment, this would take until March 2015. If so, this would mean that Obamunism would have required 63 months to produce a complete jobs recovery. It took Reaganomics 7 months to perform the same feat.

Since Obama took office, America has lost more than 2.5 million net jobs. If every month from now on were as "good" as December 2011, it would take until February 2013 simply to get back to the level of total employment that existed when Bush left office. At this rate, by the end of Obama's first term, we would be 5.1 million jobs farther from full employment than we were on the day that Obama was inaugurated.

It was nice that President Obama found the January 6 Employment Situation report so encouraging. However, would be even nicer if we had a president with a firm grasp on economic reality, rather than one so adept at grasping at political straws.


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


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