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Jobs Report: Unemployment Down, But 800,000 Leave Workforce

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The “cooking of the books” scam perpetrated by President Obama and the Federal Government continues. When the whole of the workforce continues to shrink at the rate it is, the unemployment rate ceases to have meaning. For example, the total unemployment rate, U6 is still shown around 12%, but if the labor participation rate was similar to what it was in 2008, the U6 total unemployment rate would be between 18% and 20%. So when another 800,000 leave the workforce and the Obama Administration and their acolytes in the press herald improvement in the unemployment rate, you know it is a calculated lie.

From Heritage.org by James Sherk:

The headline figures for the April employment report finally demonstrate strong labor market growth. A deeper dive into the report, however, shows it remains too early to uncork the champagne.

On the surface, both the payroll and the household survey reported good news. Employers added a net 288,000 payroll jobs while the unemployment rate fell by 0.4 percentage points. April experienced the fourth largest growth in payroll jobs and ties for the largest drop in unemployment since the recession began in 2008—very welcome news for struggling workers.

However, this large drop in unemployment occurred because of an enormous number of Americans simply giving up looking for work. In April, an estimated 800,000 Americans simply left the labor market. As a result, the labor force participation rate dropped back to 62.8 percent—tied for the lowest rate since the 1970s. Fewer prospective workers, not more jobs, caused the decline in unemployment.

Further, the largest decreases in unemployment came among younger workers—not prime-age adults. Three-fifths of the total reduction in unemployment occurred among those aged 16 to 24. So while the overall unemployment rate fell by 0.4 percentage points, it only fell 0.2 percentage points among those 25 and older. Much of the statistical improvement in April came from teenagers and young adults dropping out of the labor force.

A major concern with substantial changes in economic indicators is that the measurements contain statistical noise. Like any poll, the Household Survey has margin of error: 9 times out of 10 it is within plus or minus 300,000 workers of the actual change in unemployment. Such sampling noise can lead to wild gyrations in the reported figures.

The March report, for example, found labor force participation jumping by 500,000 workers, and the April report found it plunging by over 800,000 workers. Taking both months changes into account, this amounts to an average decrease of 150,000 Americans in the labor force each month—a far more likely estimate than the reported surges and plunges in the labor force. Consequently, it will likely take time and more reports to determine whether April’s report actually represents a turning point in the labor market.

The payroll survey also showed good headline numbers, with jobs growing in many sectors: financial activities (+75,000), retail trade (+35,000), leisure and hospitality (+28,000) and healthcare (+28,000) showed the largest gains. Beyond the changes in actual employment figures, however, the payroll survey did not show other typical signs of a growing labor market. Both average hourly wages ($24.31) and average weekly hours (34.5) remained flat over the month. Typically when the labor market improves wages rise and employers increase overtime before hiring. That does not appear to have happened this month, which raises questions about the robustness of this reported growth.

The April jobs report comes as welcome news after the GDP report suggested the economy slowed to a crawl (0.1 percent growth) in the first quarter of 2014. The fact that the report does not find job losses or rising unemployment suggests the GDP report was likely more an aberration, not the harbinger of a new recession. Sadly the internal details of the April report suggest it is not the herald of a robust recovery either.

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