Unemployment “Truthers”
Via Mark Thoma’s Economists View comes Bruce Bartlett’s post at The Big Picture
by Bruce Bartlett:
Unemployment ”Truthers’‘
Donald Trump and Other Republicans Are Unemployment “Truthers”, The Big Picture: Among Donald Trump’s stump sound bites is that the national unemployment rate is far, far higher than the official rate of 4.9 percent. He is not alone in making such claims. Both former Texas Governor Rick Perry, who dropped out of the presidential race last year, and retired surgeon Ben Carson have repeated this claim during this election cycle. Its origin dates back to the 2012 election when many Republicans believed that Barack Obama had ordered the Bureau of Labor Statistics to report a much lower unemployment rate in October, just before the election, than seemed plausible. It also feeds into a growing distrust for government statistical data that parallels a denial of scientific facts such as climate change.
You could at least point out that downward revision of the October 2012 employment numbers was the largest such downward revision of that year (-75k) or since. http://www.bls.gov/web/empsit/cesnaicsrev.htm
There have certainly been larger downward (and upward) revisions before then, but the timing of that good report was suspicious, particularly when coupled with the admitted faking of data in Philadelphia.
http://www.usatoday.com/story/money/business/2013/11/19/census-jobs-data-manipulation/3645819/
Now, I do NOT believe that there is or was any systemic or systematic faking of census data. My point here is that it is necessary to address the reasons for their misconceptions, and then provide the refutation — such downward (and upward) revisions had occurred before, that on a seasonally-adjusted basis it was NOT the largest of 2012, and the Congressional investigation (run by Republicans) revealed no evidence of other faked reports.
Truthers on these subjects have been around well before 2012. Shadowstats is from at least 2003, and I’m sure the founder of the site has been making potentially dubious claims since before that.
I’ve never used Shadowstats. The government data showing lower labor force participation (particularly among women). However, it seems the original reports are hardly worth the paper they are printed on (and I read them on-line). Just look at Table A of this month’s report. Every month’s employment numbers were revised downward.
http://www.bls.gov/news.release/archives/empsit_02052016.pdf
This time last year, every one in the previous year was revised UPWARD!
http://www.bls.gov/news.release/archives/empsit_02062015.pdf
The media make (“makes”? I’m never sure whether “media” is singular or plural.) way too much out of what can only be considered preliminary estimates.
All the comments and the post here are correct, and these people need to be dismissed. However, there is a deeper way in which they have a point, which is that the standard unemployment rate simply is not the best indicator of the state of the labor market, and in recent years has made things look better than they really are, although this does not involve any faking of the measurement of it. But people have this sense that somehow both their ability to demand higher wages as well as their job security are not the same as what they were the last time the unemployment rate was this low, which I think was in the late 90s or not too long after then.
So what many now look at is the employment rate, the percentage of people of working age who are employed. This is now about 3 percentage points below where it was in 2008, and whereas the UR was higher then, this employment rate probably is a better indicator of the actual labor market conditions. The issue is that lots of people of working age have dropped out of the labor force, so the UR looks low, but the dropped out are not counted in it. They only show up when we look at the employment rate, which while improved since the pit of the recession, remains unpleasantly low.
Employment conditions have been steadily improving since late 2009, but they are still not back to what they once were, and many people sense this, which makes them more open to these unemployment “truther” claims of outright fakery by Trump et al.
True, Barkley. If the labor participation rate, now 59.6%, were at January 2008 level (66.1%), the Unemployment rate would be 9.0%, not 4.6%.
http://www.bls.gov/news.release/archives/empsit_02012008.htm
Another thing that really “berns” people, particularly low-income workers, is that 24% of the labor force got 45% of the new jobs between Jan. 2009 and Jan. 2016 — the foreign-born population. (See Tables A-7 in the respective reports.)
http://www.bls.gov/schedule/archives/empsit_nr.htm
Warren, you are confusing the employment rate (or employee-to-population ratio) with the labor force participation rate (which is the employment rate plus the unemployment rate).
