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NationofChange / Op-Ed
Published: Friday 2 November 2012
“An unemployment rate above last month’s 7.8 percent, or a number of new jobs below September’s 114,000, will be wielded by Mitt Romney as evidence the economy is slowing – while a rate below last month’s, and a number above it, will be used by Team Obama as evidence the economy is moving in the right direction.”
Why Today’s Unemployment Report Should be Taken with a Grain of Salt
Three times today I’ve been asked on media outlets about the likely effect on the presidential election of Friday’s jobs report, depending on what the Bureau of Labor Statistics announces.
Unfortunately, the BLS report is likely to sway some voters — and therefore have an impact on this tight race. But it shouldn’t.
The report surely will be used by one of the candidates to make a sweeping case for himself and against his opponent. An unemployment rate above last month’s 7.8 percent, or a number of new jobs below September’s 114,000, will be wielded by Mitt Romney as evidence the economy is slowing – while a rate below last month’s, and a number above it, will be used by Team Obama as evidence the economy is moving in the right direction.
In truth, no one should base their vote on tomorrow’s labor report is because a single month’s report isn’t a reliable gauge of which way the economy is heading. A report that the unemployment rate is 7.8 percent, for example, means only that the Bureau of Labor Statistics is 90 percent sure the real rate lies between 7.6 percent and 8.0 percent. By the same token, an announcement that the economy created 100,000 jobs in October means the BLS is 90 percent sure the number of new jobs is between 90,000 and 110,000.
A small shift one way or the other from September’s readings may have huge political significance but has no statistical significance, and therefore should have no political significance.
So much uncertainty attaches to a single report that the BLS is continuously revising its job numbers as more information comes in. At the start of September the BLS announced that August’s job growth had slowed to 96,000 new jobs — a finding that had a noticeably negative effect on the President’s campaign and at a critical juncture. But a month later, in its October release, the BLS revised the August number upward to 141,000.
Or look back on that awful year of 2008, when between July and August the Bureau was reporting relatively small declines of 20,000 to 60,000 jobs per month. We now know the true job numbers were falling off a cliff. BLS’s revised job numbers showed the economy was losing roughly 200,000 jobs a month, starting in April.
My advice: Regard tomorrow’s BLS numbers with a good grain of salt. Month-to-month reports shouldn’t be taken nearly as seriously as they are. It’s the long-term trend that counts. And here the picture is encouraging regardless of what’s reported tomorrow. Since the start of 2012, employers have averaged 146,000 new hires a month. It’s a slow rate of recovery, but a recovery nonetheless.
This article was originally posted on Robert Reich's blog.
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ABOUT Robert Reich
ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.
4 comments on "Why Today’s Unemployment Report Should be Taken with a Grain of Salt"
November 04, 2012 8:57am
The fact still remains there are a lot of people out there unemployed and Obama
is still preaching infrastructure borrowing money to fix infrastructure and no new ideas. Why should the republicans relent as no new ideas mean the same old tactics will be used so basically we will get a repeat of the last four years if Obama wins and a repeat of Bush,s last four years if Romney wins. Its daylight savings time just roll back the years to 08 and start all over again.
Unless we change corporate laws banking laws and re election funding we will never have change things will only get worse.
November 02, 2012 11:41am
Romney will/would create jobs. He will begin a process of deregulating industry thereby adding to our already massive environmental woes but in the process create low wage labor, bereft of benefits, to desperate people who simply need some sort of paycheck. Emma Goldmann, the famous anarchist, once described the process as enlisting "worker bees." She was soon deported to Russia for such laissez-faire blasphemy. Of course, she also stated "that if voting really changed anything they'd probably outlaw it." Quite difficult to say she was wrong, particularly viewing the last thirty years in retrospect.Hard to say what Obama will/would do since much of what he said in '08 he never followed through on. How about nationalizing the major financial institutions, actually making loans to small and large business applicants, raising taxes on the wealthy and dramatically cutting anachronistic military spending to invest in nationwide public works projects and badly needed infrastructure. Socialism? Damn straight!
November 02, 2012 8:15pm
Romney has made it clear he is completely indifferent to climate change and environmental issues. So, jobs he expects to create via deregulation will come with a great cost in further environmental degradation.
Looking at the past four years, I have nothing bad to say about Obama, but 'binders' of complaints about Boehner, Ryan and other GOP'ers. Frankly, I believe that in ten or twenty years, the prevailing history will conclude Obama was confronted with a horribly intransigent opposition and tried too hard to ignore the acid they were spitting and find true consensus. He tried, and they refused to meet him. He is already a lot smarter, and a reelected Obama will be far more forceful in moving this country forward until the next multi-billion dollar lie-fest climaxes in '16. (Yes, we do need to fix THAT!)
In '08, Obama was a far better choice than Palin and her mate; in '12, Obama is a far better choice than that Bain actor from Book of Mormon, 'Hello, my name is Elder Mitt..."
November 02, 2012 10:23am
Dr. Reich is right again but nobody's listening. The monthly jobs report issued by ADP, the payroll processing firm, is far more accurate but rarely quoted in non-financial papers. The Conference Board Index of Leading Economic Indicators uses the report of new filings for unemployment as one of the key measures of where the economy is headed. Last months new jobs or unemployment percentage are trailing indicators so don't tell us what we want to know. But all this makes boring politics so we don't see it in the press. Too bad.