By Nancy Thorner and Edward Ingold -
On Friday, August 2, a top White House official remarked, following the release of the latest employment data revealing better than expected job added in July -- 163,000 jobs -- that "The U.S. economy is on road to recovery from the worst downturn since the Great Depression", even as the unemployment rate ticked up slightly to 8.3%.
Further related, "The economy has now added private sector jobs for 29 straight months, for a total of 4.5 million jobs during the period."
An article on the front page of the the Saturday/Sunday edition of the Wall Street Journal, Job Gains Spark Stock Rally spoke of how July's stronger-than-expected jobs gains of 163,000 sent stocks soaring when fears about the U.S. veering into a recession were eased. Economists surveyed by Dow Jones Newswires had expected a gain of only 95,000.
The Department of Energy bases its monthly job numbers reports using the following criteria:
1. Job numbers are estimates based on sampling.
2, Jobs "created" are estimated by polling selected large companies and then extrapolating.
3. Employment (and unemployment) is estimated separately, by polling about 60,000 households to see who found or lost a job, or who has stopped looking. Only people still looking for work are counted.
4. The numbers are further subjected to "seasonal adjustments", to reduce the effect of seasonal part-time employment, summer shutdowns.
For example, the auto industry shuts down in August for retooling, but also to compensate for slow sales in the late summer and early fall. Many affected employees file for unemployment compensation during these shutdowns.
5. Jobs numbers are released twice--within 5 days of the new month, and about a week later for "adjusted" values. These "adjusted" values have been significantly lower than the preliminary results throughout recorded history. It's fair to say that Obama touts the higher number.
6. The latest figure, 163,000 jobs created, does not reflect the fact over 50,000 jobs were lost in July, due to cutbacks, and that 55,000 of the those created were Federal jobs.
7. The May and June numbers of net increases in non-farm jobs were revised from +77,00-0 to +67,000 and from +80,000 to +64,000, respectively. It has yet to be reported what the revised figure will be for the 163,000 July jobs figure?
8. About 125,000 people enter the potential work pool each month, once they are old enough to look for work. Estimated is that between 100,000 to 250,000 new jobs need to be created each month just to keep pace population growth.
President Obama claims that 4.5 million jobs have been added since he took office, including 254,000 for the federal government. He neglects, however, to mention that an additional 11 million people have entered the job market in that time, and that 8.5 million remain unemployed.
The monthly job reports are indeed dismal. For Obama to celebrate the July figure of 163,000 figure as anything but a failure is irrational and deceptive (including the media) given that this nation is having difficulty producing enough jobs to keep up with its population growth, let alone those needed to recover from a decreasing number of jobs.
According to David Talbot, in technology review published by MIT, there are 6.3 million fewer Americans who have jobs than was true at the end of 2007. Where did the jobs go? Outsourcing is partially to blame, but fast-advancing, IT-driven automation might be playing an even bigger role.
On average, historically speaking, the economy must create in excess of 180,000 jobs every single month just to absorb the growth in working age population.
Taking the last 5 year average annual change of employed to non-institutional civilian population, we get 1.36 million jobs needed each year to keep up with population growth. At a rate of 200,000 jobs gained each month, that's 6.8 months of the year just keeping up with population growth or 113.4 thousand jobs each month needed. That gives us 86,569 jobs per month extra to make up for the 10 million jobs lost, or a whopping 9.68 years to get back to 2007 unemployment levels.
Bottom line, even 200k jobs per month is no miracle. It is misleading to say that the economy is moving in "the right direction" just because the jobs numbers are positive. Since the number of unemployed continues to increase, the economy is falling further and further behind. Without new jobs, we would simply fall behind faster.
It just goes to show you how politicians count on you not being able to add and subtract.