Wednesday, October 10, 2012

Unemployment falls to 7.8% or does it?

Last week the unemployment numbers came out for September and fell from the previous month to 7.8%. The Democrats applauded the numbers as they needed good news after the pathetic showing of President Obama at the first Presidential debate a few night prior. Since those numbers have come out the validity has been raised by former CEO Jack Welch.

On October 5th, CEO Jack Welch tweeted, "Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change the numbers." The tweet sent the punditry and the White House into a tizzy over the next few days. President Obama, Gibbs, and Axlerod all took turns lambasted Welch for the comments. So let's look at the hard data per the Bureau of Labor Statistics (BLS) reported:

  • Unemployment rate dropped to 7.8 percent in September
  • Total nonfarm payroll employment rose 114,000
  • Number of unemployed is at 12.1 million - decreased by 456,000 in September
  • Long-term unemployed was 4.8 million or 40.1 percent of unemployed
  • Total employment rose by 873,000 in September
  • Employment-population ratio increased by 0.4 percent to 58.7 percent
  • Civilian labor force rose by 418,000 
  • Labor Force participation rate was 63.6 percent
  • Part-time rose to 8.6 million from 8 million
Now none of these numbers are adjusted for seasonal changes. As CEO Welch points out in his op-ed toady in the Wall Street Journal,"The unemployment data reported each month are gathered over a one-week period by census workers, by phone in 70% of the cases, and the rest through home visits. In sum, they try to contact 60,000 households, asking a list of questions and recording the responses." The BLS website confirms the process that Welch alludes to as well. Is anyone else bothered by this? 

Why are we not using payroll information that can be harvested from various payroll servicing companies? That seems to be a better and more accurate look at unemployment. That being said, when President Obama took office there were 233,788,000 people (civilian noninstitutional population) with 154.287,000 considered part of the work force or 62.2%. At the end of 2009, we had 235,801,000 people with 154,142,000 considered part of the work or 65.4%. In 2010 and thus far in 2011 the numbers are respectfully - 237,830,000 people 153,889,000 workforce or 64.7% and 239,618,000 people 153,617,000 workforce or 64.1%. The unemployment rates for 2008, 2009, 2010 and thus far for 2011 are 5.8%, 9.3%, 9.6% and 8.9%. (All data in this paragraph can be found on the BLS website under the table Household Date Annual Averages).

One may ask, "Chris, why are you focusing on this information and not the most recent months data?" That is a great question. I will let Alan Krueger, President Obama's Economic Advisor, who is reported as say back in March of this year, "The monthly employment and unemployment numbers can be volatile, and employment estimates can be subject to substantial revision. Therefore, as the administration always stresses, it is important not to read too much into any one month report" (On jobs, former Obama aid Goolsbee warns against irrational exuberance, March 9, 2012, yahoo news). The monthly reported unemployment numbers for January, February and March of 2012 were 8.3%, 8.3% and 8.2%.

Mr. Goolsbee, President Obama's Economic Advisor prior to Krueger, said in an op-ed in the New York times back in 2003 in response to unemployment numbers reported under President Bush didn't add up by claiming, "the government has cooked the books." The month to month gyrations of the unemployment numbers can be an indicator but looking at data over a period of time gives us a better trend. 

In 2008 we had 79,501,000 people out of the work force and as of today we have 86,001,000. At the same time we have seen the participation rate go from 66% to 64.1%. These are not good trend lines for someone seeking re-election at any level of government let alone the President.

Perhaps Larry Elder and Rep. Emanuel Cleaver, D-Mo. and chairman of the Congressional Black Caucus, are posing the right questions. Mr. Elder penned, "What if President Obama were white?" in his article from October 4, 2012 on Or when Rep. Cleaver stated, "As the chair of the Black Caucus, I've got to tell you, we are always hesitant to criticize the President. With 14 percent (black) unemployment, if we had a white president we'd be marching around the White House." The irony is that in April of 2003, Sen. Obama railed against President Bush over high black unemployment and it was only 10.3 percent at that time. President Bush did get black unemployment as low as 7.9 percent during his term in office.

No matter how you slice it, the employment situation in the United States is not better under President Obama. How can we be pleased or how can anyone make 7.8% unemployment rate, not adjusted for seasonal change, a good thing? Especially when we have less people looking for work then we did four years ago. Personally, I say throw out the numbers that are done via a survey of calling people and let's start looking at number based on more concrete data. 

I think Ron Florance, managing director for investments strategy for Wells Fargo Private Bank, sums it up best, "It's a little confusing, to be honest with you. The number of jobs created wasn't that high but the unemployment rate came down and the participation rate went up a little bit, so it's confusing. All in all, it doesn't change the trajectory of what the jobs environment has been really for the last year" (Unemployment rate falls to 7.8% as economy creates 114,000 jobs, October 10, 2012,