12.11.2013 1

7 percent unemployment… happy days are here again, right?

Happy_Days_By Nathan Mehrens

Even with winter storms sweeping across the nation the economic news from Washington D.C. is coming up roses, with the U.S. economy creating more than 200,000 new jobs in November for the second straight month and the national unemployment rate dropping to 7 percent — a five-year low.

“Happy days here again,” right?

Let’s not get ahead of ourselves. President Obama’s administration is facing a major scandal over the alleged manipulation of its jobs data — specifically the Census Bureau community surveys that comprise the Bureau of Labor Statistics’ widely watched monthly employment situation reports.

Last month, The New York Post reported Census data had been deliberately fabricated in the months leading up to the 2012 election — possibly artificially lowering the unemployment rate at the most critical moment in Obama’s presidency. According to the Post report, “Census never publicly disclosed the falsification” nor “did it inform Labor that its data was tainted.” Worse still this abuse may be ongoing.

U.S. House committee Chairmen John Kline and Dave Camp are investigating these allegations, an effort that deserves full bipartisan support and full White House cooperation. But while lawmakers work to get to the bottom of this latest alleged Obama corruption, it’s important not to forget the broader fabrication taking place with respect to America’s unemployment rate.

Assuming the compilation of the government’s data is as pure as the driven snow, the data itself still offers a fundamentally distorted assessment of the nation’s true jobless situation. Most glaringly the official unemployment rate fails to take into account America’s shrinking workforce — rendering it effectively meaningless.

Consider this: The current labor participation rate in America stands at 63 percent — up fractionally from a thirty—five year low of 62.8 percent in October. In February 2009 — President Obama’s first full month in office — this rate stood at 65.8 percent (a number identical to its thirty—year average).

If we assume a constant 65.8 labor participation rate, America’s real unemployment rate would have been 11.5 percent in November — or 4.5 percent higher than the official number issued last week.

Here’s how these numbers are calculated: America’s official unemployment rate only tracks the percentage of the active workforce that’s out of a job — it doesn’t take into account the millions of workers who have dropped out of the labor force entirely (many of them becoming government dependents).

Putting these numbers in human terms, 91.3 million working age Americans are currently not part of the labor force (down marginally from a record figure of 91.5 million in October). When Obama took office this number stood at 80.5 million.

When we add all of these workers (or former workers) to the equation, it becomes painfully clear America’s declining unemployment rate is due mostly to a shrinking workforce — not the creation of new jobs.

Another data point illuminating this trend is America’s civilian employment-to-population ratio — which fell off a cliff during the recent recession and has yet to rebound during the so-called “recovery.”

Take a look at this chart from the Federal Reserve:

Fed_Res_Chart-12-11-13

Source: Federal Reserve Economic Data

Another important factor to consider in assessing America’s true employment situation, is the quality of jobs being created (or lack thereof). From January 2009 to July of this year, BLS data revealed a 1.8 million increase in part—time employment compared to only a 270,000 increase in full-time employment. This discouraging trend will become even more pronounced when Obamacare’s employer mandate kicks in beginning in 2015.  This is another reason to repeal Obamacare completely.

While our nation’s true employment situation is bleak, it isn’t hopeless. More than any other nation on earth America is capable of creating millions of quality, high-paying jobs. But this will only occur when government stops incentivizing dependency and perpetuating bureaucracy, and starts re-engaging the free market.

Until then it is incumbent upon our elected officials — and the media outlets which cover them — to start telling the truth about our jobs situation, and hold those accountable who seek to manipulate it for political gain.

Nathan Mehrens is president of Americans for Limited Government.

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