Optimism over economic recovery and an immediate upswing in the stock market were the result of information released Feb. 3 by the Bureau of Labor and Statistics (BLS), whose report claimed a drop in the unemployment rate and creation of 243,000 new jobs. But some experts are digging further into the data, asking questions not only of job quality and the unemployment rate, but of the accuracy of the data itself.
Robert Reich, Berkeley professor and former U.S. Secretary of Labor under Bill Clinton, reflected on what an 8.3 percent unemployment rate would ordinarily mean if not compared to the 9.1 percent rate of four months ago.
“At January’s rate of job gains—243,000—the nation wouldn’t return to full employment for another seven years,” Reich stated in a blog posting.
Examining job quality, many of the reported 243,000 jobs are low-waging, such as “hospital orderlies, nursing aides, secretaries, and temporary workers,” Reich noted. “Millions of Americans remain working only because they’ve agreed to cuts in wages and benefits,” he proposed.
According to the BLS jobs report, the unemployment rate decreased most for those who work in construction, transportation and utilities, and financial sectors.
The job report excludes those who are looking for full-time positions but have settled for part-time, and “discouraged workers” who have ceased to actively look for a job. According to the report, the number of discouraged workers remains at 1.1 million, changing little since last year.
Since the beginning of the recession in Dec. 2007, the working-age population has expanded to nearly 10 million, Reich stated. “But many have never entered the workforce. Millions of others are still too discouraged to look for work.”
In summary, if it weren’t for previous dismal unemployment numbers, January’s 8.3 percent would be “terrible,” Reich wrote. Prior to the recession, 63.3 percent of working-age Americans were employed. According to the data, the employment-to-population ratio is 58.5 percent today.
The details of the BLS data were examined in a Feb. 6 posting titled “The Relentless Pursuit of Meaningless Metrics,” on the economic blog Zero Hedge.
“The higher employment numbers may be neither real or a trend. With layers of data, adjustments and errors, and a constant threat (or promise) of supernatural intervention by the Fed, the picture is obscured,” said blog contributor “Irene,” adding that: “The metrics we examine may be meaningless—making the prediction business even more challenging.”
The statement was in response to an earlier post on the site by Zero Hedge blogger Tyler Durden, which showed that “the number of people participating in the workforce dropped by 1.2 million in a single month, lowering the civilian workforce participation rate to a 30-year low of 63.7 percent.”
Durden pointed out that “the real concern is with the 16–24 age group. The longer that age group remains unemployed, the higher the probability that they will become long-term unemployable due to degradation of job skills.”
He added that “this age group has a much higher unemployment rate than any other category, and that doesn’t bode well for economic strength in the future as this group moves into lower wage-paying positions.”
Hope Lies Ahead
McKinsey & Company, a global consulting firm, has found that out of the ten largest economies in the world, the United States is “most closely following” the economic recovery paths of Sweden and Finland, who successfully recovered from their major economic crisis in the 1990s.
Optimistic signs of recovery are shown through a stabilized housing sector, increase in exports, and a “credible, medium-term” deficit reduction plan, according to the McKinsey report.
In order to continue with an even stronger recovery, a “concrete long-term deficit reduction plan” is needed, claims the McKinsey report.
Compared to the United Kingdom and Spain, “the United States has not yet adopted a credible long-term deficit reduction plan,” the report said. Consequently, detrimental effects were shown in Aug. 2011 when “the first credit rating downgrade of U.S. Treasury debt ever, from AAA to AA+.”
Tyler Durden is optimistic. “The best for us lies ahead. It will just take the realization that ‘hard work’ and ‘sacrifice’ are ideals that will once again have to be adopted not only by the ‘average American,’ but by our government as well.”