The Edmond Sun

October 12, 2012

'Unbelievable' is right

Mickey Hepner
By the Numbers

EDMOND — “Unbelievable jobs numbers ... these Chicago guys will do anything ... can’t debate so change numbers.” — Former General Electric CEO Jack Welch, Oct. 5, 2012

 

Unbelievable is the proper word, although it’s not the jobs numbers, reported last Friday, that are unbelievable. What is unbelievable is that someone with Jack Welch’s knowledge and experience would believe (or even insinuate) that the government jobs report was manipulated for political gain.

In reality, the methodology behind the monthly employment situation report released by the U.S. Bureau of Labor Statistics has widespread acceptance among economists across the ideological spectrum. In short, the numbers are as reliable as can reasonably be expected.

This does not mean that the estimates released last Friday are final, as the BLS will regularly revise the numbers in the coming months as more complete data becomes available. Still, those revisions will be driven by statistical reasons, not political ones.

What was lost in all the discussion about the accuracy of the jobs report was that the report wasn’t a very good one. Yes, the unemployment rate fell to 7.8 percent — slightly below the level when President Obama took office. Yet the unemployment rate is arguably the most over-hyped economic statistic because it can decrease even as the economy worsens, and increase as the economy improves.

Furthermore, of the two different surveys reported in the monthly Employment Situation Report, the smallest one — the household survey — is the most volatile. For example, in the last six months the household survey indicates that the monthly change in the number of employed Americans has been -169,000; +422,000; +128,000; -195,000; -119,000; +873,000. It was the +873,000 last month that triggered the surprising drop in the unemployment rate. But, as you can tell from the numbers, the figures for the previous months have been all over.

This is why most economists focus initially on a different statistic from a different survey — a survey of employers — that is much more stable. Over the last six months, the monthly changes in private-sector employment have been +85,000; +116,000; +63,000; +163,000; +97,000; +104,000. In other words: meh.

Of course, August was the 31st consecutive month of private-sector job growth. During this period the economy has added 4.7 million private-sector jobs (not counting the additional 453,000 jobs BLS recently announced it will add to the total in its annual revisions). As a result, in 2011 the economy clocked the largest increase in jobs since the tech-boom of 1999 … and 2012 isn’t far behind.

Still, it wasn’t great. During the last year the U.S. adult population has grown by an average of 141,000 people per month. In the last six months private-sector employment has grown by an average of only 105,000 jobs per month. So, while the economy is growing and jobs are being created, they aren’t being created fast enough. This is a concern.

Of course, the situation could have been a little better. It was more than a year ago that President Obama proposed the American Jobs Act — legislation that according to various economic analyses would have created an additional 1 million jobs. However, the Republican-controlled House of Representatives killed it. We know how to solve the unemployment problem. And we know that Congress won’t do it.

Outrage is appropriate. But unlike with Jack Welch’s irrational rebuke of BLS civil servants, the deserving target of our outrage should be Congress. After all, it was Congress who could have acted to boost the economy. It was Congress who could have stepped in to help hardworking taxpayers and protect America’s families. And it was Congress that said “no.”

Unbelievable.



MICKEY HEPNER is the dean of the College of Business Administration at the University of Central Oklahoma. Hepner serves on the Executive Committee of the Board of Directors for The Oklahoma Academy.