Unemployment Rate

For John, BLUF:  The new 7.8 Employment Rate is NOT the story, but points to the story; fewer people seeking work.  Nothing to see here; just move along.

What was former GE CEO Jack Welch thinking when he tweeted?

Unbelievable job numbers..these Chicago guys will do anything..Can't debate so change numbers

Mr Welch doesn't believe the 7.8% Unemployment Rate, down from 8.3 8.1 last month.

Here is a succinct statement of the situation by Pajamas Media Columnist Charlie Martin.

It’s always tempting to fall for conspiracy theories, because they explain everything in a nice neat package.  So, naturally enough, a lot of people — including Jack Welch, who should know better — are suggesting that today’s unemployment numbers have been manipulated down.

In fact, if you look at the Bureau of Labor Statistics report, it’s unlikely that anything has been manipulated — which would be hard to do without being caught anyway — because you can see exactly how the change happened.  Here’s the net-net:

• net 114,000 new full-time jobs
• net 456,000 people who left the unemployed list — discouraged or whatever
• net 600,000 people added to part-time workers.

What distinguishes part-time workers from full-time? In general, part-time workers don’t get benefits — like health insurance.

What these numbers seem to be telling us is that it’s too expensive to pay for benefits.

So, a one-dimensional look at the economy says things are getting better, and it means President Obama's goal of having unemployment under 8% before the election of November 2012 is achieved.  Congratulations, President Obama.

Now back to taking a multidimensional look; we are not doing so good.  This number of people LEAVING the labor market should be concerning.

The Department of Commerce Bureau of Economic Analysis (BEA) report from a fortnight ago (27 Sept) tells us that GDP growth is not sufficient to add jobs at a rate that would drop unemployment that way:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.3 percent in the second quarter of 2012 (that is, from the first quarter to the second quarter), according to the "third" estimate released by the Bureau of Economic Analysis.  In the first quarter, real GDP increased 2.0 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month.  In the second estimate, the increase in real GDP was 1.7 percent (see "Revisions" on page 3).

The increase in real GDP in the second quarter primarily reflected positive contributions frompersonal consumption expenditures (PCE), exports, nonresidential fixed investment, and residential fixed investment that were partly offset by negative contributions from private inventory investment and state and local government spending.  Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the second quarter primarily reflected decelerations in PCE, in nonresidential fixed investment, and in residential fixed investment that were partly offset by smaller decreases in federal government spending and in state and local government spending and an acceleration in exports.

Motor vehicle output added 0.20 percentage point to the second-quarter change in real GDP after adding 0.72 percentage point to the first-quarter change. Final sales of computers subtracted 0.10 percentage point from the second-quarter change in real GDP after adding 0.02 percentage point to the first-quarter change.

We are looking at a situation like you having a car that you fill up with 16 gallons of gas about every 400 miles, and your on-board computer is telling you that you are getting 40 mpg.  Do you think you should believe your experience or your on-board computer?

Roughly 63% of the population is between 18 and 65 years old, or about 196.56 million people.  (Strangely enough, BLS uses 16 as their age for entering the work force, but a quick review of the World Wide Web shows the rest of us use 18.)  At any rate, 88.70 million of those folks were not in the labor force, per BLS.  Now a bunch of those folks may be stay at home wives (but not more than 53.44 million).  Some 35.26 million are men.  The fundamental question facing us is how do we get a bunch of those folks back to work and on benefits and paying taxes.

UPDATE:  Here is the Gallup look at unemployment.

UPDATE:  As Joe notes, August was 81% vice 83%.  I need to stop listening to Rush.

Regards  —  Cliff