Deceptive Unemployment Rate 


The December Employment Situation Report, or Jobs Report, was released Friday January 6, 2017 with little fanfare. Some in the media are calling this a "Goldilocks Report," not too hot, not too cold, just right. Some people are calling this a cold porridge report. This author called it a "Deceptive December Jobs Report." We saw full-time jobs, non-seasonally adjusted (NSA)  drop by 390,000 jobs and an additional loss of 197,000 part-time jobs.We also recorded a jump of over 100,000 unemployed workers, non-seasonally adjusted or seasonally adjusted (SA.)This data comes from the Current Population Survey. Unfortunately, the media focuses on the Current Employment Statistics (CES) data that measures workers added to, or subtracted from,  the economy. The CES data can count workers who work two or more jobs twice.The CES worker data recorded a NSA worker loss that was seasonally adjusted into a private sector worker gain of 144,000 workers. If they had used the seasonal factor used during December of 2015 the number would have been reported at 34,000 SA private Sector workers added.In addition to this news, the NSA CPS data revealed a drop in the participation rate and a bump up in the unemployment rate.This happened because we saw a drop in the number of people working multiple jobs. (This will be dealt with in tomorrow's Multiple Job Worker Column.) People who lose one of their jobs do not qualify for unemployment benefits because they are still employed.


The "Four President's" series was created when some person was promoting that President Obama and Democrats were better at creating jobs than President's George H.W. Bush and George W. Bush. They forgot about President Reagan. They were also comparing President Obama's job creation with more than a year left in his Presidency with President's who have finished their time in office. Jobs tend to decline during the final six months in office, especially during January. President Obama was in fourth place for job creation at month 81.


How does President Obama compare to Presidents Reagan Clinton and George W Bush after 95 months in office with regard to full-time jobs and part-time jobs created, as well as number of participants added to the economy and the unemployment rate and participation rate? Participation matters, as will be explained later in this column.


President Reagan Added 17.9 Million Jobs for 16.3 Million Workers.  Adding more jobs than workers is a good thing. People who were not working prior to President Reagan coming into office were earning money. The peaks that you see in the Reagan Job Population Graph are the seasonal spikes during the Summer Months. You will notice that the number of Full-time jobs dropped during the period of time from the Summer of 1988 through December. Even though these seasonal jobs disappeared  President Reagan had averaged 188,000 jobs per month while  adding 172,000 workers a month.


 President Clinton added 20.8 million jobs for 19.7 million workers. One thing that you will notice is that President Clinton only had one month where he had fewer full-time workers than when he took office. You have to squint to find it.   You will also notice that President Reagan had two recession early in his Presidency. President Clinton, technically, never had a recession. President Clinton averaged 233,000 jobs a month for 206,000 new workers.


President Bush added 7 Million Jobs for 21 Million workers. President Bush's job creation peaked during the Summer of 2007. It almost returned to the same level during the Summer of 2008. Hurricane Ike hit that Fall. The Housing recession picked up steam. We were in a recession. President Bush had only added 75,000 jobs for 233,000 workers a month. People were still participating in the economy - they were participating as unemployed workers. More will be discussed on this topic  in this column.


President Obama has added  11.4 million jobs for 20 million workers. He has added more jobs than President Bush after 95 months in office. The problem is that he has added  6.5 million fewer jobs than President Reagan and 9.5 million fewer jobs than President Clinton.  President Clinton added more workers than President Obama. President Obama has only averaged 120,000 jobs a month for 211,000 workers.


Unemployment was Soaring Under President Bush, Dropping under Reagan and Clinton.  President Obama had the highest real level of unemployed workers of the four Presidents throughout the first seven years of his Presidency. President Bush had a steady level of unemployed workers through the majority of his time in offices.President Bush has 11 million unemployed workers during December 2008. President Obama saw over 7 million unemployed workers this past month. President Reagan had just over 6 million unemployed workers during December 1988.President Clinton had just over 5 million unemployed workers during December 2000.


