Economics, U.S. Economy

The big March jobs miss—and why the real unemployment rate sure ain’t 8.2%

Swing and a miss. A big miss. A really big miss. U.S. employers added just 120,000 jobs last month, the Labor Department said on Friday. That’s the smallest increase since October. Economists polled by Reuters had expected nonfarm employment to increase by 203,000. And as economist Robert Brusca points out, “The strong amazing run in household jobs came to a crashing halt as employment in that survey fell by 31,000 after rising by 42,000 last month and 847,000 the month before that.”

Then there’s the unemployment rate, which dipped to 8.2% from 8.3% the month before. That extends the longest streak of 8%-plus unemployment since the Great Depression. The U.S. economy hasn’t been below 8% unemployment since Obama took office in January 2009. And back in May 2007, unemployment was just 4.4%. (And keep in mind that average hourly wages are up just 2.1% over past year. But inflation up 2.9% (2.2% core). American workers are losing ground.) As Barclays Capital puts it: “Overall, the report had an undeniably weak tone and will raise doubts about the strength of the labor market. Given that the report reflects only one month of data and some of the underlying cyclical sectors registered payroll gains, we do not view it as conclusively signaling a shift to a lower trend rate of employment growth.”

And here’s how economic consulting firm IHS Global Insights views the report:

March was expected to bring another good jobs report, and it failed miserably. The streak of 200,000-plus monthly payroll gains ended at three. Job gains were almost 100,000 below expectations, the workweek shrank, and the decline in the unemployment rate reflected not more employment, but fewer people looking for work.

The big disappointments were in private services, where retail had a second successive bad month, and temp jobs fell for the first time since last June. Construction jobs fell for the second month in a row, but that is not too surprising – although the weather was exceptionally warm in March, it probably didn’t help construction as much as in January or February.

One disappointing jobs report is not reason to panic, but it will dampen some of the optimism about the strength of the recovery this year.

Recall that back in 2009, White House economists Jared Bernstein and Christina Romer used their old-fashioned Keynesian model to predict how the $800 billion stimulus would affect employment. According to their model—as displayed in the above chart, updated—unemployment should be around 5.8% today.

But the true measure of U.S. unemployment is far worse:

1. If the size of the U.S. labor force as a share of the total population was the same as it was when Barack Obama took office—65.7% then vs. 63.8% today down from last month—the U-3 unemployment rate would be 10.9%.

2. But what if you take into the account the aging of the Baby Boomers, which means the labor force participation (LFP) rate should be trending lower. Indeed, it has been doing just that since 2000. Before the Great Recession, the Congressional Budget Office predicted what the LFP would be in 2012, assuming such demographic changes. Using that number, the real unemployment rate would be 10.5%.

3. Of course, the LFP rate usually falls during recessions. Yet even if you discount for that and the aging issue, the real unemployment rate would be 9.4%.

4. Then there’s the broader, U-6 measure of unemployment which includes the discouraged plus part-timers who wish they had full time work. That unemployment rate, perhaps the truest measure of the labor market’s health, is still a sky-high 14.5%.

5. The employment-population ratio dipped to 58.5% vs. 61% in December 2008. An historically low level of the U.S. population is actually working.

6. The number of long-term unemployed (those jobless for 27 weeks or longer) account for 42.5% of the unemployment. That number is basically stuck. It was the same, for instance, in August 2010 and last December.

Bottom line: The economy is adding jobs but not very quickly, which is to be expected given GDP growth of around 2% or so. A Great Recovery after the Great Recession? More like the Great Stagnation …

 

James Pethokoukis is a columnist and blogger at the American Enterprise Institute. Previously, he was the Washington columnist for Reuters Breakingviews, the opinion and commentary wing of Thomson Reuters.

 Pethokoukis was the business editor and economics columnist for U.S. News & World Report from 1997 to 2008. He has written for many publications, including The New York Times, The Weekly Standard, Commentary, National Review, The Washington Examiner, USA Today and Investor’s Business Daily.

 Pethokoukis is an official CNBC contributor. In addition, he has appeared numerous times on MSNBC, Fox News Channel, Fox Business Network, The McLaughlin Group, CNN and Nightly Business Report on PBS. A graduate of Northwestern University and the Medill School of Journalism, Pethokoukis is a 2002 Jeopardy! Champion.

Pethokoukis can be reached [email protected] or follow him on Twitter @JimPethokoukis

76 thoughts on “The big March jobs miss—and why the real unemployment rate sure ain’t 8.2%

  1. The Republicans should simply post this graphic and speak on the economy no matter what questions are raised (to deflect race baiting, class warfare and other distractions).

    People need to take active measures as well. Go Galt and put off any purchases you can until November. Don’t buy, don’t invest, don’t hire (and consider pruning your workforce of “victim studies” graduates of university while you are at it). If enough people do this the economy will crash in ways the legacy media cannot hide or cover for, putting the final nail in the Obama Administration. Once November passes, you can go out and spur the American recovery and celebrate the new administration coming into office.

