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October 14, 2012

Not Lying, Just Bad News in Employment Numbers

The Bureau of Labor Statistics report on preliminary unemployment data is released on the first Friday of each month. This report provides scant information about the state of the economy, but it widely anticipated and reported, even more so during a hotly contested election season. It is useful to explain what it does and does not tell us.

To begin, I wish to dispel the myth of a conspiracy about rigged unemployment numbers. I have two reasons to know that these data are not contrived. The first is simply that I know the federal government struggles to keep a secret. Moreover, the real reason I know these numbers to be true is that if the administration could pull off a secret of this nature, then it would surely make up better numbers. The fact is the current economy is in poor and worsening shape, and the drop in the unemployment rate reported last weekly hardly masks that fact. Here’s why.

The National Bureau of Economic Research declares a recession while looking at four data points: industrial production, real incomes, employment and retail sales. The recession dating is a judgment call, but as it stands now, three out of four of these measures are lower now than at the beginning of summer. Only employment continues to grow, but there is nuance to this story.

We have about 310 million Americans alive today, with about 155 million actively in the labor force. This is a smaller share than any time over the past three decades for many reasons: aging baby boomers, adults in school, exploding disability, and other reasons. Among those other reasons are that individuals have given up on finding a job. Of those who make up the labor force (people who have jobs or are actively looking), 7.8 percent do not have jobs. This is some 12 million people.

Last month, total employment grew by 114,000 jobs, but the working age population grew by 206,000. Of those who got jobs last month, 582,000 held part-time jobs for economic reasons (that means they wish to work full time, but cannot). The math here is a devastating indictment of our current economic conditions. For every 20 kids now entering working age, only about 11 will find a job. Worse still, full-time employment is declining. If we counted only full-time jobs, last month would have seen employment drop by 468,000 jobs, a figure reminiscent of the worst days of the recession.  To put it plainly, 1 out of 17 workers are part-time workers due to an ailing economy, and growth in that number explained the total decline in the unemployment rate last month. Sadly, the bad news gets worse.

The BLS also published data known as the diffusion index, which measures how broadly job growth is occurring. This measure has plummeted at a recessionary rate since last year, indicating the little job growth we have is concentrated in fewer sectors. So, we need to face the fact that the employment situation is so bad, no one would fabricate these numbers, even if they could.

Link to this commentary: https://commentaries.cberdata.org/645/not-lying-just-bad-news-in-employment-numbers

Tags: data, jobs and employment, jobs and employment, unemployment and the labor market


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

© Center for Business and Economic Research, Ball State University

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