Unemployment Rate News: Analyzing Jobs Report Numbers from Labor Department and Other Sources

This entry is part 1 of 5 in the series Exploring Labor Market Data

Looking for Good News on Unemployment and Employment

Some economic indicators, such as the stock market and Gross Domestic Product (GDP), have shown significant recovery from what is now being called by many “The Great Recession.” But what most Americans are looking for as they assess the state of the economy — especially if they or a family member are unemployed — is a labor market recovery. They’re still awaiting unambiguously positive news on the unemployment rate.

Good News on Unemployment Rate is Both Cause and Effect of Economic Recovery

Employment is usually a lagging indicator in a recovery, and “[w]e are in a bit of a vicious circle, with businesses not hiring until consumers start buying, and consumers not buying until employment picks up.” Turning it around to a “virtuous circle” is what we need, with more spending driving more hiring, which drives more spending, which drives more hiring, etc.

Consumer spending is still not looking like it’s definitively turned the corner, although the year-to-date trend is looking up. Absolute levels are far below pre-recession levels:

It’s About Politics, As Well As About Individual Household Finances

There are major political implications to unemployment data. As a New York Times news analysis states, voters’ and candidates’ assessments of ongoing jobs reports will be central in the 2012 election cycle:

Few metrics are as critical to re-election as the employment rate. Even at 8.8 percent in March, the lowest level in two years, the jobless rate is still high in political as well as economic terms, and it is not expected to fall significantly before November 2012.

The administration does not project the rate dropping below 8 percent until 2013. It was 7.8 percent when Mr. Obama took office after the recession began, and rose to a peak of 10.1 percent in October 2009 as the economy shed about 700,000 jobs a month.

The White House and the Democratic Party are banking on voters focusing not on the unemployment rate, but on a trend of job growth. That assumes, of course, the trend continues.

“While today’s jobs numbers are headed in the right direction, most Americans believe the economy is still pretty seriously off-track, making the jobs issue still a challenging one for the president,” said Neil Newhouse, a Republican pollster.

Not surprisingly, when the labor department’s March 2011 jobs report came out, the Obama administration went right to work pitching the good news, as reported in the New York Times:

The president and his fellow Democrats pointed to the latest jobs report on Friday, and to an unemployment rate that fell a touch to 8.8 percent, as evidence that their policies, like stimulus spending and the payroll tax cut, were working. All of this, they made clear, could become ammunition in their showdown with House Republicans, who have spoken of cutting deeply into the federal budget and have threatened a government shutdown.

Thus far in 2011, we’ve seen some jobs reports numbers from the labor department that, at first glance, appear to represent a positive labor market trend.

However, the jobs numbers most often reported — the unemployment rate and the number of workers employed — are not without their flaws and the employment trend may not be as good as it initially appears. So we decided to take a closer look at the numbers and factors that go into them.

We started with a single post, but then realized it merited a whole series.

We hope this series helps increase awareness of how multi-dimensional labor market statistical analysis is and how relatively shallow much of the public discussion is.

Many thanks to Beth Hanson for her assistance with this series.