Talking Past Each Other #3: Unemployment

By now you either have or have not seen the latest figures on employment in the USA as released by the Bureau of Labor Statistics.  BLS is a part of the Department of Labor, meaning that it is subject to political manipulation.

That manipulation, which is a bit more visible during election campaigns, is of the kind that may have you see numbers which are beneficial to the party of the president in a given month and, dependent on how "cooked" they are, are ultimately corrected retroactively in a subsequent report a month or two later.  No one sees those, of course, since they're like the little corrections of fact that you occasionally see in newsprint, hidden on page Q21 of the Saturday edition.

To give the BLS credit, they put out a lot of numbers each month, and the metrics are pretty much the same every month, which is why if they're subsequently "fixed" to offset the cooking, at least you can look back and see trends after the cooking is corrected.

The fact that there are a lot of numbers makes it fairly easy for one party to argue by using one set of figures, while the other party can cherry-pick equally and argue their side.  This, to me, constitutes the whole "talking past each other" situation, and is the third time, I believe, that I've had to write about it.

So here are the facts.  BLS put out a number that said that the "unemployment rate" had dropped from 4.9% in October to 4.6% in November.  That meant that, of those who were actual participants in the labor force, only 4.6% were looking for work.  Conversely, in the sense of the opposition, the "labor participation rate" sank to 62.7%, meaning that we're around a 40-year low as far as the number of potential workers in the workforce who were actually employed.

The "talking past each other" here is mainly a debate over which number more fairly represents the actual labor situation in the USA.

Let's look at those numbers as actual numbers and not percentages, and then you tell me what you think.  The economy created 178,000 jobs in November.  Is that a good number?  Well, it is a relative number.  By comparison, the number of people who left the work force, either by giving up looking for work and settling for welfare, or by retirement, was well over double that number, as 446,000 Americans left the work force.  That's why the "unemployment rate", which is now so irrelevant, dropped and let the Obamists claim that something good had happened.

It is not hard to make somewhat qualitative inferences from this quantitative data.  The number of new jobs being created does not come close to the number of people giving up on the labor force in some form.  The total labor force declined by a net 334,000, meaning that 112,000 people were added to the work force (446,000 minus 112,000), against the net increase in jobs of 178,000.

None of that suggests that the employment rate of 4.6% has any relevant meaning whatsoever.  If the number of new jobs, and the number of people added to the labor market, are dwarfed by the number of people leaving the work force, then it is quite clear that the net of new jobs is a minor factor in the unemployment rate; its drop is far more reflective of people leaving the job market.

Now, we can talk past each other all day about whether this is a good or a terrible economy for jobs, but I would suggest that those apparent low percentages are a smokescreen to mask what are referred to as "discouraged workers", those who would like to work but have given up.  Even BLS admits in its FAQ that such people are not counted in the unemployment rate, which accounts for seemingly opposite results between the labor-participation and unemployment percentage changes.

I believe the answer will start to be seen about a year from now, when the Trump Administration has had a year to pass legislation that encourages business to grow and hire.  If I am (and the labor-participation rate is) right, and the economy is indeed in a horrible state, then we will see some interesting numbers.

The labor participation rate after a year or so of Donald Trump should be rising toward 65% or a bit higher, because new jobs will be added but the number of those potentially in the labor force will stay steady.

However, the unemployment rate could actually rise, because some number of those who are discouraged will reappear in the labor force, encouraged to not be "discouraged."  So the unemployment rate might actually rise, even though more people are finding work, if enough people who had voluntarily dropped out of the work force -- even once-retired -- are attracted back.

So it is here that I encourage the Trump camp to explain now why we should expect a rise in the unemployment rate we're used to, even as the economy is recovering.  Use the bully pulpit and teach about the labor stats that have meaning.

How ironic that would be if the economy improves obviously but the unemployment rate actually rises as more people are attracted into it.  Well, there are lies, darn lies and statistics.  And the unemployment rate is simply lipstick on a pig under Barack Obama.

Let us see what Trump does.  And perhaps then we might use the same terminology to discuss what is good.

Copyright 2016 by Robert Sutton
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