New Unemployment Rate A Political Fraud

Steven Birn Speaks ^ | 10/05/12 | Steven Birn

The media will no doubt trumpet the new 7.8% unemployment rate as evidence that Obama’s policies are working. Unfortunately the new 7.8% figure is a political fraud. The numbers don’t add up. The government claims 114,000 jobs were added last month, which isn’t all that great of a number. This resulted in a 0.3% drop in unemployment? That isn’t believable in the least. The ranks of the unemployed decreased by 456,000 last month. Well wait a minute, how does that figure decrease by so much when only 114,000 new jobs were created? The government is tossing 340,000+ people out of the job market in order to boast unemployment is down. It took me all of 30 seconds to figure out what they’re doing. Unfortunately the press will only report the 7.8% number.

CNBC claims the numbers are tame and they’re confused by all of the contradictory figures. This report is overtly political. It’s meant to secure Obama’s re-election. Just wait, the November surprise we’ll get when the October jobs report is released on November 2nd will be even worse. Magically unemployment will be below 7.5%. That the government threw half a million more people out of the job market will be ignored. Just in the last two months the government has claimed that over 500,000 people are no longer in the job market. Where are they? Did they leave the country? Surely they aren’t all women who have decided to stay at home with their kids.
In fact, the numbers are even worse than this. We need 150,000 new jobs every month just to keep pace with population growth. Each month new kids graduate college or high school, jobs need to be available for them. When 114,000 jobs are created that means we aren’t even keeping pace with population growth. Sure, some people are retiring and that offsets the number. But a lot of people are foregoing retiring in this economy. Romney was right during the debate 50% of college graduates can’t find a job out of college right away. These people are either going directly to the ranks of the unemployed or the government simply isn’t counting them.
The real telling figure from the government is the U-6 report which indicates that real unemployment remained at 14.7% last month. U-6 includes people who have given up (like the 340,000+ the government doesn’t count in the official unemployment rate) and people who are underemployed. In other words, the economy isn’t really getting better. Instead the government is manipulating the numbers to favor an incumbent President.
Mitt Romney needs to issue an ad today attacking the new unemployment rate. He needs to focus on the 340,000+ that the government simply removed from the job force. The ad should make it clear 114,000 isn’t good enough. If we had a real recovery we would be creating jobs at the rate of 500,000 a month like we did during the Reagan recovery. What we have now isn’t a real recovery, it’s a stagnation. Romney has to make these points loud and clear over the next couple of days otherwise any bump he would have received from his debate victory will be lost.
This sort of nonsense job reports shouldn’t surprise any of us. It was entirely predictable. It’s a good example of why government really shouldn’t be in the business of labor statistics in the first place. These statistics are easily manipulated to favor those already in power, no matter the party. In fact, the government has changed the formula so that the U-6 rate, which used to be the official unemployment rate, is no longer used officially. Why? Because it hurts the incumbent as it is always higher than the current version of the unemployment rate. The question now is whether the public will pay attention to the September number or whether they’ll wonder how it dropped so much when only 114,000 jobs were created. My guess is that they’ll pay attention to the number alone.

UPDATE: It appears that several Bureau of Labor Statistics economists are donors to Obama’s re-election campaign. Is anyone at all surprised?