National Unemployment Falls Below 8 Percent, But Economic Recovery Still Far Off
While President Obama lauded the September job numbers which showed unemployment at 7.8 percent, Mitt Romney remained critical, saying the numbers alone do not paint an accurate picture of the economy. Jeff Brown asks the Washington Post's Neil Irwin and Mesirow Financial's Diane Swonk if the latest report is a sign of recovery.
JEFFREY BROWN: More jobs, less unemployment. The September numbers offered the latest look into the U.S. economy, and the latest fuel for the fight over economic policy in the presidential campaign.
It was the kind of news that President Obama hoped for, just over a month before the election and two days after a subpar debate outing.
PRESIDENT BARACK OBAMA: More Americans entered the work force. More people are getting jobs.
(CHEERING AND APPLAUSE)
JEFFREY BROWN: Indeed, September's unemployment rate, calculated by a survey of households, fell to 7.8 percent. That's the lowest since the president took office.
A second survey, of businesses, showed that employers added a net of 114,000 jobs, and job gains for July and August were revised upward by 86,000.
The president touted the numbers in a campaign stop at GeorgeMasonUniversity in Fairfax, Va.
BARACK OBAMA: Now, every month reminds us that we have still got too many of our friends and neighbors who are looking for work.
There are too many middle-class families that are still struggling to pay the bills. They were struggling long before the crisis hit.
But today's news certainly is not an excuse to try to talk down the economy to score a few political points. It's a reminder that this country has come too far to turn back now.
JEFFREY BROWN: That was a swipe at Republican Mitt Romney and his economic prescriptions. But in southwest Virginia, Romney fired back that the report doesn't portray a real recovery.
MITT ROMNEY (R): The unemployment rate as you noted this year has come down very, very slowly, but it's come down nonetheless.
The reason it's come down this year is primarily due to the fact that more and more people have just stopped looking for work.
So it looks like unemployment's getting better, but the truth is, if the same share of people were participating in the work force today as on the day the president got elected, why, our unemployment rate would be around 11 percent. That's the real reality of what's happening out there.
JEFFREY BROWN: In fact, total employment in September did increase, for the first time since June, by 873,000.
But two-thirds of those were people who took part-time jobs when they could not find full-time work. Today, some even questioned the accuracy of the data. On Twitter, former general electric CEO Jack Welch suggested the Obama administration manipulated the numbers.
But, on CNBC, Labor Secretary Hilda Solis called that claim ludicrous and defended the Bureau of Labor Statistics.
LABOR SECRETARY HILDA SOLIS: You know, I'm insulted when I hear that, because we have a very professional civil service organization where you have top, top economists that work at the BLS.
JEFFREY BROWN: The employment numbers landed as the campaigns put up new ads attacking each other on jobs and taxes.
NARRATOR: President Obama says he's creating jobs. But he's really creating debt. The facts are clear. Obama's four deficits are the four largest in U.S. history. He's not just wasting money. He's borrowing it and then wasting it. We can't afford four more years.
NARRATOR: Why won't Romney level with us about his tax plan, which gives the wealthy huge new tax breaks?
Because, according to experts, he'd have to raise taxes on the middle class or increase the deficit to pay for it. If we can't trust him here, how can we ever trust him here?
JEFFREY BROWN: Meanwhile, on the FOX News Channel last night, Romney reversed course on his remark that 47 percent of Americans don't pay taxes and, in his words, are dependent on government, so he couldn't worry about them and their votes.
MITT ROMNEY: In this case, I said something that's just completely wrong.
And I absolutely believe, however, that my life has shown that I care about 100 percent. And that's been demonstrated throughout my life. And this whole campaign is about the 100 percent.
When I become president, it will be about helping the 100 percent.
JEFFREY BROWN: Still, President Obama was having none of it.
BARACK OBAMA: From the day we began this campaign, we have always said that real change takes time. It takes more than one year or one term, or even one president. It takes more than one party. It certainly can't happen if you're willing to write off half the nation before you even take office.
JEFFREY BROWN: With the economy dominating the campaign, and with 12 million Americans still unemployed, it was clear the punching and counterpunching over jobs will only grow more intense. And there's still one more monthly employment report coming on November 2, four days before Election Day.
