It didn’t take the conspiracy theorists long to go to work. At 8:30 A.M. E.T., the Labor Department gave President Obama a much-needed boost by announcing that the unemployment rate in September was 7.8 per cent—the first time it has fallen under the politically important threshold of eight per cent since January, 2009. At 8:35 A.M., or thereabouts, CNBC’s Rick Santelli was openly suggesting that the numbers had been cooked. “I told you they’d get the figure under eight per cent before the election, and they did it,” he said from his perch in the Chicago futures markets. A few minutes later, Joe Kernen, one of the network’s anchors, suggested that President Obama may have known what was coming. “You can relax at the debate if you knew it was going to be 7.8 per cent,” he said. “You can mail it in.”
Kernen may have been joking—it’s hard to know with him. Santelli, whose February, 2009, rant about the government bailing out “losers” that had taken out mortgages they couldn’t afford was widely credited with helping to get the Tea Party off the ground, was undoubtedly serious, and, on the face of it, he had some grounds to be suspicious. The eagerly awaited monthly employment report showed that payrolls expanded by 114,000 in September, a pretty modest figure which isn’t enough to keep up with the expansion of the labor force caused by population growth. And yet the unemployment rate, which was at 8.1 per cent in August, fell by three tenths of a per cent. How can this have happened?
The answer lies in the way the monthly job figures are compiled, which often leads to confusion. The change in payrolls is derived from a survey of business establishments that the Labor Department conducts. The unemployment rate comes from a separate survey of households carried out by the Census Bureau. In theory, the two sets of figures should match up, but all too often they don’t, and this was one of those occasions. The household survey showed the number of people in work shooting up by 873,000, and it was this leap in employment that pushed down the unemployment rate.
Anybody can see there is is a big difference between 873,000 and 114,000. But that doesn’t mean the fix was in. Having covered the U.S. economy for many years, I have never seen any credible evidence of malfeasance or political machinations on the part of the questioners and statisticians who produce the job figures. They occasionally get things wrong, and give a misleading impression of what’s happening in the economy, but that’s almost always a product of coverage problems with their surveys, or faulty statistical adjustments, rather than political bias. Of course, that doesn’t rule out something untoward happening. But in my experience it would be unprecedented.
My take on what happened is this: the job figures, particularly those derived from the household survey, are notoriously volatile. From month to month, they bounce around a lot, often creating headaches for the governments of the day. In September, 2011, the Labor Department reported that job growth the previous month was zero, sending the White House into a tizzy. This month, Obama got lucky. In July and August, the employment figures from the household survey were very weak: they showed a decline in employment of 195,000 followed by another decline of 119,000. That probably exaggerated the weakness in the economy. This month, the figures rebounded, and by more than anybody can have expected.
To be sure, the figure of 873,000 almost certainly exaggerates the underlying job growth in the economy, something the Labor Department readily acknowledges. Each month, the Department produces a third estimate for job creation, one that is based on the household survey but which strips out some of the most volatile sectors of the economy, such as agriculture and self-employment. In September, the adjusted household figure showed employment rising by 294,000—a very good outcome, but nothing like as large as the unadjusted number.
As always when looking at the labor market, the important thing is to take a broad view, and not to say anything too dogmatic on the basis of any single figure. From this perspective, the economy appears to be doing O.K.—there is nothing in this report to support the idea that we about to enter another recession—but it is nothing special. The payroll survey was actually stronger than the headline figure of 114,000 new jobs for September. The numbers for the previous two months were both revised up substantially. July’s figure was adjusted from 141,000 to 181,000. July’s figure went from 96,000 to 142,000. The average figure for the past three months is about 146,000, which is consistent with an economy expanding at a modest rate—perhaps 2.0-2.5 per cent on an annualized basis.
Taking a longer-term perspective, the economy has created about 4.7 million jobs since the spring of 2010, which means more than half of the roughly 8.5 million jobs lost in the recession have been recovered. Obviously, you can look at that in two ways. On the White House blog, Alan Krueger, the head of the Council of Economics Advisers, said that “today’s employment report provides further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression.” That is undoubtedly correct. The economic recovery that began in the summer of 2009 is continuing. But Republicans are also right when they say this recovery is weak compared, say, to one that followed the deep recession of 1981-82.
Mitt Romney is already busy making this argument. “This is not what a real recovery looks like,” he said in a statement shortly after the employment report was released. But nothing he says can disguise from the fact that the job figures are good news, very good news, for Obama. For months, Republicans have been harping on the Administration’s failure to bring unemployment down below eight per cent. With less than five weeks to go to the election, they can’t make that argument any more.
Not that Obama is quite out of the woods when comes to the economy. One of the puzzles about today’s report is that it doesn’t jibe with the recent figures for G.D.P., which have been weak. In the second quarter of the year, growth in G.D.P. was just 1.3 per cent. Most analysts expect the third-quarter figure to come in somewhere between 1.5 per cent and 2.0 per cent. If the slowdown in growth were to continue, the unemployment rate would start to creep back up again at some point. Indeed, some people in the Obama Administration were fearful that this could happen before the election, which would have been disastrous. It didn’t happen this month, but it’s still a possibility. The October jobs report will be released on Friday, November 2nd, just six days before the election.
Official White House Photo by Pete Souza.
