Economics, Pethokoukis

The sickly, stagnant September jobs report

romerbernsteinSeptember2012

Is this the Obama October Surprise?

Only in an era of depressingly diminished expectations could the September jobs report be called a good one. It really isn’t. Not at all.

1. Yes, the U-3 unemployment rate fell to 7.8%, the first time it has been below 8% since January 2009. But that’s only due to a flood of 582,000 part-time jobs. As the Labor Department noted:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.0 million in August to 8.6 million in September. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

2. And take-home pay? Over the past 12 months, average hourly earnings have risen by just 1.8 percent. When you take inflation into account, wages are flat to down.

3. The broader U-6 rate — which takes into account part-time workers who want full-time work and lots of discouraged workers who’ve given up looking — stayed unchanged at 14.7%. That’s a better gauge of the true unemployment rate and state of the American labor market.

 

4. The shrunken workforce remains shrunken. If the labor force participation rate was the same as when President Obama took office, the unemployment rate would be 10.7%. If the participation rate had just stayed steady since the start of the year, the unemployment rate would be 8.4% vs. 8.3%. Where’s the progress? Here is RDQ Economics:

Such a rapid decline in the unemployment rate would be consistent with 4%–5% real economic growth historically but much of the decline is accounted for by people dropping out of the labor force (over the last year the employment-population ratio has risen to only 58.7% from 58.4%).  We believe part of the drop in the unemployment rate over the last two months is a statistical quirk (the household data show an increase in employment of 873,000 in September, which is completely implausible and likely a result of sampling volatility).  Moreover, declining labor force participation over the last year (resulting in 1.1 million people disappearing from the labor force) accounts for much of the rest of the decline.

5. As the chart at the top of the post shows — a chart originally produced by Team Obama — even the artificially depressed 7.8% unemployment rate is way above the 5.6% unemployment rate the White House predicted for September 2012 if Congress passed the $800 billion stimulus package back in 2009.

6. The 114,000 jobs created would have been a good number … but for 1962, not 2012. The U.S. economy needs 2-3 times that number every month to close the jobs gap (which is the number of jobs that the U.S. economy needs to create in order to return to pre-recession employment levels while also absorbing the people who enter the labor force each month.) At 114,000 jobs a month, the jobs gap would not close until after 2025, according to the Hamilton Project.

7.  We are still on pace to create fewer jobs this year than last year. In 2012, employment growth has averaged 146,000 per month, compared with an average monthly gain of 153,000 in 2011.

8. White House economist Alan Krueger says the jobs numbers are ”further evidence” the economy is healing. But he’s wrong.

The employment-population ratio, which merely shows how many folks have jobs as a share of the civilian population, was 58.7%. Now that’s up from last month. But it is still far below where it was in June 2009, 59.4%,when the recession officially ended. And it’s even further below the 63% level before the downturn.

Bottom line: The U.S. labor market remains in a deep depression with virtually no recovery since the official end of the Great Recession. But the Long Recession continues unabated.

 

James Pethokoukis is the Money & Politics columnist-blogger for the American Enterprise Institute. Previously, he was the Washington columnist for Reuters Breakingviews. Pethokoukis has written for many publications including USNews & World Report, The New York Times, The Weekly Standard, Commentary, USA Today, and Investor’s Business Daily. Pethokoukis is also 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.

79 thoughts on “The sickly, stagnant September jobs report

  1. Ummm, thinking about what those 500,000+ part time jobs might by the only thing It can probably be are the College students going back to school and working in the cafeteria, student hall or student housing to help pay for their tuition. Who else would hire those numbers this time of year? So are they really jobs or is this more smoke and mirrors from an empty presidency. Why can’t these people be honest?

  2. I don’t see how there are 500,000+ part time self reported jobs created in September – far in advance of the Christmas season. What industry hires that amount of new PT hires before the holiday season? Retail is the only industry that could. I could understand these numbers in november or December but not September and October. Something is fishy.

  3. But this fails to show that corporate after tax profits are up near 2.6 times from what they were at the end of the Q4 in 2008 and the S&P is up over 70% for the same time period. Apparently companies are making money, they’re just not spending it on hiring workers or giving raises to their employees.

  4. @David and @Big truck joe,

    Those part time jobs “created” can actually represent full time employment moving to part-time employment rather than actual new jobs. If you look at part time employment data versus total employment data going back several decades, there have been times when part time jobs created have been greater than change in total employment; the only explanation is shifting from full time to part time.

    @David E,

    Companies are indeed making money. But with an uncertain regulatory framework (does anyone REALLY know how Dodd-Frank works?) and the Fed announcing unlimited QE, there’s no reason for companies to invest domestically.

  5. I’m sure you were concerned about the rising deficit and unemployment rate for the 8 years Bush was in office!! (sarcasim of course)But like all good Republican sheeple, I’m positive you sat there on your “sickly” butt making excuses for his actions while that administration destroyed this country’s economy!!!!!

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