A major theme of the current presidential election is
whether the country is doing well under the current Democratic
administration. Republican candidate
Donald Trump is making the case that conditions are terrible, and require a
change. One of Trump’s claims is that
the official unemployment rate is “a hoax”.
Trump claims that actual unemployment rate is as high as 42%.
Let’s look at some of the data.
The unemployment rate since 1980 has fluctuated with the
business cycle. Recessions cause sharp
increases in unemployment, followed by years of recovery. The business cycle is about 7 to 10 years
long.
Non-farm employment since the 2009 recession has grown at a
steady pace. The chart shows a similar
slope to the increasing numbers of jobs during the years of the 2nd
Bush administration.
The Bureau of Labor Statistics also collects data on
“discouraged” workers, who are no longer looking for work. This adjustment adds about a half-percent to
the base unemployment rate, but does not significantly change the pattern of
improvement over the past seven years.
There is a persistent conspiracy belief among conservatives
that the unemployment numbers published by the BLS are altered by the administration
to appear better. This has been
rebutted by several economists and economic publications.
Economist Jeff Frankel writes: "The truth is that
presidents don’t and can’t manipulate the jobs numbers. No White House has even
tried — at least not since Richard Nixon made a heavy-handed attempt in 1971 to
interfere with BLS staffing. After that, extra firewalls were put in
place."
For those who do not believe government statistics, we can
compare the independent evaluation of unemployment done by Gallup, by household
surveys. The Gallup survey corresponds
closely to the BLS unemployment rate without seasonal adjustment.
Some problems do exist in the economy, and there are reasons for
underperformance compared to previous decades.
First, and most significantly, there are large numbers of part-time workers who want full-time work. In the aftermath of the 2009 recession, record numbers of workers accepted part-time work instead of full-time work. Those numbers have remained stubbornly high through the economic recovery. If these workers are included with unemployed workers, the unemployed/underemployed rate remains at a stubbornly high 10 percent after declining from 17 percent during the height of the Great Recession.
First, and most significantly, there are large numbers of part-time workers who want full-time work. In the aftermath of the 2009 recession, record numbers of workers accepted part-time work instead of full-time work. Those numbers have remained stubbornly high through the economic recovery. If these workers are included with unemployed workers, the unemployed/underemployed rate remains at a stubbornly high 10 percent after declining from 17 percent during the height of the Great Recession.
The reason that many people cannot find full-time employment is really obvious, to anyone familiar with employment practices at a "big-box" retail store, and federal employment regulations. According to current Federal law, employers do not have to provide full benefits to part-time employees. In particular, employers do not have to offer health insurance to part-time employees. This single fact explains the historically high number of workers working part-time, but desiring full-time work. This fact also explains why the Affordable Care Act was necessary, in order to make health insurance available to millions of workers and their families without health insurance.
Secondly, another issue is declining participation in the labor
force. Labor force participation among
adult Americans peaked in the late 1990s at 67%, and has declined to about 63% in
2016, representing an increase of about 17 million people not working.
A major factor in this change is the aging of
the baby boom population. Comparing
statistics from 2014 and 2004, there are 7 million more retirees in 2014, and 4
million more people who are ill or disabled.
There are about 5 million more people going to college, and 1 million
more out of the workforce for other reasons.
The decline of labor force is not primarily due to discouraged workers, but rather
is the due to the aging of the baby boomer generation.
In the most recent months, labor force participation has ticked upward slightly, and discouraged workers return to the labor force. Still, the labor force is likely to remain a smaller percentage of the population than in 2000, due to the demographic aging of the population and longer lifespans.
In the most recent months, labor force participation has ticked upward slightly, and discouraged workers return to the labor force. Still, the labor force is likely to remain a smaller percentage of the population than in 2000, due to the demographic aging of the population and longer lifespans.
The record of the Obama administration has been a continuous improvement in the unemployment rate and number of jobs since the recovery from the 2009 recession. In truth, I believe that the business cycle is the dominant factor in determining the level of employment in the economy, and that the presidential administration deserves little credit or blame for the unemployment rate. But for those who would label the policies of the administration a failure, based on the nation's unemployment rate, they should look at charts and understand the numbers.
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References
Trump claims that government (BLS) unemployment rate is
incorrect. Trump claims a 58%
unemployment rate for African American youth.
Non-working population includes retirees, youth,
stay-at-home parents (25% of adult population).
I would also include care-givers for seniors.
Actual unemployment rate is correct, at under 5%. Labor force participation is down from 65%
to 62.8%.
Video of Trump speech.
Reasons for decline in labor force participation.
Reasons for decline in labor force participation.
7 million more retirees, 4 million more ill or disabled, 5 million more going to school in 2014 than in
2004.
