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.
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.