Rising Job Numbers: Will they Buoy the President’s re-election Chances?

Recently, the Obama administration has justifiably trumpeted news from the Department of Labor Statistics that hiring hiring by the private sector has increased significantly, and added 227,000 jobs in February while the national unemployment rate remained at 8.3 percent.

With 233,000 jobs added by private businesses, this marks the 24th consecutive month of private sector job growth. http://www.bls.gov/news.release/empsit.nr0.htm

This is good news for everyone, especially individuals, private households, the economy at large, small businesses, including the president, whose re-election chances are buoyed with each positive report, which graph follows.

When reading and interpreting charts of any kind, it’s important to realize that almost nothing happens instantly. While the figures from March, April, May & June 2010 show somewhat anomalous moves, it should be borne in mind that the laws of physics also apply. That is, for every action, there is an equal and opposite reaction. Which is to say, just like the waves of the ocean, or on a pond when a stone is thrown into it, when one thing goes down, it will eventually come up.

The very sense of trends is important in understanding the subject, and a rising trend can be seen beginning from the end of the Bush Administration. It could be rationally argued that the “zero point” – the point at which the losses ceased – occurred in or around the time frame of November 2009 – February 2010.

Regardless of the intricacies, or the interpretation of the minutiae, the trend continues upward. (ENTRY CONTINUES BELOW GRAPH.)

One concern about the jobs picture is the way in which the BLS interprets the data.

The concern is not that reports are “seasonally adjusted” – such adjustments are justified and warranted because they are known to occur with predictable regularity – but the way in which the numbers are collected according to the definition of terms. More to the point, some people are specifically NOT counted because they have stopped looking for work. It’s not that they do not desire to obtain employment (for they do), it’s that they have become discouraged or depressed in their job search and have for ceased – at least temporarily – from actively searching for employment.

Following is one question frequently asked of the BLS about unemployment, which they also answer.

“Is there only one official definition of unemployment?

“Yes, there is only one official definition of unemployment, and that was discussed above. However, some have argued that this measure is too restricted, and that it does not adequately capture the breadth of labor market problems. For this reason, economists at BLS developed a set of alternative measures of labor underutilization. These measures are published every month in the Employment Situation news release. They range from a very limited measure that includes only those who have been unemployed (as officially defined) for 15 weeks or more to a very broad one that includes total unemployed (as officially defined), all persons marginally attached to the labor force, and all individuals employed part time for economic reasons.”

The BLS says this about those whom are not reported as unemployed:

“The remainder—those who have no job and are not looking for one—are counted as “not in the labor force.” Many who are not in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force.” 

While those so situated are genuinely “not in the labor force,” there are other questions which can and should be asked to more fully determine whether one is unemployed with ABSOLUTELY no desire to work.

Acknowledging this, the BLS writes:

“These questions form the basis for estimating the number of persons who are not in the labor force but who are considered to be “marginally attached to the labor force.” These are persons without jobs who are not currently looking for work (and therefore are not counted as unemployed), but who nevertheless have demonstrated some degree of labor force attachment. Specifically, to be counted as “marginally attached to the labor force,” individuals must indicate that they currently want a job, have looked for work in the last 12 months (or since they last worked if they worked within the last 12 months), and are available for work. “Discouraged workers” are a subset of the marginally attached. Discouraged workers report they are not currently looking for work for one of four reasons:

1. They believe no job is available to them in their line of work or area.
2. They had previously been unable to find work.
3. They lack the necessary schooling, training, skills, or experience.
4. Employers think they are too young or too old, or they face some other type of discrimination.

Additional questions about persons not in the labor force are asked during each household’s last month of its 4-month tenure in the sample rotation pattern. These questions are designed to collect information about why these people left their previous jobs, when they last worked at a job or business, and whether they intend to look for work in the near future.”

The BLS therefore uses the following definition.

Unemployed persons are:

• All persons who did not have a job at all during the survey reference week, made at least one specific active effort to find a job during the prior 4 weeks, and were available for work (unless temporarily ill).
• All persons who were not working and were waiting to be called back to a job from which they had been laid off (they need not be looking for work to be classified as unemployed).

I mention these points for one reason: We often hear the term “Longest Stretch of High Unemployment Since the Great Depression,” or similar variations upon that theme.

During this period of recovery, there is a very real possibility that unemployment may actually rise.

Why?

It is because those unemployed individuals whom have NOT been counted in the unemployment picture – those who would work if work was available but who have stopped looking for work – will again return to the job market. The “real” unemployment picture must include those whom would work if there was a suitable job for them.

It is precisely those individuals whom the BLS calls “marginally attached” to the workforce whom will be returning to employment.

Granted, the true jobs picture will NOT change overnight, within one week, one month or even in one year. While it is not beyond the possibility for it to happen, the chances it will are slim to none. And rather, we will see a slow but steady increase in the number of jobs added to the private sector. The jobs weren’t lost in one week, one month, or even in one year. Just as they steadily declined, they will steadily increase.