What is Behind the 7.8% Unemployment Rate?
by Tom Donelson on October 8, 2012 at 2:48 PM
The recent job report shows all the weakness of the Obama administration, a lot of style but very little substance behind the policy. On the surface, 7.8% unemployment rate and the monthly drop of .3% looks impressive since it broke 43 months of 8% or greater unemployment rate. Team Obama did their somersaults and proclaimed once again, the great recovery is just another month or two away.
A deeper look at the data shows an economy still sputtering and mediocrity taking hold. This is one of those repeat performances that put these numbers in proper perspective. Yes, the rates are down and that is to be celebrated, but how can anyone be all that excited at the creation of just 114,000 jobs this past month? Even with the various revisions upwards, 2012 is still behind 2011 on a monthly basis for jobs created and 2011 was mediocre. If we were witnessing a decline of unemployment with an expansion of labor participation rates or even keeping the rate similar to when Obama took office, then we can all scream hallelujah. Instead, we have seen a reduction of labor participation rate and this stat hides a significant decline in real economic activity and job creation.
To those who will argue that the labor participation rate is declining due to the graying of America, the reality is that much of the decline has nothing to do with the graying of America. It is due to Obama's economic plans.
If we had a similar rate of participation rate when Obama took office, we would be seeing double digit unemployment. Even by Obama's economic team's own admission, this performance is subpar based on their original projection. If one was to use Obama's economic team's original projection, there’s at least 4 million jobs not created, a point that I demonstrated in a previous column.
Of the 800,000 plus of new jobs found to be created based on household surveys, the Wall Street Journal noted, “Even if the 873,000 job estimate is confirmed in future months, the survey found that 582,000 of those jobs were what the survey calls part-time for economic reasons. That is, they would rather be working full-time. The number of part-time workers for economic reasons grew to 8.6 million in September from 7.7 million in March.” So we are seeing a ton of part-time Wal-Mart greeters and hamburger flipper jobs being created, hardly the great surge in Middle Class opportunities. Obama and Biden may describe their love for the Middle Class, but their economic plan is trapping many into dead-end part time jobs that may not even pay the monthly bills.
As for those manufacturing jobs, the Wall Street Journal noted, “Manufacturing employment fell again (down 38,000 in the last two months) further dampening one of the few bright spots in this recovery. A still abysmal 40.1% of the unemployed in America have been jobless for six months or more. Such a job market is anemic by any historic measure for this stage in an expansion and reflects continuing slow GDP growth in the 1%-2% range.” This shows an mediocre economy, just one step above slipping into recession.
The next President will have to clean up an economy that is burdened with excessive debt and kept alive by loose monetary policy and an interest rate kept low by the Fed. There is likely a chance that the next President will see economic recession over the next twelve months, a point that I have made earlier. America has been slipping in categories of competitiveness and economic freedom for the past decade, and this has played a role in the United States economic stagnation. The most recent economic data shows an economy in decline and barely hanging on.
The question is will the voters look at the 7.8% number and conclude happy days are here again, or will they search the truth behind the numbers? If they look behind the numbers, they will see a hallowed out economy; and will the voters be satisfied with an economy that encourages mediocrity, while discouraging the successful from producing?