Jobs! Jobs! Jobs!
President Obama and challenger Mitt Romney have both made hay over the miraculous 7.8% unemployment rate announced last Friday.
The President says it proves his economic policies are taking hold and we should not go back to the policies of the past that put us in a bind in the first place. He points out that 31 straight months of private-sector job growth creating 5 million new jobs supports his claim.
Mitt Romney says that the jobs picture is far worse than the 7.8% number implies. He points out that if the workforce participation rate were the same today as when President Obama took office that the unemployment rate would be over 11%.
Romney says that proves the President’s policies are not working. Romney claims, therefore, its time for new leadership at the top from someone who understands job creation – him!
So, who is right?
Given that jobs and the economy are the #1 issues this year, its the subliminal question of 2012.
How voters answer it will determine the next President of the United States.
Round One: What Policies?
The President distinguishes two types of unnamed policies affecting the economy… his own and the damaging policies of the past.
According to the President, his policies are working. The damaging policies of the past are inhibiting their full bloom.
The President’s Policies
The President doesn’t identify what policies he implemented that lowered the unemployment rate to 7.8% last month. The possibilities are:
- The $831 billion “Stimulus” (ARRA)
- The 2-year payroll tax cut
Granted, the President has implemented other minor actions but they are small potatoes by comparison.
The “Stimulus” was passed his first month in office and funding ran out two years ago. That can’t be it. Even the President has stopped talking about ARRA.
On the other hand, the 2% payroll tax cut “holiday” has been effective. It has put about $2,000 back into the pockets of the average worker over the last two years. That is about $83/month. That’s enough to generate demand and economic stimulus.
But that can’t explain a rapid .5% drop in unemployment in two short months. There has to be another explanation. There is.
The Damaging “Policies of the Past”
What are they? According to the President, they are what caused the Great Recession.
It’s a matter of speculation but in the past the President has named these causes:
- Failure to regulate the banking industry
- Bush’s prescription drug program
- Two unpaid wars
Wars are an economic stimulus. They always have been. They create demand. That’s Econ 101. World War II is what ended the Depression. We’d fallen back into recession for two years before WWII came along and perked the economy right back up. That is not the cause.
Its unclear how a drug program might trigger a massive recession but if it made prescription drugs cost more it could put a drag on an economy.
Be that as it may, if Bush’s prescription drug program is one of the damaging “policies of the past” then Obama is making it worse today. President Obama expanded Bush’s prescription drug program in Obamacare by plugging the infamous “donut hole”. That doesn’t help.
No doubt, though, deregulating the banking sector helped cause the Great Recession.
Guess who did that? Not George W. Bush. Nope. That was done by none other than President Bill Clinton in 1999. Clinton repealed the part of the Glass-Steagell Act that lead directly to the mortgage bubble collapse.
Pulitzer Prize winning business journalist Gretchen Morgenson, of the New York Times, sorts out all the sordid details where she points fingers and names names. Her revealing book is titled, “RECKLESS ENDANGERMENT: How OUTSIZED AMBITION, GREED, and CORRUPTION led to ECONOMIC ARMAGEDDON“.
The President faults Bush for failing to see it coming and stop it. However, even the Fed didn’t see it coming and its their job! How could Bush have seen it?
Round Two: The Fib
For the first time last week, President Obama fibbed about how many private-sector jobs were created when, in the debate, he said it is 5 million. Since early this year the President has fastidiously quoted the exact BLS numbers. Not this time.
When he made that claim, the actual number was 4.6 million. After Friday’s jobs report that number improved to 4.7 million.
Some might ask, “Its close, what’s the big deal?” The big deal is the President’s fib proves he is minimizing the problem.
First off, quoting only private-sector job growth itself exaggerates job creation numbers. The President knows this. He and his economic advisers get all the BLS data the Thursday before each monthly report. They know that there are around 500,000 fewer jobs overall than private-sector growth alone. -518,000 public-sector jobs have been lost in the last 31 months.
When the President exaggerates the private-sector total by another 400,000 on national television he is overstating actual job growth by around 900,000 jobs. That is a 19% exaggeration. It borders on lying.
The President is in denial. He wants the numbers to be better than they actually are. He is minimizing the problem, not facing it head on.
What about the 7.8%?
Scour the BLS stats this month and two numbers stick out like lighthouse beacons on a moonless night.
First, “Employment Level”, from the A-1 household survey, leaped an astounding +873,000 jobs in September. That is the bottom line number used to calculate the surprising huge and unexpected .3% drop to 7.8% unemployment.
Second, “Part-Time for Economic Reasons”, from the A-8 household survey, leaped by +582,000 jobs created in September.
In other words, the lion’s share of jobs created last month were hardship part-time jobs taken for economic reasons. That is NOT good news. The economy is still in a very fragile recovery.
The President and his economic advisers know that from the numbers. Now you know it to.
What about Romney’s 11%?
Romney’s 11% unemployment rate claim is slightly overstated but has legs.
“Workforce Participation Rate” is an obscure concept to most of us, but not to a job creator. It is the percentage of active workers who actually have jobs.
What Romney is doing is making a true apples-to-apples comparison by evening up the workforce participation rate. He’s right and pretty smart.
When President Obama took office, workforce participation was 65.7%. Today it is 63.6%. That is the lowest rate since the early 1980s.
The dip translates into a 10.7% unemployment rate for September and an 11.2% unemployment rate for August. Romney’s 11% is right in the ballpark.
As seen above, most of September’s drop to 7.8% came from undesired part-time jobs taken due to economic conditions.
Though it sounds impressive at a campaign rally, President Obama’s argument for an improving economy has more holes in it than Swiss cheese.
For the 2nd month in a row the unemployment number dropped big time for spurious reasons. It is no wonder it is questioned.
Candidates can exaggerate and/or banter statistics back and forth all day until they are blue in the face. It doesn’t matter.
Voters can just look around them and see for themselves. It isn’t a pretty picture. Living wage jobs are hard to come by.
It boils down to what you see vs. who is believable. That elects the next President of the United States.