The October jobs report released by the Bureau of Labor Statistics found the economy added 204,000 jobs, The unemployment rate rose by 0.1 percent to 7.3 percent, matching economists’ forecasts. The labor force participation rate – a measure of the proportion of the population employed or seeking employment – dropped to 62.8 percent, which is the lowest level since March of 1978.
While the report widely beat estimates the economy would add 125,000 jobs in the month of October, the data tells a few concerning tales.
The U.S. economy supposedly grew faster than expected over the summer, according to government data released Thursday. The 2.8 percent annual reported growth rate is — on its face — the best showing since last fall. But had the economy experienced a 2.8 percent increase in gross domestic product, then we should expect to see far more than 204,000 jobs in October, and far more than reported in the summer months.
That is, in large part, due to the government literally changing how they measure GDP. In reality, much like the October jobs report, the GDP report was “deceptively weak,” said Alan MacEachin, corporate economist at Navy Federal Credit Union. “You drill down below the surface, and you can see what’s going on.” MacEachin had lowered his forecast to just 110,000 jobs in the October jobs report.
“This is not an economy that is firing on all cylinders,” said James Marple, senior economist for TD Economics. So how did they miss the mark?
One reason, which is worth mentioning before looking further into the data, is that economists have forgotten their own foundation. They truly expected the government shutdown to have a significant negative impact on the jobs numbers. It didn’t, and it won’t, because money doesn’t simply disappear when the government loses control of it, but rather moves to or stays in the far more efficient private sector.
Economists are looking for a red herring, which in this case is the government shutdown, but that cannot statistically account for the increase in unemployment. The number of people who reported being on temporary layoff increased by 448,000, which includes furloughed federal employees, not driven by them, and these were classified as unemployed on temporary layoffs under the definitions used in the household survey.
But the civilian labor force was down by 720,000 in October. The labor force participation rate fell by 0.4 percentage point to 62.8 percent over the month. Total employment, as measured by the Bureau of Labor Statistics household survey, fell by a whopping 735,000 over the month of October. And the employment-population ratio declined by 0.3 percentage point to 58.3 percent. This employment decline can only be partly attributed to a decline in federal government employment, not driven by it.
In other words, as John Pethokoukis at AEI brilliantly prophesied how Republicans will phrase it, “the government shutdown was a non-event.” How do Americans, who have anecdotal evidence presented to them everyday, feel about the economy?
According to Rasmussen, who tracks regularly, “Americans are more pessimistic about the U.S. job market than they have been in nearly 2 years.” Rasmussen found only 19 percent of American Adults believe the job market is better than it was one year ago, which is down 6 points from 25 percent in September, and the lowest finding since December 2011. Also, now 38 percent believe the job market is worse today than it was a year ago, up 7 points from their previous survey and the most pessimistic assessment measured by Rasmussen since October of last year. A substantial 39 percent expect the job market to remain about the same.
This is very much in line with Gallup, whose index of consumer confidence plunged 16 points in October, the biggest monthly drop since the poll began in 2008. Many economists and news outlets would like to peg the bad economic data on the government shutdown, but as shown above, the data just doesn’t support this theory.
Americans were hurting long before the shutdown, and will continue to hurt, especially because the implementation of ObamaCare will not force companies to comply and increase cost, which will cost the economy more jobs and confidence.
The Rasmussen Employment Index which measures worker confidence fell another point in October to a new low for the year.
At 81.2, worker confidence is down one point from September and down 13 points from May of this year. This is the lowest level of confidence measured — a new low from the previous month before the shutdown — since last November.
A preliminary reading on U.S. consumer sentiment from Reuters and the University of Michigan checked in at 72.0 for November from 73.2 in October, falling short of expectations of 74.5 and is the lowest reading since December 2011.
The bottom line, is although there seems to be a concerted effort to blame the government shutdown for a failed economic model, the data doesn’t agree, and neither do the American people. As far as the 204,000 jobs created in the month of October, it isn’t enough, and even former Obama economic advisor Austan Goolsbee agrees. The U.S. economy needs 250,000 jobs monthly just to keep pace with population, and far more to achieve the 2.8 percent GDP growth the government tried to sell us this quarter.
