The Unemployment Rate and Private Job Growth
Once again this morning, the BLS employment release tells conflicting stories depending on whether one looks at the unemployment rate or job growth. The U.S. unemployment rate fell from 8.3% in July to 8.1% in August, continuing the gradual three-year downward trend (from its 2009 peak at 10 %). Political economy equations often say that the direction of movement of the unemployment rate in the period preceding a presidential election is the main economic determinant of whether the incumbent is re-elected.
“Are we better off than we were four years ago?” Yes. If the criterion is to be a narrow unemployment comparison, and one counts from the month following the day Obama took the oath of office, then we are now at a lower unemployment rate. But that is very simple-minded as a criterion. (Look at GDP. Better yet look at how the free-fall turned around and the recession ended within his first 5 months.)
Employment growth is the more important statistic, to evaluate the progress of the economic recovery. Here today’s BLS report was disappointing: only 96,000 jobs created. The jobs number climbs into six digits if one looks at private sector employment growth.
By the way, am I the only one who sees a general bias toward negativity in the media? When the unemployment number looks bad and job creation looks good, like a month ago, the newspapers seem to headline the former. When the unemployment rate looks good and employment disappoints, as this time around, they tend to focus on the latter. The TV shows do the same (including those on which I appear).
In any case, as always, one should look at a longer run trend. The fact is that private sector job growth has been running at an annual rate of 162,000 per month over the last two years. This is far greater than the rate during the Bush Administration even if one looks only at the years in between the Bush recessions of 2001 and 2008 (83,000 per month, on average, from November 2001 to December 2007.) It is not enough. For example it is much less than the rate during the Clinton Administration, month in, month out (218,000 private sector jobs created per month, on average). But it is a big improvement over where we were.
On the subject of Bill Clinton. His speech to the Democratic Convention Wednesday night again demonstrated his unique ability to explain wonkish policy details in a folksy way. This included pointing out the statistics on private sector job creation under Democratic presidents since 1961 compared to Republican Presidents. The rate has been just over twice as great. Thus the current Obama-Bush comparison continues a half-century tradition.
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The point about private sector job expansion looking better than overall employment growth is of course what Obama was trying to say in June when he made his unfortunately worded statement that “the private sector is doing fine.” He quickly retracted that language, which was the right thing to do. But the point still needs to be made.
Why look at private sector jobs, instead of total jobs? I have a feeling that this is a Republican way of looking at things. The Republicans don’t seem to believe there is anything amiss if a million public sector workers lose their jobs. (Which is what has happened over the last year: 934,000.) Teachers, firefighters, construction workers… Apparently those don’t count as real jobs because they are in the public sector. That would explain the Republican congressional opposition to Obama’s initial fiscal stimulus in 2009 (the one that ended the recession) and their more successful subsequent attempts to block Obama’s job proposals.
So maybe we should be looking at total employment after all, rather than private employment. Or even focusing on the underemployed and discouraged workers. But these are all reasons why we need to resume enacting the policies that Obama has been trying to enact.