‘Trust But Verify’
President Obama was elated by the January 2012 jobs report: 243,000 more jobs, and unemployment down to 8.3 percent.
Unfortunately, he was projecting election year hopes rather than “focusing like a laser on jobs.” Gallup’s next jobs report in March will show unemployment rebounding to 9 percent, and the Bureau of Labor Statistics (BLS) should report the same.
The following analysis, done in mid-February, anticipates this reversal.
Historically, unemployment increases in January because temporary Christmas hires are laid off, and the BLS applies its annual correction to compensate for reporting errors in the past year.
Both January adjustments should have increased unemployment, instead of the reported decrease.
BLS unemployment data excludes the “not in labor force” category in computing unemployed workers. Its unexplained January shift of 1.2 million unemployed workers into “not in labor force” caused the decline, a classic “Chicago-style” technique for improving statistical data.
Unemployment is decreasing because people are dropping out of the work force. Net jobs are not being created. Even the 243,000 jobs reported is not good news. We need at least 250,000 jobs per month just to accommodate our growing population.
Also, the “churn” data (job turnover as workers move from job to job for economic improvement) shows continuing weakness. A good economy produces a churn rate of about 3 million per month. In December it was less than 2 million.
Increasing unemployment was predictable, even if Obama couldn’t see it.
Remember, “trust but verify,” especially in an election year.”
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