An Apples-to-Apples Comparison of Obama and Bush

So, the unemployment rate fell to 4.9% for January. Obama supporters are in full gloat mode. Who can blame them? We haven’t seen an unemployment rate this low since February 2008.

There’s just one problem…

What often goes unreported is the labor participation rate. It’s been declining (actually, it’s been slightly increasing the last few months but is still well below what it was when Bush was in office). As of yesterday, the labor participation rate, which according the BLS is, “the percentage of the population that is either employed or unemployed (that is, either working or actively seeking work).” What does that mean exactly?

Well, let’s say we have a town of 1,000 people. Let’s say that 350 people in the town aren’t working because they are either retired or are stay-at-home parents. That means the town’s labor force is 650 people. The math looks like this:

1,000 population – 350 people who aren’t in the labor force = 650 people in the labor force

Now let’s say of the 650 people in the labor force, 600 have jobs. That means 50 of them are unemployed. Our unemployment rate would be 7.7%:

50 unemployed ÷ 650 labor force = 7.7% unemployment rate

Now let’s say six months pass and the only change is that 20 of the previously unemployed people either decided to officially retire or simply decided they no longer needed a job. The labor force would drop to 630 people. If the number of employed people stayed the same at 600, the number of unemployed would drop to 30. The new unemployment rate would be 4.8%:

30 unemployed ÷ 630 labor force = 4.8% unemployment rate

Nothing really changed except how the people were counted. Now keep that in mind as we look at the following table I put together using numbers from the BLS. I dug up the employment numbers for January 2009 (Bush’s last month in office) and plugged them into a spreadsheet along with yesterday’s employment numbers. Then I adjusted the numbers to reflect the difference in the labor participation rate. What I found was interesting.

Comparing Obama with Bush

Basically, what we can take from the above graphic is this:

The only difference between President Obama’s numbers and President Bush’s numbers is the change in the labor participation rate.

The Unemployment Rate is 5.1% (NOT REALLY)

While perusing the WSJ this morning, I came across an article that stated that the unemployment rate is now down to 5.1%. Unfortunately, the labor participation rate now sits at 62.4%. When President Obama took office, that number was 65.7%. If we adjust today’s numbers using a 65.7% labor participation rate, we get an unemployment rate of 9.9%.

How so?

Let me illustrate with some numbers;

Unemployment Adjusted for LPR

To arrive at these numbers I simply took the difference in the labor participation rate and added them to the unemployed. At 9.9%, that’s nearly twice the 5.1% reported unemployment rate.

To be fair, the labor participation rate does fluctuate. Here is the history of the rate since 1948 (from the BLS):

Labor Force Participation Rate History

It peaked in the 90s, but has fallen off the cliff in recent years.

Labor Participation Rate Since Obama Took Office

Some of the drop could be due to people retiring, but certainly not all.

Unemployment Rate Funny Business

Did you hear the news?

Non-farm payrolls increased 288,000 in April and the unemployment rate “plummeted” .4% to 6.3%. See this Yahoo! story.

At the same time the employment participation rate fell .4% to 62.8%.

In case you don’t know, the participation rate “refers to the number of people who are either employed or are actively looking for work. The number of people who are no longer actively searching for work would not be included in the participation rate.” (Source).

Here is what that rate has looked like since 1990:

Labor Participation Rate History (1990 - April 2014)

It’s dropped 2.9 percentage points since President Obama took office. It had dropped 1.5 percentage points during Bush’s presidency.

I understand some of the reason for this drop could be people retiring. Regardless, it makes the unemployment rate statistic almost meaningless.

While writing this post, I happened to see an AFL-CIO blog post about this news. They failed to even mention the labor participation rate. Why does this not surprise me?

Have a good weekend, everybody.

MSN: 12 Things That Will Cost You More in 2013

Oh goody!

MSN lists 12 things that will cost more in 2013. Some of them aren’t a big deal. Food, however, is a big deal. Their list:

• Cars

• Food

• Grain

• Health insurance premiums

• High-end TVs and home theater systems

• Computers

• Copper

• Smartphones

• Daily deals

• College tuition

• IPhone 5 accessories

• Shipping

U.S. Adds 96,000 Jobs and Yet the Unemployment Rate Drops to 8.1%

I don’t know about you guys but I think it’s misleading the way the unemployment rate is calculated.

Today’s employment report shows that 96,000 jobs were added in August. I did a quick search and found that we need to add about 250,000 jobs per month in order to drop the unemployment rate. We added 96,000 jobs but 400,000 people are no longer counted in the numbers because they gave up looking for work.

So, what’s the real unemployment rate?

According to the last paragraph of this article, it’s around 14.7%, or nearly TWICE the official number.