In their first debate, Gov. Romney and President Obama focused heavily on which of them would best encourage job creation and help the middle class. In the debate, Obama tried to deflect criticism over his handling of the economy by claiming to have created five million jobs while in office. Unfortunately for the country, Obama’s attempts at job creation have been simply dismal. Before examining Obama’s claim specifically, it is important to understand the unemployment situation.
The Bureau of Labor Statistics (BLS) has several sets of unemployment figures. The official figure is called the “U3” unemployment rate; however, this unemployment rate only includes people who are part of the workforce. To be considered part of the workforce, an individual must be actively looking for work. Since the economy has been so poor for so long, people are increasingly giving up looking for work. They have sent out their resumes and applications and gone to job fairs, but have run out of options. The latest numbers from the BLS show that over 40 percent of unemployed persons have been unemployed for 27 weeks or longer, a historic high according to John Bazemore of the Associated Press. This has a large effect on the U3 unemployment number. According to Joe Weisenthal of Business Insider, the labor force shrunk by 367,000 people in August. When this many people give up looking for work and “leave” the labor force, it makes it look like the unemployment rate decreased, even though the number of people working has not increased. It is worth noting that the labor force participation rate has been steadily declining since 2008.
The most recent data from the BLS shows that the U3 unemployment rate dropped under eight percent for the first time in 43 months. Some are arguing that the decline will work to Obama’s benefit in the election. However, the drop is misleading for three reasons.
First, the U6 unemployment rate, which accounts for people who are unemployed, working part-time when they would like to work full-time, and those who have given up looking for a job, gives a bigger picture than the U3 number. The most recent data from the BLS shows that this rate is at 14.7 percent, or around 23 million people. Unlike the U3 rate, U6 unemployment is exactly where it was in August.
Second, other economic indicators point to this sudden and unexpected drop as a statistical fluke. James Sherk and Salim Furth of the Heritage Foundation point out that if employers hired 900,000 people, economic output should be increasing and fewer people should be applying for unemployment insurance. Instead, they point out that “none of these are happening. Second-quarter GDP growth was recently revised down, and new UI claims remain around 370,000 a week.”
Thirdly, Mark Zandi, chief economist at Moody’s Analytics, argues that, “the decline in the unemployment rate overstates the improvement in the labor market” since over half of the jobs created were part time jobs taken by people who could not find full time work. With this in mind, Obama’s claim to have created five million jobs can be more accurately judged. Obama is largely correct that the economy has created five million jobs since unemployment peaked. Still, Obama cannot personally claim to be responsible for “creating” these jobs, simply because he does not have exclusive control over the economy. It is more likely that these jobs were added in spite of his economic policies, not because of them.
Second, as Antony Davies points out in U.S. News and World Report, “the economy needs to add about 180,000 jobs a month just to keep up with population growth.” However, the economy has added an average of only 146 thousand jobs per month in 2012. For unemployment to really decrease, job creation needs to consistently outstrip population growth.
For Obama to portray himself as a stellar job creator is rather presumptuous, given these numbers. It’s time to give someone else a shot.
Nelsen is a senior majoring in political science. Comments can be sent to [email protected].
