0

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).