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October 05, 2012

Why That 7.8% Unemployment Figure Is Raising Eyebrows

Ed notes there are two employment surveys each month: One of businesses (in which 410,000 businesses report) and a large phone survey of households (in which 60,000 homes are called).

The latter survey is much more volatile than the first. It tends to have lots of noise in it, and big swings. But even so, this big spike is notable for being bigger than recent swings (see chart at bottom).

It's this last survey that informs the actual unemployment figure. The first number, the payroll survey, tells us the net job creation in a month.

Now, according to the household survey, 873,000 jobs were created last month. Very close to one million jobs. That's not unprecedented; it happened last in 1983.

Only thing is, when that happened in 1983, that was in the first blast of the Reagan boom, and the country's Gross Domestic Product was growing at a blistering 9.3% rate.

Current rate of GDP growth? Something like 1.3%.

Jumps almost as big as this one (but not quite) have happened when the GDP growth rate was 5% or so.

But at the 1.3% level? At this level of economic growth -- not even enough to keep up with population growth-- what exactly would be driving the employment train?

If anyone's too young too know, let me explain to you what a 1983 economy feels like: It feels like the movie Wall Street. As Adam Carolla says, "pre-AIDS, mid-coke." Poppy music on the Blaupunkt. People buy plastic watches to wear on their ankles and in their hair. The world is your Cinnabon's.

It's the kind of economy where you sort of have some leverage with your boss because the economy's so hot that labor is a seller's, not buyer's market.

Not just for good jobs. For crap jobs too. A sizzling economy makes a lot of crap jobs. So you can quit your job and have a pretty good idea you'll have a new one in a couple of weeks.

Is that the way the third quarter of 2012 feels to people?

So. You can buy that this number is real, and we all just missed the signs of a 9.3% growth spurt, or you can wonder if maybe this isn't just an "implausible statistical quirk," as one analyst calls it. Every poll -- and that's what the household survey is, a big poll -- is subject for the occasional outside-the-MoE error.

You don't even have to think Obama cooked the books (though Jay Cost reminds that that does happen) to look at the number with suspicion.

The economy simply did not add 873,000 jobs last month. It simply did not. The payroll survey says it added a mere 114,000.

There is absolutely no confirmatory data suggesting that the 873,000 number is right and the 114,000 number is wrong. As one guy asked on Twitter -- did payroll taxes jump up past month?

It's either a lucky outlier for Obama -- or luck had nothing to do with it -- but it doesn't represent current economic conditions.

If Obama and Solis really believed the economy grew 873,000 jobs, why aren't they celebrating that? Why aren't they bragging about it? Why aren't they doubting the 114,000 figure, and noting the 700,000 in undercounted jobs they should be getting credit for?

Answer: Because they know it's ridiculous.

Gallup Does Its Own Poll... And they didn't find a big drop in unemployment. They found the unemployment remaining at 8.1% (seasonally adjusted).

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posted by Ace at 02:06 PM

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