    • Hey T,
      I sense some ancient wisdom here with you. Good thinking, including your Rand’s -John Galt- parable.
      The most important question is, though, are there enough educated/patriotic Americans to vote and get rid of these Bolshevik-heir vermin?
      We’ll find out on Nov 6.

  2. It’s a simple message, but has to thwart Obama’s only narrative. He prevented a Depression and the economy was worse than thought; but his policies have created growth and jobs. Of course, economies recover on their own, but people are intellectually lazy and may fall for his story.

  3. Canada produced 82,000 jobs in the same period. Based on population, that would equate to roughly 800,000 or more jobs in the American population base.

    Someone needs to get this information out to the American people. How is it that Canada, with it’s much less industrialized economy and small population, is able to generate 7 times the jobs?

  4. I don’t understand this whole, “we didn’t know how bad it really was” business. Wasn’t the President saying the whole time that this was the worst economic situation since the Great Depression? He seemed to know exactly how bad it was when he was putting a plan together to fix it. I wan’t to know what information was hidden from him. It’s not like there is some sort of super secret economic stats and data are kept only by the President. “Well uhhh… Bush was uhhh… you see… hiding important information… that uhhh… would have made it easier to uhhh… really get the economy back on track… had we uhhh… known it at the time. ” So, I wonder… was he not telling the truth then, when putting his plan together, or is he not telling the truth now?

  5. James Pethokoukis, you are such a partisan hack! And like all partisan hacks, once you’re proven wrong, you’ll simply come up with some other lie.

    So what will you say when the number of jobs added in March is revised upward? You know as well as anyone else who’s ever looked at the numbers that these data are notoriously subject to revision, especially when the direction is changing. You also know that the 120,000 estimate doesn’t match other surveys that have lately been more reliable.

    It’s truly a shame to see what has happened to the once-great American Enterprise Institute.

    • S H,
      You sound more like an Obama drone than a stats hound, you dog.
      If you follow JP’s posts you wouldn’t write such bs comments.
      Anyway, go back to your sewer; this blog is not for your intellect; focus on Krugman and his ilk. They gather inside and around the NYT sewer system…

  6. Unemployment in construction is 21.2%, I wish these guys would tell the truth. We all need to education ourself in this tough market only way is a degree or change your career.. search online for High Speed Universities for career advice

  7. Commentator,

    “Economies recover on their own”

    Looking at historical trends for basically all US recessions in the 1900′s and 2000′s, the rate of job growth and economic expansion should be far greater than it currently is.

    I believe it would be intellectually lazy then to say that [Obama's] policies have created growth and jobs without offering any significant data to justify this assertion.

  8. Another way to look at the $800B Keynesian stimulus is they borrowed and spent $800B not knowing how to accurately assess the state of the economy in 2009. When they come back and tell me what their plans are now, what is to lead me to believe that there assessment is any more accurate or their plans will be any more productive.

  9. I would like to see this data back to at least 1999 so we could see how the economy reacted to the dot-com bust, 9-11 and Bush’s subsequent tax cuts.

  10. Yes the unemployment rate is disappointing, but how can this entire mess be pinned on Obama? When he presented the chart in question, the estimated Q408 GDP had yet to be revised downward to a whopping 9%. And in his first 4 months in office, the economy lost about 3M jobs; of course this is a big reason for the unemployment rates you quote. Was this his fault? Or Bush’s? Are gas prices his fault too? Or have you looked at the 15 year chart for gas prices? Many commentators have misled the public on this issue too?

  11. Actually, the economy is far, far worse than these mere unemployment numbers portend. Ever since the advent of the so called information age, consumer economy and the break up of Bretton Woods when Nixon pulled the plug on gold reserve ratio, there has been a looting of our nation’s physical economy by the financial speculators. Now I realize that academic (perhaps better quackademic) economists like that genius helicopter Ben Bernanke do not have the sense to give two cents about what kind of employment there is because to them money is money. (That’s why they think printing it is the financial panacea, while in reality diarrhea is more like it.) But due to the economic monetary nostrums of these very same quacks, we have become a virtual junkheap of an economy.

    The problem can only be solved by first shutting down the lunatic bucket shop derivative securities speculators like Goldman Sachs and George Soros’ Quantum Fund by separating out their worthless casino chip nominal values and cutting them loose through bankruptcy. That means a return to Glass Steagall and a new Bretton Woods.

    Second we need to take down the Federal Reserve which is nothing but an instrument of these very same financial houses like Goldman and Morgan Stanley that have created this execrable mess. We must return to the principle of Alexander Hamilton’s design of a national credit system for the restoration of a physically productive economy. His attack on Adam Smith by name in his Report on Manufactures to the Congress, puts the lie to the myth of so called free enterprise. This means creating a Third National Bank of the United States that is not in the control of today’s international financial oligarchy radiating out of the City of London and Wall Street.

    The reason the United States of America was established was to promote the general welfare. Period. Without that commitment, we are but a sorry reality show parody of the rancid Roman Empire’s bread and circuses. Today that means repair and development of long term sustainability of our wrecked physical economy. Credit must be established like Hamilton and later Lincoln did to promote investment in high technology water, power, transportation, and agriculture.

