Jobs: Political Happy-Talk Vs Grim Reality

The Obama Administration and its media friends proclaim good news without disclosing that it masks bad news.

“The Employment Emergency is Over,” announced Reuters News Service when the December Jobs report was published.  The White House bragged:

…the unemployment rate declined from 7.9 percent in October to 7.7 percent in November, the lowest since December 2008.

But it turns out that the drop in the Unemployment Rate statistic is misleading. [continued below the chart] Barely mentioned in media reports was the reclassification of 350,000 people  from “unemployed” to “not in the labor force” in one month, November.

  • The Labor Force is the sum of all persons who have jobs plus all who are officially classified as “unemployed” because they are actively seeking jobs.
  • The labor force participation rate is the percentage of all working age adults who are officially counted as “in the labor force.”

Today, there are millions of people who want jobs but don’t qualify as “unemployed” by meeting government criteria and are thus counted as “not in the labor force.”  We know this to be true because the participation rate has steadily declined for four years.  Counting unemployed people as “not in the labor force” artificially lowers the unemployment rate.

The chart above shows tracks both the official unemployment rate and what the “actual” unemployment rate would have been each month if labor force participation had not declined from 65.7% to 63.6%, by reclassifying more than five million people.

It is important to note that this continuous, four year decline in the labor force participation rate is unprecedented.  The rate has never declined this much since the Labor Department began reporting it in 1946. [Continued below the chart]

The second chart places the labor force participation rate into context by tracking it over three decades. 

  • During the boom years of the Reagan Administration exploding employment opportunities drew millions of new people into the labor force. 
  • For most of the next twenty years the participation rate tracked within a narrow range between 66% and 67%. 
  • After the end of 2008 labor force participation dropped precipitously as employment opportunities disappeared and more than five million people became discouraged and quit seeking jobs often enough to be classified as “unemployed.”

The media have all but ignored this dramatic deterioration in employment statistics, portraying very gradual, incremental drops in the unemployment rate as good news, without explaining that in reality it masks bad news.

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