With the release of the September unemployment rate, the collective breath of economists took a gasp. Widely held expectations of 113,000 added jobs and an unemployment rate of 8.2% were replaced with wildly politically positive news of a decrease in the unemployment rate. The information has more than just economists puzzled.
Let’s start with something simple. Every month the nation needs to add 150,000 jobs to be flat with the growth of the population. Its a simple rule of thumb that economists and the Government have followed for decades. While some have disputed the figure, it is the guideline that helps determine if unemployment is growing or shrinking.
“Thus, the benchmark corresponds to an estimate of trend or
sustainable employment growth. Common rule-of-thumb estimates put the trend rate of increase at 150,000 jobs per month.” – Todd E. Clark, vice president and economist at the Federal Reserve Bank of Kansas City & Taisuke Nakata, assistant economist Federal Reserve Bank of Kansas City with help from David Brauer of the
Congressional Budget Office and Karen Smith of the Social Security Administration
So 150,000 is the target. More jobs is positive and means a lower employment rate, the converse is bad. Simple, right? Not quite.
The September employment rate increased by 114,000 and the target to be dead-even is 146,000 per month in 2012 according to BLS. That’s 32,000 jobs less than even. Which should be bad and mean higher unemployment,
“Gallup’s seasonally adjusted U.S. unemployment rate was flat in September, which suggests that the government’s unemployment rate will be unchanged when the U.S. Bureau of Labor Statistics releases its jobs report on Friday morning, and will likely be at or within a tenth of a point of 8.1%.” – October 4, 2012
According to the Bureau of Labor and Statistics (BLS), 40.1% of the unemployed long-term (27 weeks or more) remained unchanged at 4.8 million. The Labor force participation rate was virtually unchanged at 63.6%. The number of people employed part-time because they can’t get a full-time job rose .6 million to 8.6 million. 2.5 million people without jobs still don’t count – and that group does not get seasonally adjusted like the rest of the unemployment numbers do.
According to Christopher S. Rugaber and Paul Wiseman, of Associated Press, private-sector employees pay, adjusted for inflation, dropped 1.6 percent since President Obama took office with more than 5 million unemployed by their figures. GDP of the nation slowed to 1.3% in the second quarter, the poverty rate is 15% based on the latest figures from the Census, mortgages in foreclosure or at least 30 days late in payment are 11.62% with new foreclosures up .82% in August.
Waiting for the good news? Keep waiting. The data, from virtually every aspect of prosperity tracked, indicates that things are at best just as lousy as they were a month ago; and slightly less lousy than a year ago. In fact, the US Debt Clock still has the actual number of unemployed at 22.7 million – 7.2% of the total population, but 15.9% of the actual workforce (and they get their numbers from BLS).
Given the overwhelming data, where exactly does a decrease in the unemployment rate come from? Unlike in August, its not an increase in the number of people not being counted. So where then?
The key words are seasonal adjustment and part-time workers. 600,000 people, which the BLS called “involuntary part-time workers,” took a job just to pay some bills and feed the family something. Like the 368,000 that just stopped being important enough to count in August, these people made a massive impact in the unemployment rate. Add to that the fact that the BLS increased the number of people who got a job in July by 40,000 and in August by another 46,000.
That’s the silver lining. The big change is that some people were able to get a job to hold of starvation and homelessness for just a bit longer, and that the BLS essentially decided that they counted wrong months after the fact because of the time of year. Oversimplifications, but we are not economists after all.
So does this mean that if you used up your 99 weeks of unemployment you will be able to get a job this month? No more likely than last month. If you are a college student that graduated, will you get a job now? See the first answer. If you are Black (13.4%) or Hispanic (9.9%) be happy you are not a teenager (23% unemployment rate according to BLS). Considering how murky all the other unemployment figures are, its doubtful that reality lies in these numbers either.
In the end, celebration of the official unemployment rate rests with just supporters for re-electing President Obama. Not because they are bad people, but rather they are the only people that can accept the gyrations of the unemployment numbers at face value as it provides them with rays of sunshine while the rest of the nation gets a couple of buckets of rain poured on them.
Don’t you just love Government math?