Fighting the Jobs Report Spin

Cain Solutions Inc. | October 6, 2012 

By DAN CALABRESE – U6 unemployment is what matters, and it remains unchanged at 14.7 percent.

This morning’s jobs report is giving Obama’s media backers a chance to change the narrative, and you’ll be hearing throughout the day how this is “good news for the president” because unemployment has finally dipped below 8 percent to 7.8 percent, which is the lowest it’s been in 44 months. This will be accompanied by their celebratory announcement of a statistic you’ve probably never even heard before, that of an increase of 873,000 in employment from the “household survey.”

None of this represents anything good, but you have to understand what the numbers mean in order to recognize that. So let’s go through it:

- The Bureau of Labor Statistics reports that only 114,000 new jobs were added in September. That is slighly better than the 96,000 that were originally reported in August (later oddly revised to more than 140,000), but it is still terrible, and still well below what you need to even keep up with population growth.

- The household survey includes people who took part-time jobs, which is why it says there are 456,000 fewer “unemployed” people, because you are not unemployed if you work at McDonald’s. They are still undermployed, however, for purposes of being counted in the U6 unemployment number, which is why that figure remains unchnaged at 14.7 percent.

- The fact that 7.8 percent is the lowest we’ve seen U4 in 44 months only demonstrates how horrible the past 44 months have been. During the Bush Administration, U4 stayed around 5 percent from the end of his first-term recession until the financial market meltdown in 2008. The recession has been over since 2009 but unemployment has remained at or above 8 percent ever since. A slight drop now to 7.8 percent is mere statistical noise, especially with U6 remaining unchanged.

What is going to happen over the course of the next several days, however, is a competition of narratives over what these new numbers mean. You’ll hear a lot about 7.8 percent, and you’ll hear a lot about the household survey number of 873,000. You won’t get much explanation to put them in context, except in a political context. But you should know what these numbers really mean, and now you do.

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