Friday, September 7, 2012

The unemployment rate falls, but where are the cheers?

The latest jobs numbers from the BLS are in and the report opens with what should be a bang:
Total nonfarm payroll employment rose by 96,000 in August, and the unemployment rate edged down to 8.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in food services and drinking places, in professional and technical services, and in health care.
There ya go, another month of "job creation" for the Administration and a huge .2% drop in the unemployment rate! What's not to be happy about? While I'm sure that spinmeisters like Wasserman-Schultz  will happily add another month on to their job creation talking point--now it's 30 months of job growth under Obama!--the narrative is becoming near-impossible to maintain. Because farther down in the BLS report is this tidbit:
Both the civilian labor force (154.6 million) and the labor force participation rate (63.5 percent) declined in August. The employment-population ratio, at 58.3 percent, was little changed.
I've been harping on the declining labor force participation rate for a while now, how lowering it leads to a decrease in the reported unemployment rate. In the above piece--from back in February--I noted this explicitly:
The problem lies with the BLS's use of a participation rate, based on a questionably theorized idea of the number of people seeking employment. By lowering this rate--based on people "dropping out" of the job market--the BLS is able to report a lower unemployment rate, even if the number of unemployed people has not actually decreased.
And again, that was from back in February of 2012, at a moment when a drop in the unemployment rate--from 8.5% to 8.3%--was supposedly great news. As the NYT reported then:
The front wheels have lifted off the runway. Now, Americans are waiting to see if the economy can truly get aloft. 
With the government reporting that the unemployment rate and the number of jobless fell in January to the lowest levels since early 2009, the recovery seems finally to be reaching American workers.
The Labor Department’s latest snapshot of the job market, released on Friday, makes clear that employers have been hiring more in recent months, with 243,000 net new jobs in January. The unemployment rate now stands at 8.3 percent, down from 8.5 percent a month earlier and from 9.1 percent as recently as last August.
Get that? In the beginning of the year, the drop in the unemployment rate heralded great things, the wheels were up, a real recovery was at hand, despite a similar drop in the labor force participation rate! What does the Grey Lady say about the latest numbers? Now, it's become decidedly wishy-washy on the issue, with an article entitled "Steady Progress or More of Same:"
Even though the data shows a bit of improvement, it remains hard for the Democrats to make much out of a formula that includes fewer than 100,000 new jobs and a shrinking of the work force, along with downward revisions of previous monthly data.
The NYT almost--almost--delves into the issue of the labor force participation rate. But if it did so, it would have to abandon the idea of "a bit of improvement" altogether, and that's something it just won't do. Other sources are finally catching on. A story at Bloomberg, for instance, get's to the meat of it (my boldface):
Payrolls rose less than projected in August and the unemployment rate was unexpectedly driven down by Americans leaving the labor force, boosting the odds of additional Federal Reserve easing to spur a faltering recovery...

The jobless rate fell from 8.3 percent as 368,000 Americans left the labor force. Unemployment was forecast to hold at 8.3 percent, according to the survey median. Estimates in the Bloomberg survey ranged from 8.1 percent to 8.4 percent...

The participation rate, which indicates the share of working-age people in the labor force, fell to 63.5 percent, the lowest since September 1981, from 63.7 percent.
Reuters deals with reality in its report as well:
While the unemployment rate dropped to 8.1 percent from 8.3 percent in July, that was because so many Americans gave up the hunt for work. The survey of households from which the jobless rate is derived actually showed a drop in employment...

In addition, the labor force participation rate, or the percentage of Americans who either have a job or are looking for one, fell to 63.5 percent -- the lowest since September 1981.
Tyler Durden over at Zerohedge has revised his chart showing what the unemployment really looks like and the direction it has actually been trending:

(courtesy of Zerohedge.com)

And again, the number of jobs added or created is a useless metric as a stand alone. It means nothing, since those touting these numbers fail to account for simple population growth. The phony unemployment rates reported by the BLS are a product of hiding the actual consequences of such growth in the labor force participation rate, thus making it appear that 100,000 or so new jobs can be called "growth."

After a year of hearing about "created jobs" and "job growth," of listening to the media happily lap up the nonsense they were being spoon-fed by Democrats and the Administration, it would appear the worm may actually be turning. Which I guess is ultimately a good thing, as it demonstrates that there still is a learning curve in the media, however steep it may be.

Cheers, all.

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