NCPA - National Center for Policy Analysis

Jobs Unaccounted For

March 19, 2004

The economy grinds on, but many people -- economists included -- think the job situation is pretty bleak. In fact, it's not, says Investor's Business Daily.

One indicator is jobless claims fell to 336,000 last week, the lowest level since January 2001, or about when the recession began. Why are jobless claims important?

  • Falling claims signal fewer people are being laid off.
  • More importantly, they signal a rebound for small businesses, which create virtually all the new jobs.

Jobless claims are such a good indicator that the Labor Department uses them to estimate small business growth, something its payroll survey doesn't -- and can't -- do. There's a big problem with that method, however. The data Labor's using are at least six months out of date, says IBD.

  • Indeed, as economist Brian Wesbury recently noted, the government is using unemployment insurance data from the second quarter of 2003 -- back when the war began in Iraq, tax cuts were still being debated in Washington and growth was still slow.
  • Since then, claims have fallen sharply; that means the number of real new jobs is probably way higher than reported.

The government simply isn't doing a good enough job accounting for jobs created through entrepreneurship, small business and self-employment. It misses the tremendous amount of ferment, change and job-formation at the lowest levels of the new economy, says IBD.

  • The Household Survey shows 2.1 million jobs created -- not 2.3 million destroyed, as the Payroll Survey suggests.
  • Unemployment now stands at 5.6 percent, down from 6.3 percent last June.

That's also why the annual rate of economic growth has topped 6 percent in the last six months, with seemingly few jobs to show for it; productivity has made it easier not to hire, says IBD.

Source: Editorial, "Working Orders," Investor's Business Daily, March 19, 2004.

 

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