"Bill" Board Day 10 – Brother, can you spare a dime

First, I must make an admission. The advertisement for this billboard was placed in August 2012.  At that time, the United States had experienced 43 months of unemployment over 8.0%. In fact, the August number was 8.1%  Knowing that this billboard was going to run in October and November, I stuck my neck out and projected that we would sustain one more month of unemployment over 8.1%, so I went for it.  I was wrong: the official number in September was 7.8%!  Congratulations, Mr. President! As you recently stated, unemployment has reached the “lowest level since you took office.”  The problem is that unemployment was 7.8% when you took office, almost four years ago.

Several other problems with the unemployment number concern me.  First, the Bureau of Labor Statistics this week stated that because of Hurricane Sandy, they are not going to release the unemployment data for October until after the election.  I may be a little gun shy when it comes to the President’s promises, but this sounds like an attempt to not release a bad number before the election.  You know, Mr. President, you promised if we bought into stimulus, TARP, quantitative easing … those things that increased our debt almost $5T … unemployment would return to 5.6%.  But what we have is an unemployment rate that is no different than the day you took office, which you characterize in a manner that makes it appear that you are responsible for the great progress in unemployment reduction.

Second, the September data is circumspect.  The raw employment level of the Household Survey -- the number which gets seasonally adjusted and then goes into the unemployment rate calculation --appears to be unreasonably high. If it is off, the unemployment rate is skewed downward. History suggests we have a problem (see graphic).

The August-to-September change, +775,000, was the largest upward August-September change in the history of the Household Survey. It was the largest difference between the Household Survey and the Establishment Survey (August-September change) in the history of the Household Survey. In fact, it was the only time ever that the Household Survey showed a greater increase in September than the Establishment Survey. Based on the previous 64 years (and assuming August-September changes are independent of each other year-to-year), the chances of seeing an increase that big in the Household Survey in September was 0.14%. That is well outside most reasonable statistical "confidence intervals."

The reported data is wildly inconsistent with GDP growth as well, reported as 1.3% in the second quarter, and in decline over the past two years. Creating the level of monthly jobs reported would reflect economic growth 3 to 4 times as large.

In short, most statisticians would say these results are statistically unlikely. I ask again: why is the October data not being released?

Last, the unemployment rate calculation suffers from another structural weakness. It is defined as the number of unemployed workers divided by the total labor force. Persons who stop looking for work drop out of both the numerator and denominator of this calculation, which improves the number.  For example, suppose we are crazy enough to re-elect this administration, and we end up with two unemployed persons looking for work and a total labor force of three. The unemployment rate is 2/3 or 66.7%.  Suppose the next month, one of the 2 unemployed persons -- an old guy like me -- has been looking for work for 1 year and it just is not promising, so I drop out of the workforce (viz., stop looking for work).  Under this scenario, the unemployment rate is calculated as ½ or 50%!  Magically, unemployment has gone down almost 17% in one month. 

According to Peter Ferrara, Director of Entitlement and Budget Policy for the Heartland Institute, writing in Forbes magazine, the real unemployment rate is about 14.3%.   In addition, the jobs being created are not replacing the incomes of the jobs being lost. As economist John Lott reported at FoxNews.com on October 3, “Mid-wage occupations accounted for 60% of the jobs lost during the recession, but low-wage occupations accounted for 58% of hiring during the recovery.” As a result, since President Obama entered office, annual median household income has declined by $4,019, or 7.3%. Moreover, the decline has been greater since the recession supposedly ended in June, 2009, than it was during the recession. In the three years from June, 2009, until June, 2012, median household income declined by 6%.  Clearly, the President’s so-called “policies” are not working.

My advice: if you want an economy that is less encumbered by bureaucracy, regulation, and lack of accountability and might actually create an economic environment that supports job growth, you best elect someone who has actually created jobs before. Barack Obama is not that guy.

 

Vote November 6^th.