08.31.2010 0

Behind the Unemployment Numbers

  • On: 09/01/2010 09:43:26
  • In: Economy
  • By Rick Manning

    The first Friday of every month is a special day at the U.S. Department of Labor. Somewhat lovingly called “numbers day,” this is when at 8:30 a.m. Eastern Time, the Bureau of Labor Statistics (BLS) releases the employment report for the previous month.

    Contrary to what many believe, due to the impact that employment data has on stock markets around the world, not even the Secretary of Labor gets to see this data before 8:00 a.m., and she is precluded from making public statements about these numbers until one hour after their public release due to Office of Management and Budget rules at 9:30 am.

    When the first Friday falls before Labor Day, it gets even more interesting as there is nowhere for the Labor Secretary to hide, due to various public appearances scheduled to commemorate the state of labor in America.

    This Labor Day will be particularly difficult for President Obama’s spinners, they now own this economy, their economic stimulus package and various social engineering attempts have been implemented, and the jobless rate is at 9.5 percent, a far cry from the 8 percent ceiling they forecasted if the stimulus was passed. The blame Bush card has been maxed out.

    Given this sensitivity, the Administration will be trying to eke out any good news from the latest report. An example of this type of spin showed up last month when President Obama called July’s increase of private sector payroll employment by 71,000, “a good sign” for future growth. Of course, this “good sign” fell far short of the 100,000 jobs a month that the economy needs to add just to keep up with population growth. So, the “good sign” actually fell 29,000 jobs short of the break-even point to keep the jobless rate stable.

    Expect the Administration to be running some key data through the spin cycle this Labor Day weekend. When BLS representatives meet with Secretary Hilda Solis and her team at 8 a.m., they will first look at the top-line number — the unemployment rate. This measures what percentage of those who are actively seeking jobs can’t find one. This rate has been 9.4 percent or higher for the past year, and any movement downward from the current 9.5 percent will be hailed triumphantly by the Administration regardless of the reason.

    Many analysts were initially surprised when the rate dropped from 9.9 percent in April 2010 to 9.5 percent in June 2010, in spite of 336,000 fewer people being employed during this two month period. The drop occurred because almost a million people left the workforce during those two months as the civilian labor force dropped from 154,715,000 to 153,741,000. In this two month period alone, the labor participation rate in our nation dropped a full half a percent from 65.2 percent to 64.7 percent. So, the drop in the unemployment rate had nothing to do with the strength of the economy, and in fact was more of a reflection of its overall weakness as almost a million people chose to leave the labor market.

    Another particularly troublesome group of people who will be counted by BLS are those who are known as “discouraged workers.” BLS defines discouraged workers as those people who are not currently looking for work because they don’t believe there are any jobs available to them. In July, there were 1.2 million discouraged workers up by almost 400,000 people from one year before. These discouraged workers essentially are providing a giant vote of no confidence to the economy and the Administration’s attempts to bolster it. If this group of people continues to increase, Secretary Solis might find herself to be the only Administration spokesperson available for media interviews on Labor Day, as everyone else will be in hiding.

    I have already alluded to the other key number that astute observers will be focused upon like a laser beam — the private sector job creation number. Rather than increasing by 100,000 a month, the number of people employed by the private sector has fallen by 41,000 from July 2009 to July 2010.

    This is important because it shows that the stimulus package did nothing to stimulate private sector job creation which is the engine that drives our nation’s economic growth. In order for Secretary Solis to have a good Labor Day, she is praying that when the BLS comes knocking on her door on Friday morning, they have a nice surprise of accelerating private sector job growth.

    If not, it is likely to be a bleak Labor Day forecast which portends ill tidings for Democrats running for election across the land, because ultimately, Democratic Party strategist and James Carville had it right when he said back in 1992, “It’s the economy, stupid.”

    Rick Manning is the Director of Communications for Americans for Limited Government and the former Public Affairs Chief of Staff for the U.S. Department of Labor.

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