Today the Obama administration announced that the national unemployment rate edged down two tenths of a percent for February, from 5.7 to 5.5 percent. This is good news, but not great news – it calls for cautious optimism, not celebration.
A two-tenths drop in unemployment indicates a continued trend in the right direction. It’s still too high, however – especially among young people and minorities.
Before you pop the cork to celebrate this drop in unemployment, you have to look at the disappointing news in the labor force and how much workers are being paid. Neither of those numbers looks good at all.
The measure of how many people are participating in the workforce went down a tenth of a percent to 62.8 percent – for over a year, we’ve been stuck at levels we haven’t seen since Jimmy Carter was in office. (From 1989 until 2009, that figure was between 66 and 67 percent.)
When the labor force participation drops like this, you’ll often see a slight improvement in the unemployment rate, just like we saw last month. So statements like “This is the best job growth we’ve seen in years” are illusory. But that doesn’t stop the media from toasting the president - and forgetting to tell you it's more about people dropping out than getting jobs.
Over the past 12 months, average hourly earnings have risen by 2.2 percent, well below the 3-3.5 percent growth range economists say is healthy. Wage growth continued to be slow in February: Average hourly earnings rose by just 3 cents to $24.78 after an encouraging 12-cent increase in January. This isn’t good.
Weakness in wage growth and labor force participation are both caused by a slack jobs market. Both these indicators impact inflation, which has remained below the Federal Reserve's target rate of 2 percent as those two indicators have lagged. This slack in the jobs market is why Fed Chair Janet Yellen is keeping interest rates low.
It’s important to note that African Americans (10.4%) and Hispanics (6.6%) are far more likely to be unemployed than the February average – and this remained virtually unchanged. (Illegal immigrants are not included in the Bureau of Labor Statistics survey.)
Some of these job gains occurred in food services and drinking places, and that’s good news. That likely means people are eating out more, taking time to relax outside the home more and that bodes well for the coming months.
Unemployment in the ‘information sector’ remained unchanged, but that won’t last. The technology industry will see gains in the months ahead along with this slowly rising tide.
Unfortunately, this jobs report proves the manufacturing sector still faces a big threat in unchecked foreign currency manipulation by China and Japan. In fact, we’ve gained less than 40 percent of the 1 million manufacturing jobs President Barack Obama promised in his second term.
He’ll probably never reach his goal. That’s because this administration doesn’t recognize the importance of manufacturing in our economy.
If you want to fix this, Washington has to put the right policies in place. Tax reform. Regulatory reform. Kill the Trans-Pacific Partnership or at least put a currency provision in there.
Before you pop the cork to celebrate this drop in unemployment, you also have to consider the validity of the monthly jobs report.
In the fine print of today’s report we see the government looked back over their math and revised their January report downward: Their job count was off by 7 percent in January. How far down will they revise February after the champagne runs out?
It’s simple: the unemployment rate is down because more people have given up looking for work. Today’s report effectively hides six million adults who dropped out and are no longer counted as unemployed in the official stats. That’s like the entire workforce of Illinois dropping out and the administration just not counting them as unemployed anymore.
The fact is, this administration – and probably most of the predecessors - manipulates the numbers for a favorable result. We’ve seen reports by former federal employees who say that’s a fact.
In 2013, a retired Census Bureau employee told the New York Post his bosses instructed him to fake data used in the September 2012 unemployment survey. He said when he could not reach people to interview for the monthly jobs report, he was told to fabricate answers. That year, the rate of joblessness dramatically dropped from 8.1 percent in August to 7.8 percent in September.
By making up data, the unemployment rate dropped right before voters headed to the polls to decide if Obama should remain president. Coincidence? Hardly.
I think the Department of Labor monthly jobs report is so manipulated that it is almost worthless. But that won’t stop the party in Washington, where up is down, bad is good – and champagne toasts come cheap on misleading unemployment reports.