UL:
You are correct. While he is correct in how he explained it about, he did not explain it in the same manner in his initial statement. “labor participation rate, now 59.6%.” Hmmm By gosh it is not 59.6%; it is 62.7%. http://www.bls.gov/news.release/empsit.a.htm He is trying to make a point by recalculating U3 using PR from 2008. Which is fine, except he should have done it initially.
No, I’m not. I am saying that IF the labor force participation rate now were what it was eight years ago, the unemployment rate would be 9.0%.
Let me run through the numbers….
Currently, we have a civilian noninstitutional population of 252,397k, and a labor force of 158,335k, giving us a labor force participation rate of 62.7%. 150,544k are employed, so 7,791k are unemployed. 7791 divided by 158,335 gives the unemployment rate of 4.9%. That’s all in Summary Table A: http://www.bls.gov/news.release/archives/empsit_02052016.htm
Now, the labor force participation rate in January of 2008 was 66.1%.
http://www.bls.gov/news.release/archives/empsit_02012008.htm
If we had that now, we would have 0.661*252,397k = 166,834k people in the labor force. Keeping the same 150,544k employed, there would be 166,834k – 150,544k = 16,290k unemployed. Taking that 16,290 and dividing by 166,834, we get 9.7% unemployment.
(Looks like my original computation was a bit low. Not sure what I missed there.)
Please check my numbers and let me know whether I made any other errors.
I think a lot of the problem is that the BLS measures employment, but people experience employment security. (I’m using ‘security’ here the way international aid planners use it when they talk about ‘food security’.) The way work is structured right now, we might have 1% unemployment, but 85% of everyone worried about getting fired tomorrow, 90% expecting a wage and/or hours cut, and 95% realizing that they aren’t going to get a raise or promotion now or ever.
The fact that a lot of people have left or have never entered the work force speaks volumes. Most people know that the economy is much weaker than the numbers show and that is the fact that matters to them. It’s like temperature as opposed to the wind-chill factor. I was in the mountains above the Atacama and it was 14F out, but the air was still at dawn. I could walk around in a light sweater and admire the flamingos. I would have needed a well insulated parka and heavy gloves for 14F if there had been a light breeze.
Thirty or forty years ago a 4.9% unemployment rate meant that one wasn’t likely to get fired, one might get a raise or more hours, and one might even get promoted to a better billet. Now, a 4.9% unemployment rate is something like an 9% unemployment rate in the 1970s or 1980s. It isn’t that the BLS is cooking the books, it’s that its measurements are out of date.
Well said, Kaleberg. Back in the day, professionals could look for another job discreetly. Now, some employers scan the resume sites for their own employees, and will sack them if they post a resume.
Employers run credit checks and background checks for menial jobs. (I will not say it is racist to do so, but it does impact Blacks and Hispanics more than Whites and Asians.)
It ain’t easy out there, even for professionals.
My own fortune 500 employer STRONGLY (i.e. more or less required) everyone create a LinkedIn account about a decade ago. I basically presumed it was to monitor job search activity.
One more factor in limiting job mobility I haven’t seen mentioned here… The lingering effects of the housing crash are probably keeping some job seekers stuck since they can’t unload houses bought at peak or near peak of the bubble. Unevenly distributed, of course, not a problem in say Austin TX, but the overbuilt suburbs have already had bubbles burst with accompanying repos etc.
Yup — that was a particular problem with the government’s pushing banks to give mortgages to unqualified people. Especially those in “factory towns”. If you were renting, you give 30-days notice and start packing. If you owned, who are you going to sell to when the factory closes?
The fact is, home ownership is not right for everyone.
“Government’s pushing banks to give mortgages to unqualified people”
If you have a citation (statutory or regulatory) to justify this assertion please share. Otherwise quit making it.
As far as I can tell it was crooks pushing banks to give mortgages so they’d have crap paper to sell the rubes. The governments role was basically non-existent regulation.
“Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.”
http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html
Looks like our current president is repeating that policy:
https://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_story.html
See “Inside Job”. Or if you prefer a more recent (and probably more entertaining) version, try “The Big Short”.
I guess it all depends on how you look at the individual transactions.
On one side of the desk is your “unqualified borrower” who I prefer to refer to as “Customer”. Many of whom were actually poorly served as I guess you are pointing out.
On the other side was supposed to be a loan officer who was paid (along with his management and executives) to protect the interests of the bank and its investors.
That slick willie sure pulled a fast one on those poor capitalists didn’t he?
If the “root cause” (applying an engineering term here) is your nytimes story of “government pushing” on those poor loan officers and their bosses, can you help me understand why investors piled into the stocks and securities of the affected institutions? Are they to be held harmless for their own irresponsibility?
Why?
Because the loans were backed by government guarantees. They were seen as having only upside potential, with downside risk being covered by the government.
Oh right, now I remember how hard the GWB administration fought to undermine those irresponsible bureaucrats defending those government guarantees. Or maybe that was just a movie I saw.
Either way, government backing of loans changes the risk factors. The point was to encourage home ownership. Of course, adding more money to the process drives up prices. The default risk shift from individual default to systemic default.
We see the same thing with government-backed education loans. Money pours into the market, more people get college educations (almost two-thirds of high school graduates go into college the next Fall: http://nces.ed.gov/fastfacts/display.asp?id=372), and prices go up. But as more people attend college and get college degrees, the competition for jobs which require such degrees increases, and to the payoff decreases. So the defaults go up. http://www.ifap.ed.gov/eannouncements/attachments/060614DefaultRatesforCohortYears20072011.pdf
Government intervention made a college degree more necessary to good employment, raised the price of that degree, and lower the payoff for getting it. As the saying goes, “With friends like that, who needs enemas?”
And of course unlike a lot of the mortgage loans (ex the ~38 recourse states of course), those government backed education loans can NEVER be discharged in bankruptcy.
Q: why does an educational loan officer at a community college have power that trumps a federal bankruptcy magistrate?
A: The loan officer can do something the judge cannot undo.
Because that’s how the law was written.
The reason it was written that way is that no-one in his right mind would give an unsecured loan to someone with no assets if that loan could be discharged in bankruptcy, UNLESS he could charge exorbitant rates (as with credit cards). Congress did not want lenders charging rates that actually matched the default risk, so they reduced that default risk by making those loans not dischargable in bankruptcy and by backing them with government guarantees.
You can repossess a house, but not an education.
Sure sure. Maybe when the law gets re-written (assuming for the moment that President Sanders doesn’t do away with college tuition and loans) maybe we can make the lenders put some skin in the game and provide for student loans to be repaid at some maximum level of post-graduation income.
I understand this is how things work in Australia and they seem to be doing okay with it.
typed “level of” above when I meant to say “percentage of” sorry.
That’s as it should be. If the lenders have some risk, they will be loath to lend people tens of thousands of dollars for a worthless degree. Higher risk borrowers should pay higher interest rates.
I’m curious, do you like the German/Danish education model Sen. Sanders references?
I’m probably neutral on it. On the one hand I support the idea of enabling people to get more education without crippling lifetime debt. But I also acknowledge we probably put too many people through college and have too many marginal ones still in operation. Especially the recent rise in for profit diploma mills which mostly operate as scams on the educational financing system.
As you probably know, college attendance is rather lower in those countries. One has to pass a standardized test to get into the college-track high schools, and another to get out with a diploma. College may be free there, but it is not for everyone.
Quite so. Both countries also offer generous and well organized apprenticeship programs in multiple disciplines that offer non-college bound citizens a path to a decent living.
So there is an alternative. It takes both.
I agree. Politically, however, I do not think many on the left will like the idea that standardized tests are going to sort people as they do in Germany and Denmark.