(Article changed on October 7, 2012 at 08:45)
Rush Limbaugh and other GOP hacks are claiming the President instructed his Labor Secretary to lie. They claim he told her to massage (my word) the data so that unemployment is below 8%.
On the other hand, the President is touting unemployment falling below 8%, which is now where it was when he took office.
So who is lying? Someone has to be, right?
When the economy bursts out of a deep recessionary gap with 6-8% growth for several consecutive quarters, which is the norm but is not happening, the unemployment rate spikes upward not downward. This is because unemployed workers who had stopped looking for work see that there are significantly more job postings, and start looking for work. When they start looking for work, the government includes them in the labor force (L). When L goes up, the unemployment rate follows:
u = 1 - E/L
So, yesterday's unemployment rate is not something the President should be celebrating. At this point, we can say he is not lying but he is either an economic dunce or he is a politician who is doing what politicians do: exploit the fact that many journalists and Americans are economic dunces.
Now, what about the claims that Rush and GOP hacks are making about the Labor Department twisting the data to get the unemployment rate down to 7.8%? The federal government surveys employers and households. The first survey showed about 110,000 new jobs were added by employers. The second showed over 800,000 people who were not working previously are now doing so.
How is that huge difference in those similar numbers possible?
If it looks like a lie, and quacks like a lie, it must be a lie, right?
The household survey is used to compute the unemployment rate. When people tell Current Population Survey interviewers that they worked at least an hour for pay (under the table or for an employer who asked them to fill out a W2), the government considers these workers as being employed. If people tell the interviewers that they worked at least 15 hours for mom or dad's business for no pay, government considers these people as being employed, too. Those are two very week definitions of employment. We are talking about part time work at gas stations or working in mom's new hair braiding business in her living room!
On top of that, "Emergency Unemployment Compensation, which currently helps 2.6 million Americans with 34 to 53 weeks of benefits -- will be dramatically scaled back beginning in June. The retrenchment in this program will immediately harm workers in 24 states, and will reduce or cut off benefits for hundreds of thousands of jobless Americans over the rest of the year."
If a large portion of the more than 800,000 jobs that were added according to the household survey were 'created' in the 24 states mentioned in the previous paragraph, I suspect that many of these new 'jobs' are people working part time, working for rent in mom and dad's struggling new business, or working under the table.
According to Chart 1, which is from a BLS report that summarizes employment trends in the household and payroll surveys, a recession is looming when total employment in the employer survey flattens and employment in the household survey explodes. This was the case in the previous recession, and appears to be the case now.
So, yesterday's jobs report is legit but not good news for the President. The firestorm around the report that suggested the numbers were cooked by the administration confirms Rush and his fellow GOP hacks are economic dunces or are exploiting the fact that many Americans are economic dunces.