We have a Failure to Participate. If you add the number of employed workers, full-time and part-time jobs, to the number of unemployed workers you end up with the number of participants in the economy. President Obama was the only President of the four to have fewer participants than he had at inauguration day.  President Clinton had added 15.5 million participants by December of his final year. President Reagan stood at 15.1 million. Bush was at 11.2 million participants. President Obama is a distant fourth place at 5.2 million new participants. If President Obama grew the workforce at the same pace as his predecessors then we would have between 6 and 10 million more workers worker part-time or full-time jobs or at least collecting unemployment.


President Reagan Increased the Participation Rate while decreasing the Unemployment Rate. The participation rate is the amount of participants (Employed + Unemployed) divided by the workforce population. The Unemployment rate is the percentage of unemployed workers as a fraction of the participants.  UR = (U3+PT+FT)/U3. PR =( U3+Pt+FT)/Population A change in the unemployment rate of 1% does not equal a change of 1% in the participation rate. President  Reagan had a low participation rate of 63.04% during January of 1982. He was at 65.87% by December 1988. He saw peak unemployment of 11.40% during January 1983. His unemployment rate was 5.03% during December 1988. Five percent is considered full-employment.


President Clinton Reduced the Unemployment Rate while Increasing the participation Rate, too. President Clinton started with an unemployment rate of 7.84% and a participation rate of 65.76% He hit his peak participation rate, over 68%, during the Summer of 1997. His participation rate December of his final year was 66.96% with an unemployment rate of 3.68%. If 5% unemployment is "Full Employment' is 3.68% "Fuller Employment?"


President Bush Had an Unemployment rate of 7.13% and a Participation rate of 65.67% during December 2008. Unemployment levels were rising. The number of Unemployed workers were rising. The were still participating. President Bush's lowest Participation rate was 65.44%He approached 68% during the Summer of 2007. His lowest unemployment rate was nearly 4% during September of 2007. Stated another way, Presidents Bush and Reagan had roughly the same participation rates  during their final Decembers.


President Obama is Approaching his Lowest Participation rate ever at 62.40% and his lowest unemployment rate of 4.43%. President Obama started with a participation rate of 65.47% and boosted it to 66.25% during July 2009. His participation rate has slid as his unemployment rate slid. Where Presidents Reagan and Clinton saw unemployment rates drop while participation rates rose, the only way he could drop his unemployment rate was to drop his participation rate. There has been some recovery for his participation rate during the past year. He bottomed at 62.31% during September of 2015 and nearly matched that low at 62.34% during January 2016. Currently his participation rate is 62.40%, non-seasonally adjusted. He hit his lowest unemployment rate of 4.43%$ last month. Now it has ticked up to 4.51%. Is it really 4.51%? How can  an unemployment rate of 4.51% and a participation rate of 62.40% compare to Reagan's 5.03% and 65.87%? It Can.t. This is not what full employment looks like.


Is the Real Unemployment Rate Closer to  10% or 12%. We have a record level of people working full-time jobs and part-time jobs for the month of December. We are just slightly above the full-time employment level m recorded during the Summer of 2007. This was the peak Pre-recession month for combined full-time and part-time jobs. We shed full-time jobs and added part-time jobs, creating a Part-time Iceberg. The problem is that the participation rate is at a December level not seen under Presidents Reagan, Clinton, or Bush, President Reagan's lowest participation rate was 63.04%. President Bush's Lowest was 65.44%. President Clinton's was 65.65% Could President Obama leave with his lowest level of participation ever this January? Remember that the Jobs report collects data through the 12th of January,, so the next jobs report is all President Obama.


If we had the same participation rates as Presidents Bush, Reagan, or Clinton we would have 8.3 million to 11.6 Million more participants. If we have these non-participants, and if people are working later in life this December as they were during November, then those non-participants are effectively unemployed. Not from the tables below that we would have 3 million more unemployed workers under President Obama with President Clinton's participation rate and that the effective unemployment rate would actually be lower than President Reagan. Unemployed people are participating.  Any way you calculate it the effective unemployment rate would be over  9.75% and possibly 12%


It's the Economy.



Jack Dunn - Reclaiming Common Sense