CNN’s Lack of Understanding of Labor Markets

I want to revisit this post since CNN has posted the comments of Ali Velshi:

Soledad, the numbers just come in. The unemployment rate has dropped in the United States to a historic low of 4.5 percent. It was 4.6 percent going into this report. There were even some people who thought it might tick up to 4.7 percent. The expectation was that 100,000 new jobs will be created in the United States in February. They came in at 97,000 jobs. That’s pretty much dead on. 4.5 percent as a national unemployment rate is good news for workers because it means more demand for workers, and they can demand higher wages. It’s generally good news right now, because it also means that while more people are employed, more people can spend money, and while we’ve been having these discussions about the possibility of a recession, more people earning money means lowers chances of unemployment. It makes people feel better about the economy.

BLS reports unemployment rates dating back to 1948. The historic low is not 4.5% as the unemployment rate was 2.5% for May and June 1953. The unemployment was 3.4% during the late 1960’s. But maybe Ali Velshi’s history doesn’t go back to the 1950’s and 1960’s so I decided to provide a graph of the unemployment rates since 1997. Notice that the unemployment rate was 3.9% during the late part of 2000 and didn’t pass 4.5% until after June 2001. So maybe Ali Velshi’s history is simply the past couple of years. But maybe someone should tell him that the unemployment rate was 4.4% as of October 2006.

But even if Ali Velshi knows no history except what happened last week, he must have read only the first paragraph of the BLS release. Had he bothered to read the entire report, he would have noticed that the Household Survey reported a 38,000 decline in employment. The reason the number of unemployed fell by 152,000 was not “more people are employed” but rather the reported number of people in the labor force fell by 190,000.

Ali Velshi has company. The White House also claims job growth was strong as it notes the fall in the unemployment numbers. Not be outdone, Jonah Goldberg posts some JEC spin including:

The unemployment rate has ranged from 4.4% to 4.6% for the last six months. The unemployment rate remains well below the recent peak of 6.3% in June 2003.

While noting that the unemployment rate is lower than its most recent peak is an odd way of arguing the economy is great, this description of the unemployment rate is a lot more accurate than the stupid claim we heard on CNN this morning.