    The manned space program, that the crazed Obama administration has just sunk, must be restored and vastly accelerated. We must dump the pseudo science of radical environmentalism and use advanced technologies like thorium nuclear reactors (of which there is enough proven supply to be mined at current rates of usage to last over a thousand years.) We must finance continent scale water projects that would provide fresh water enough to green the deserts like the North American Water and Power Alliance that was idiotically thrown into the dust bin. Nuclear fusion (that the insane Obama clique has just defunded) and matter anti-matter research must be made our top priority. These measures (and all that they entail) alone will restore a functioning physical economy that will promote the nations long term general welfare, anything else is too little too late.

    • I am not sure you are right, but then you are speaking on something i understand very little about. I love that you emphasize the development of physical economy, one with great visions and aspirations. That is what made us great in the past -we were not afraid to dream big, and by God, we some how always managed to get it done. I don’t want the dissolution of the Soviet Union to be our last great victory. We are only starting! There is so much more the USA can do, and lead the world in, if we have the vision!

    • Tried it the 30′s; built a lot of really useful infrastructure from the GG Bridge to Hover Dam and did enrich the nation but didn’t put much of a dent in the depression. In fact, the folks who made the money (Surprise! Surprise!) were the contractors, not their workers.

      Agreed, we desperately need infrastructure improvements but investment in new technologies, which fueled the advances of the past half-century, should be seen for what they are – great for new toys but no panacea for any level of economic woes.

      What’s needed is a reversal of the flow, first of money, from consumer to the top of the Pyramids; the folks doing the real work and the investors who fund businesses should be the benefactors, not hierarchical levels of ‘Management” that add no value but siphon off loads of cash. Replace the CEOs with active B of Ds and fire everyone above office manager (or a reasoned facsimile) while augmenting a living wage with bonus structures based on the business’s success or failure. Until the structural problem of money flowing from the bottom to the top, we’ll always be in hot water.

  12. I do agree, 100%. The unemployment is much worse than the government is saying. Last week, the unemployment in Pasadena, Texas (77505) was at 10.8%. They aren’t even including the under-employed. They need to wake up and smell the coffee. They aren’t the ones unemployed, we are.

  13. I reject the notion that people are intellectually lazy. If you want to expose Obama’s narrative as false, which it is, then you have to get out there and do it. You can’t just write one blog entry. You have to keep presenting more and more evidence. You have to actually defeat the lie. You are doing your part right here. Keep it up. The truth will triumph. Americans understand the truth when they hear it. Just look at the 2010 midterm elections.

  14. Of course today’s mess is the result of policies of a long string of administrations, Republican and Democrat. But this graph clearly shows Obama’s stimulus policy is a failure. He projected that WITHOUT the stimuls, unemployment would be 6.5% today. The idea that it is going to get back to 5% anytime soon is a joke.

  15. I haven’t been in a full time employment seen 2009 which was a full time employed goverment job. Where one of are problem begin like I’m seeing in these blog’s by putting unqualified people in these positions because of who you no and every few years these goverment agency that your tax paying dollars are being spent on are being investigated every few years for robbing us of are tax payer’s by these hired on employees This is the FBI which in turn is more tax paying money. This is public housing authority which is another end of your tax paying dollars. Where you have residents who are able body’s who are able to work and live for free with more of your tax paying dollar’s. Than to have me go in and repair a unit and change the estate manger 125 an hour with your tax paying dollar’s. Than watch upper and middle management get there yearly bonuses with your tax paying dollars. I’m not saying it all bad its needed, because the way this country going were all going to need it.

  16. Do not believe Obama’s re-election unemployment numbers–there are over 1.5 million that were kicked off of unemployment because of the election year–Obama is using those numbers to show employment gains, it is not any better now than it was 3 years ago about finding jobs–and good paying jobs do not exist right now–If Obama is defeated in Nov. this country will see a boom in the economy never seen before–the Obama liberal press will never print that …Obama has been a total failure and a huge fraud since day one–this guy will tell you anything to get re-elected..Do not fall for this crap..

  17. The oil, industry alone will produce over 1 million new jobs if Obama is thrown out as he should be, these will be non-government welfare jobs that will pay real good wages, this is the type of thing that will boost the economy–If Socialist Obama is defeated in Nov..this country will see one of the largest boom’s that our economy has ever seen..You do not hear about it because the bought and paid for Obama press will not report news like that…This is how we get our economy and country back on track..Obama is not for free enterprise jobs, he feeds off people that are addict to government assistance–pretty sad and no one will report on the real facts—This election is not about Romeny, it is about throwing out the worse president in the history of this country ..A vote for Obama is a vote for huge government, loss of freedom and loss of wealth–no national security and stripped down military..A vote against this criminal fraud anti-American Socialist Muslim loving pig will finally put this great nation back on the right track..We do not want a president who uses blame as an excuse for failure, he was elected to fix problems not make excuse after excuse..Obama and his dangerous associates have to be removed, it is very simple and this country will come together and throw him out–

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