AP-splaining unemployment numbers (Updated with The Atlantic-splaining)

Deconstructing “Why many aren’t celebrating low US unemployment,” AP, 11/8/14:

First off, while I understand that headline writers, given space constraints, often come up with some very odd constructions, the idea that anyone other than partisan Democrats would be celebrating 5.8% U-3 nominal unemployment is an absurd expectation, and a rather laughable straw man set-up.

WASHINGTON (AP) — The unemployment rate no longer seems to reflect America’s mood.

The implication that “the unemployment rate” (there are several measures of unemployment, but the author is referring to U-3) is the sole driver behind “American’s mood”–does he mean consumer confidence?– is false. Other drivers include the stock market, inflation, instability or unpredictability in world events and economic conditions, and so on.

Friday’s strong jobs report showed that the jobless rate — the most closely watched gauge of the economy’s health — is down to 5.8 percent. A year ago, the rate was 7.2 percent. Five years ago, it was 10 percent.

It’s the kind of sustained decline that would normally suggest a satisfied public.

And six years ago, it was 6.5%. And seven years ago, it was 4.7%. Why stop with the worst baseline (the highest rate in three decades) that serves your narrative?

A 5.8% U-3 nominal unemployment rate should “suggest a satisfied public”? The author has betrayed his bias. A reality check from Media Research Center (emphasis added):

In September 2012, President Barack Obama continued to face a barrage of poor economic news including a GDP downgrade to 1.3 percent, an unemployment rate still above 8 percent and “record” high gas prices. But media coverage of economic issues from that month did not accurately reflect that turmoil. When President George W. Bush sought re-election in 2004, during the exact same time period, broadcast coverage criticized him on the economy despite a GDP of 3.3 percent, an unemployment rate of just 5.4 percent and gas prices a low $1.82.

As noted here, real GDP growth “for the first half of 2014…was just 1.2 percent.” Although the third quarter growth rate was 3.5%, and analysts “foresee growth at a healthy 3 percent annual rate from now through 2015…[e]conomists made similar predictions for 2014.”

Back to AP:

Not so much anymore. After Tuesday’s midterm elections, exit polling showed how little falling unemployment has resonated. Most voters said they cast their ballots out of fear for the economy, stripping the Democrats from the Senate majority and implicitly rejecting President Barack Obama.

One of the reasons that the rate is falling, as the author addresses later in the article–far too late in the piece, after this preliminary silliness, in my estimation–is that the labor participation rate is stagnant, and at 1977-78 levels.

The author’s use of the word “fear” is telling. How about rational, self-interested worry?

Many Americans don’t feel they’ve benefited from falling unemployment any more than they have from a sustained rise in the stock market or from solid U.S. economic growth.

Solid economic growth? See above.

I suppose it’s natural that given voters’ “fears,” they might “feel” that they haven’t benefited from “falling unemployment” when they’re, yunno, still un- or under-employed and stuff.

Some hints of their discontent can be found within an otherwise glowing jobs report for October: Wages that are barely growing and a stubbornly low proportion of adults who either have a job or are looking for one.

Glowing? Glowing? Job creation is roughly half of what it should be to sustain a recovery that would return us to pre-recession levels of employment, and it’s glowing?

“Underneath the surface, things are not good,” said Michael Mandel, chief economic strategist at the Progressive Policy Institute. “Both Democrats and Republicans would be making a mistake if they looked at the unemployment numbers and didn’t understand why voters are angry.”

The Progressive Policy Institute wants to pretend that Democrats and Republicans are equally obtuse, or pretending to be, on this topic? That’s hilarious.

Is there solid evidence that the economy is better? Definitely.

Home values have recovered from their recession-induced lows, according to real estate groups. Government figures show that fewer and fewer workers are being laid-off. Consumers punched the accelerator on auto sales this year. And the stock market has kept up its stampede to record highs.

But when people are unemployed, or worried about becoming unemployed, that’s all beside the point.

Read the rest of the AP piece here, if you like. It has some accurate and useful information and analysis later in the article (some, not all). I just found the preliminary set-up annoying.

——-

Updated 11/9/14 (emphasis added):

“The Rise of Invisible Unemployment: 3 theories about today’s biggest economic mystery: If unemployment is shrinking, why aren’t wages growing?”

In the last year, the most important question for US economists and economic journalists has changed from Where are the jobs? to Where are the wages?

It’s a problem best summed up by Matthew O’Brien in the Washington Post. As the labor market approaches full employment, there should be more pressure on wages to rise. In the graph below, that would look like a trend-line pointing up and to the left. Instead, as you can see in a half-a-second glance, the trend-line is a blob and it’s certainly not pointing up. The unemployment rate has fallen below 6 percent, and earnings growth is flat….

Mystery?

Approaches what?

2. The rise of invisible unemployment is too large to ignore.

What is “invisible unemployment”? It’s discouraged workers and part-timers who want more hours. The official unemployment rate doesn’t consider them unemployed. So when we talk about the official unemployment rate—now at a lowish 5.8 percent—we’re ignoring these workers. They’re statistically invisible.

Invisible?

BLS-underutilization

Damn, Sherlock, you’re some kind of investigative genius! Here’s your Pulitzer!

If the author had simply argued that U-3 is a metric of limited utility at best, and that U-6 (which he didn’t mention in his piece) plus the labor participation rate gives a much truer picture, he would have sounded less like an idiot, breathlessly reporting what anyone who pays attention to this stuff already knew.

Sheesh.

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