NCPA - National Center for Policy Analysis

What's the Truth about the Unemployment Numbers?

March 6, 2012

The recent sudden drops in both initial unemployment insurance claims and unemployment rates have generated a slew of positive news stories and lifted White House spirits.  But other numbers show a much weaker job market and economy, say John Lott, an economist, and Grover Norquist, founder and president of Americans for Tax Reform.

  • The average unemployment duration remains near its all-time high, hiring is stuck near record lows and there are almost 3 million workers in part-time rather than full-time jobs.
  • Further, gross domestic product grew just 1.7 percent last year and few new companies are being started.

The very weak recovery means the official unemployment rate is an unreliable barometer of the labor market.  People are only counted as unemployed if they have been actively looking for work in the past four weeks.  It is good news when the number of unemployed falls due to more hires.  It is not so good if the number falls due to people giving up looking for work.

Historically people give up looking for work during recessions and resume looking for work in recoveries.

 Not this time.

  • While 1.66 million net jobs have been added during the Obama "recovery," over that same time the number of working age Americans not in the labor force rose by 7.14 million.
  • There is no comparable post-World War II "recovery" where this type of exodus has occurred.

Some have attempted to explain this anomaly by an aging workforce, but labor force participation rates have fallen for all age groups except workers age 65 and over.

Rules of thumb work pretty well most of the time.  But you have to know how the numbers are put together to tell when those rules break down.

Record-setting drops in new hires and people leaving the work force are just such cases.  The "high-fiving in the White House" is far too premature.

Source: John Lott and Grover Norquist, "What's the Truth about the Unemployment Numbers?" Fox News, March 4, 2012.

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