VOL. 36 | NO. 35 | Friday, August 31, 2012
How weak is US job market? Depends on your numbers
WASHINGTON (AP) — Is the U.S. job market dismal as Republican presidential nominee Mitt Romney says?
Or is it steadily improving as President Barack Obama contends?
Not to dodge the question, but both men are correct. It's all about how you slice the data.
Romney and his Republican allies like to point to the unemployment rate. It's stuck at 8.3 percent, compared with 7.8 percent when Obama took office. Most economists say "normal" unemployment is 6 percent or less.
Obama naturally prefers to stress the more than 4 million jobs the economy has added in the past 2½ years.
Neither figure fully illustrates the state of the job market — the pivotal issue for many voters in the final stretch of the election season. You have to consider other numbers, too.
What about the number of people who've given up looking for work and so aren't counted as unemployed?
Or the pace of layoffs?
What about the level of job openings advertised?
The job market began strengthening in mid-2010. That was about a year after the Great Recession officially ended. The gains since then have been steady but achingly slow. That's why nearly every gauge of the job market plays into a glass-half-full, glass-half-empty election debate.
Here's an overview of key numbers and the varying stories they tell:
Romney and other Republicans have stressed that the unemployment rate has topped 8 percent for 42 straight months. That's the longest such stretch since government record-keeping began in 1948.
For Obama, this is probably the most threatening statistic. No president since World War II has won re-election with such a high rate. President Gerald Ford lost to Jimmy Carter in 1976, when the rate was 7.8 percent. President Carter was unseated by Ronald Reagan in 1980, when it was 7.5 percent.
Reagan managed to win a landslide re-election in 1984, when unemployment was a still-lofty 7.2 percent. But the rate had tumbled from a peak of 10.8 percent in December 1982.
A similar trend could benefit Obama. True, unemployment is historically high. But it's down from a peak of 10 percent in October 2009. Some economists argue that the trend in the unemployment rate in an election year affects voters more than the rate itself does. Presidents have won re-election even when unemployment was high — as long as the rate was trending down.
That said, Obama has a problem: The unemployment rate has stopped declining recently. It's now where it was in January. That could all change in coming months. Three more jobs reports will be issued before the election, including the August numbers that will be released Friday.
Obama and other Democrats point out that the private sector has added jobs for 29 straight months. And over that time, 4.5 million jobs have been added. By contrast, over roughly the same period after the first year of President George W. Bush's first term, only 1.3 million private-sector jobs were added.
But the positive trend for Obama depends on a carefully selected time frame. It counts job gains dating from February 2010. It ignores Obama's first year in office, when employers shed an average of 357,000 jobs a month. And by counting only private-sector jobs, Obama's claim excludes hundreds of thousands of layoffs by local and state governments.
Since Obama took office, the overall economy — including the public sector — has lost 316,000 jobs. Private employers have added only 332,000 jobs. Put all that together, and you're a long way from 4.5 million.
The administration's supporters argue that it's fair to exclude the early part of his term. That's because his economic policies, particularly the $824 billion stimulus package, didn't kick in until months after his inauguration.
Even counting the gains of the past 2½ years, the economy still has 4.7 million fewer jobs than it did in December 2007, when the recession began.
— THE UNDEREMPLOYED
Many analysts point out that the unemployment rate would be even higher if it included millions of Americans who have given up looking for work. (The government counts people as unemployed only if they're looking for a job.)
Nearly 12.8 million people were unemployed in July. But Romney and his running mate, Rep. Paul Ryan, prefer to cite a different figure: One that also includes people no longer looking for a job and people working part time who would prefer full-time work.
When you add up those groups, plus the unemployed, you end up with 23.5 million. That produces an "under-employment" rate of 15 percent.
The trend is especially stark among younger Americans. An Associated Press analysis earlier this year found that roughly half of college graduates under age 25 are unemployed or underemployed.
There's one clear area of improvement since Obama was inaugurated: Layoffs have plunged.
As Obama has often pointed out, more than 800,000 Americans lost their jobs in January 2009, the month he took office. That was the largest one-month drop in more than 60 years. The pain persisted for months: The economy shed 600,000 or more jobs each month from November 2008 through April 2009. A total of 4.5 million jobs were lost.
The number of people seeking unemployment benefits soared. In January 2009, so many people sought unemployment aid that they swamped the phone lines of some state unemployment offices. Some offices' websites crashed. In the last week of March, 667,000 Americans applied for unemployment benefits, the most in more than 26 years.
Since then, layoffs have dwindled. The economy is steadily adding jobs, however modestly. And the number of people seeking unemployment benefits each week is averaging about 370,000. Still, most economists say that in a healthy economy, applications for unemployment aid would fall to roughly 325,000.
— JOB OPENINGS
The government calculates how many open jobs are available each month. This figure has shown improvement. But it remains below pre-recession levels.
In June, the most recent data available, employers posted 3.8 million available jobs. It was the most in four years — and 57 percent more than in July 2009, a month after the recession ended. Before the recession, job openings regularly topped 4 million.
And employers aren't filling their openings very quickly. Actual hiring is up only 19 percent since July 2009 — a much smaller increase than the increase in openings.
The job openings report provides perhaps the best gauge of what the job market feels like for the unemployed. In June, an average of 3.4 unemployed people were competing for each open job. That's down sharply from its peak of 7 to 1 in July 2009. But in a healthy economy, the ratio is usually about 2 to 1.
"We aren't where we need to be," Obama said in an interview with The Associated Press late last month. "Everybody agrees with that."