Why Republicans Should Cheer The Employment Numbers

Last week, the monthly unemployment numbers for January arrived, and gave a boost to the Obama Presidency.  The unemployment rate was calculated to be 8.3%, the lowest since February 2009, with the economy adding 243,000 jobs, the fourth month in a row of significant job increases.

Republicans instantly attacked the numbers as twisted numerical spin, even fraudulent.  And they very well may be, as I discuss below.

But I have long argued that Republicans should be cheering these numbers, and the nominal lowering of the unemployment rate that could have easily been predicted almost a year ago.  This prediction was not because of some great confidence in the Obama economy, but simply looking at the realities of the hard data, and making logical projections.

So why should Republicans cheer these numbers?

1.  Don’t be the pessimist in the room.

Republicans have largely been the party of optimism and hope for America since Ronald Reagan’s ‘Morning in America’ campaign.   While Democrats always talk about the looming disaster to befall the American middle class, Republicans have always talked about giving the middle of America more hope for the future.

In this campaign, we should be promoting the future of an ever great nation, not one in decline.  If the employment numbers are good…we should applaud, and then give a reason why they should be better, instead of simply declaring failure at every turn.

2.  Accept that the numbers right now don’t mean much.

Let us take a look at the unemployment rate.

First, definition.  The unemployment rate is defined by the Bureau of Labor Statistics as the persons who are jobless, looking for jobs, and available for work (Otherwise defined as the unemployed) divided by total number of people available to be working.

The key disclaimer here is that those who are neither receiving unemployment benefits nor otherwise not actively looking for work are not included in this number.

If you look at January’s numbers, the unemployment rate dropped to 8.3% largely because of people dropping out of the workforce (thus, decreasing the number in the denominator) than by the additional 243k persons who gained employment during the month.

How does one verify this?  By looking at the labor participation rate.  Labor force participation rate is defined as the labor force as a percent of the civilian noninstitutional population; or in other words, the number of people employed, divided by the entire adult population.  This is a much more gross number. In January, the labor force participation rate dropped to 63.7%,  its lowest level since the early 80s recession.

What does this mean?  Well, what it means is that although the BLS numbers on unemployment are accurate, they are misleading.  Overall, the number of people working today is far less than before Obama took office.  Furthermore, if you include the people that are no longer looking for work, the unemployment rate is 10.3%.  And, in fact, that number has largely been stable since 2009, even considering the Obama stimulus and other work programs.

The above graph is a little confusing, but here is the basic take home point:  the dotted red line is the TRUE unemployment rate, if you include people no longer looking for work, but actually able to work.  The solid red number demonstrates the unemployment rate as defined by BLS.  The difference between the two lines shows you all the people that are no longer working, are unemployed…but do not show up in the actual unemployment numbers.

NPR states it another way:

“The number of ‘discouraged workers’ — those who have given up looking for work and thus aren’t counted as being part of the labor force — went up to 1.1 million from 950,000 in December. Also, slightly fewer people either reentered the workforce or entered it for the first time. Those are among the reasons why the ‘labor force participation rate’ went down to 63.7 percent from 64 percent in December.”

This difference, between the two graphs above, is equivalent to approximately 3 to 6 million people.  Even if you argue that Obama was not responsible for the disaster of 2009, that still does not blunt the argument.  If you take the labor force participation rate as of January 2011, the unemployment rate would still be 8.9%.  That is wholly owned by the Obama Presidency.

 3.  The numbers ultimately may work in our favor.

Let us stipulate that the worst of the recession is likely over.  I think conservatives even accept that.  What we don’t accept is if we are in a robust recovery.  Clearly, with the numbers laid out as above, we are not.

Let us assume for a moment that this is a lagging recovery.  Then, the unemployment rate is likely to stay the same or even drop, and the people leaving the workforce is still quite large, and jobs are being created.  If you take this presumption, the unemployment rate, at current growth levels, will be around 7.5% in November.

However, in this scenario, do any of us believe that the American people will simply look at the unemployment rate, and accept all is well?  That is presuming that the public is so stupid as to accept the number, while ignoring the reality of parents, children, siblings, and friends remaining unemployed or struggling. Ultimately, I seriously doubt that the public would accept the number for anything but a fallacy.

Let us put forth a second scenario.  Let us assume the economy is really picking up. This, ironically, is even a worse scenario for the Obama Administration.  Why?  Because this would cause people who are currently so discouraged as not to be even trying to obtain work to re-enter the workforce.

This would be disastrous to the unemployment rate.  If you assume that 100k people will re-enter the work force per month, then the unemployment rate would actually increase.  In fact, using this scenario, the unemployment rate would hover around 8.5% by November, and could skyrocket to over 9% if there is a large influx of workers into the labor market.

The irony here is, it is not Republicans but possibly Democrats who are hoping that the economy doesn’t recover too fast to hurt their election chances.  They want people to stay out of the labor market, because otherwise, the true unemployment rate will be expressed in the actual unemployment rate, at which this entire mirage falls apart.