UNEMPLOYMENT RATE FALLS TO 7.8%…
BUT THE NUMBERS ARE BOGUS
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Former GE CEO Jack Welch
Job growth remained tame in September, with the economy creating just 114,000 net new positions though the unemployment rate fell to 7.8 percent, the first time it has been below 8 percent in 43 months.
The report presented a slew of contradictory data points, with the total employment level soaring despite the low net number.
The falling jobless rate had been a function as much of the continued shrinking in the labor force as it was an increase in new positions.
But the government said the total number of jobs employed surged by 873,000, the highest one-month jump in 29 years. The total of unemployed people tumbled by 456,000.
The labor force participation rate, which reflects those working as well as looking for work, edged higher to 63.6 percent but remained around 30-year lows. The total labor force grew by 418,000, possibly accounting for the relatively modest net level of job growth.
Economists were expecting 113,000 more jobs and the rate to rise to 8.2 percent. Last month saw 142,000 new jobs as the rate dropped from 8.3 percent in July.
However, those numbers were revised higher, with the Labor Department putting July’s number at 181,000 from the previously reported 141,000 and August up from an originally reported 96,000.
The level of part-time workers reported the largest jump for the month, gaining 582,000.
The U-6 unemployment number, which accounts for the underemployed and those who have given up looking for jobs, held steady at 14.7 percent.
“With a gain of 114,000 jobs in September and an upward revision for August, this economy remains on a slow but not slowing growth path,” said Kathy Bostjancic, director of macroeconomic analysis at The Conference Board. “Right now, slow job and income growth is about all the economy is capable of generating as businesses remain focused on cutting costs.”
With President Obama trying to stave off a challenge from Republican Mitt Romney, the state of the economy remains the critical point. Friday’s report underscored how slowly the jobs market is recovering from the depths of the 2008 financial crisis and likely will stoke increased debate amid the halting gains the latest numbers indicate.
Health care added the most jobs, with 44,000, while transportation and warehousing grew 17,000. Financial services added 13,000 as well.
The greatest losses came in manufacturing, which fell 16,000.
We already noted the absolutely stunning surge in reported Household Survey jobs which “added” 873,000 jobs, or the most since 2003 and the second most in the past decade, which was just a little bit off the Household Survey used in the monthly NFP jobs changes, which came at 114,000, or about 8 times less.
But what was the reason for this epic jump in Household survey jobs? Simple, and those who have read our series on America’s transition to apart-time worker society know the answer. The reason is that the number of part-time people employed for economic reasons soared by 582,000 to 8,613,000, the most since October 2011, and the largest one month jump since February 2009, when “restoring” confidence in the economy was all the rage… and just before the Fed announced the full blown QE1 in March of 2009. Odd symmetry.
So putting it all together, what does this mean for the true state of the US economy? Recall back in September one of our Charts of the Day was the number of Unemployed and Underemployed for the month of August, which was 25.8 million. Readers may be surprised to learn that when putting it all together, in September this number increased to 26.2 million.
[In other words, the number of unemployed/underemployed actually increased by 400,000 last month.]
Suspicion about the federal government’s September jobs report has fallen on Secretary of Labor Hilda Solis, who appeared on CNBC this morning and defended the numbers from the Bureau of Labor Statistics (BLS), claiming–falsely–that upward revisions of 86,000 jobs were from the private sector. In fact, the new number is entirely accounted for by upwards revisions to state and federal government payrolls.
The BLS reported that while only 114,000 jobs were created in September–which would have translated into a rise in unemployment from 8.1% to 8.2%–the unemployment rate fell dramatically to 7.8%. That unusual drop is the fastest in nearly three decades, and was unexpected even in the rosiest predictions.
One reason for the rise was an upward revision of 86,000 to the July and August jobs numbers–all of which came from a 91,000 increase in the estimate of public sector jobs. Private sector job estimates were actually revised downward by 5,000.
In addition, the BLS reported a large rise in the number of part-time jobs, adding 600,000 jobs to the total–a dramatic increase of 7.5%, not explained by any other economic indicators–and raising questions about whether the government had changed the way it counted part-time workers.
Solis was adamant today in defending both the revisions and the BLS’s methodology for counting part-time workers–relying largely on the upwards revisions for July and August jobs (emphasis added):
CNBC: We’re getting bombarded by people who do not believe the number. They believe this number was fixed and typed to coincide with Election Day. What do you say to them?…I’ll rephrase the question. A lot of people do not believe the 7.8 number. They believe that somehow BLS fixed this to coincide with the election cycle. What is labor’s response?
Solis: You know, I’m insulted when I hear that because we have a very professional, civil service organization where you have top, top economists that work at the BLS. They’ve been doing these calculations. These are — these are our best trained and best-skilled individuals working in the BLS, and it’s really ludicrous to hear that kind of statement, and I say that because just look at the — we have to look at what happens across the board, not just in one month, but look what happened in the last two months. We also saw revisions there upwards of 86,000 additional jobs added and this brings us now to 5.2 million private sector jobs across the board, we saw 104 private sector jobs created….
CNBC: Before I let you go, you say skepticism over the numbers are ludicrous. You say you’re insulted. Is there a danger, you believe, when large sections was country don’t believe the data. Not that it’s ever been considered gospel, but when you have disbelief how much danger is embedded in that?
Solis: I will tell you that we look at each report differently. We just saw revisions for the last two months and this happens. I mean, these are estimates that obviously, the BLS puts out. They do the best calculation, using the best measurements and tools and we’ve been using them for the past 70 years. We haven’t changed anything and the information that I received is given to me by our professional, civil service staff in the BLS.
Note that Solis describes the 86,000 upward revision as if it were an increase in private sector jobs, though in fact the increase came entirely from revisions to public sector payrolls by cash-strapped federal and state governments. Instead of shedding jobs, as previously claimed, governments have been adding jobs.