Unemployment Headlines Are Deceptive
- 22 January 2012 by Author 0 Comments
Unemployment Headlines Are Deceptive
By Richard Larsen
Published – Idaho State Journal, 01/22/12
It’s too bad that we can’t rely on the headline numbers that our own government gives us. The headline numbers the Bureau of Labor Statistics (BLS) releases each month obfuscate the real unemployment malaise across the country. Yet ironically, it’s in the BLS releases that we find a more complete unemployment picture, we just have to dig deeper for it.
When the BLS reported that the unemployment rate dropped to 8.5% with December’s year-end data, media pounced on the headline figure but almost none delved deeper into the official report. What they report is the demographic composition of the workforce as calculated in Table A-1 of their monthly report. Since 1994, these are the primary data for headline purposes. They also “tweak” the figures for “seasonal adjustment.”
For a more complete picture, however, look at the BLS monthly employment report, table A-15. U-6 on that table indicates as a percentage of the total civilian workforce, the number of unemployed (those included in Table A-1), those who have given up looking for jobs, plus those who are working marginal part-time jobs who need fulltime positions. In the latest report, that percentage is 15.2%. This is a much more accurate indication of the state of the economy relative to unemployment and job creation.
It’s easy to understand why those figures wouldn’t be reported in the headlines. They don’t look good. But to understand how current economic policies have failed so dramatically in job creation, it’s imperative that we look at the full picture.
Based solely on BLS data, for example, we learn the following. Over the past year alone, the civilian workforce population rose by 1,726,000. That means we need to add an average 166,000 jobs per month just to keep up with the demand of those who are entering the job market. Yet over the past year the number of people actually working fell by 67,000.
In November alone, when the headlines across the nation reported that unemployment dropped from 9.1% to 8.6%, job creation was not what caused the decline. The cause of the drop, which should’ve been the real headline, was that 487,000 fellow Americans stopped looking for work.
In the 30 months since the recession ended officially, according to BLS data, nearly one million previously employed workers have dropped out of the labor force. That means that not only are they not working, but they’ve become discouraged and given up finding a job, and aren’t even looking for a job anymore.
Investor’s Business Daily (IBD) reports that this anemic job growth is atypical in post-recession recoveries. Their research indicates that in the past nine recession recoveries the labor force “had climbed an average 3.5 million by this point.” After the recession in 2002-2003, job growth exploded with over 4 million jobs created, culminating in an official unemployment rate of 4.4% by this point in the recovery.
Instead, we have a net job loss over the past few years. The participation rate, which is the percentage of the number of people either working or looking for work compared to the civilian working-age population, is now 64%, which is down nearly two points from when the recession officially ended in June 2009. The only time that figure was lower, according to BLS, was several decades ago when women began entering the workforce en mass. And total payrolls are still a whopping 6.1 million lower than when they peaked in 2008.
The nonprofit Employment Policy Institute tracks this data closely. They take the number of jobs lost since the recession began and add in the growth of the working age population. The resulting figure they report as a “jobs deficit,” and they calculate we have a current deficit of 10.8 million jobs, even factoring in the 1.4 million jobs added since the recession ended,
The anemic job situation has a pejorative impact even on those who are fortunate enough to still have one. According to Sentier Research, real median annual household income has declined 5.1% since the recession ended 30 months ago. That represents even more of a drop than what happened during the recession itself, which declined 3.2%.
Corporate profits have continued to improve over the past two years, but companies are still reluctant to start hiring again. Most small business owners and corporate officers cite the uncertain regulatory environment, high corporate tax rates, and new regulation implementation costs as obstacles.
If anything, it’s a testament to the resiliency of our private sector that we’ve had any jobs created in this hostile environment that Washington has created. What jobs have been added is in spite of, not because of what the administration has been doing to the private sector.
The only real hope for revitalizing America’s job market lies in policies emanating from Washington that are conducive to job creation, rather than punitive. Let’s hope November elections facilitate that most critical change.
AP award winning columnist Richard Larsen is President of Larsen Financial, a brokerage and financial planning firm in Pocatello, and is a graduate of Idaho State University with a BA in Political Science and History and former member of the Idaho State Journal Editorial Board. He can be reached at firstname.lastname@example.org.