And to help break down the jobs numbers, I am joined by Neil Irwin, economics reporter at The Washington Post, and Diane Swonk, chief economist at Mesirow Financial.
Diane, start with you. Was this big drop in the unemployment number a surprise? What's going on?
DIANE SWONK, Mesirow Financial Holdings, Inc.: Well, certainly it was a surprise.
We can see allots of volatility in this number from a month-to-month basis. We saw the big increase in employment. We saw a big decrease in unemployment. But over time, both this report and the other reports that's the payroll survey tend to converge. And I think that's important to remember.
It's also important to remember that, in general a two-tenths movement or a three-tenths movement in unemployment rate actually isn't statistically significant.
I know it makes the headlines, but 7.8 percent is not all that different from 8 percent or 7.6 percent on a statistical basis. So I think that's also important to remember in this data that is highly volatile with a wide range on what is really significant.
JEFFREY BROWN: All right.
Well, Neil, of course, it makes for a big headline in a political campaign, but before we get to any politics, fill in a little bit more about these two surveys, because it is very confusing, right, the household and business survey.
NEIL IRWIN, The Washington Post: It is.
And, as Diane says, they are flashing different signals. The household survey, they go to 60,000 households every month, the Labor Department does, and says, do you have a job, do you want a job, are you looking for a job? Those are the basic questions.
And from that, they construct the unemployment rate. And that survey is showing some good signs, about 800,000 more people, 873,000, actually, who said they had jobs in September who didn't in August. That's progress. That is a good sign.
But the separate survey of employers captures many thousands of employers around the country, showed a more modest job gain, 114,000 jobs added. That's not that great. That is actually below what you need every month to match population growth.
So the question is, which is more accurate? And, normally, economists look at the payroll survey, the weaker one this month, as a more accurate month-to-month indicator of what is going on.
As Diane says, they tend to converge over time. There is a lot more statistical variance in the household survey. It jumps around a lot more. So we would expect to see something maybe a little better than the payrolls and a little worse than what we saw in the household.
JEFFREY BROWN: Well, is there any particular reason why sometimes they converge, sometimes they diverge?
NEIL IRWIN: There can be.
What the household survey can pick up is people who are self-employed, people who are working for newly created businesses that maybe aren't fully reflected in the payroll survey just yet.
So in that sense, it could be a leading indicator. We don't know for sure. It will take a few more months to know whether there is something really substantive going on or just a blip.
JEFFREY BROWN: Well, and, Diane Swonk, in that large number in the household survey, 873,000 increase, that includes a lot of people who are in part-time work, right? I mean, tell us about what can you read from a big number like that? What kind of work?
DIANE SWONK: Well, actually, you know, it's a little bit more complicated than even that.
JEFFREY BROWN: I thought so.
DIANE SWONK: That said, I think a 600,000 increase -- yes.
DIANE SWONK: The 600,000 increase in the people looking -- accepting part-time work, but for economic reasons, they would really like full-time work, but they couldn't find it, that is a sign of the stress in the labor market that is ongoing.
The underlying data in this survey -- and believe me, they have so many tables, it is mind-boggling -- actually suggests that full-time employment is increasing rapidly, more rapidly than part-time employment. And part-time employment in the economy overall has fallen over the last several years.
I think that is very important to understand. You can think about the nature of it. When you walk into a fast-food restaurant, many people behind the counter are now full-time employees that are older, rather than the teenagers that they once hired part-time. So there is a different structure in the economy.
But that sign of the stressors, the 600,000 increase in the number of people who are looking for full-time work who can't find it and are having to accept something less, I think that is really a sign of the underlying weakness in the economy.
Yet, like Neil said, we had this big number, unemployment as well. So we got to this number from a lot of different ways. It was a basically good household number, a basically OK, not great, payroll number. But, again, any month they can diverge.
And the bigger story is, what is the trend? We would need to see several months in a row of big numbers like that in the household survey and a pickup in the payroll survey to really feel good about this data.
JEFFREY BROWN: All right.
Now, I need you, Neil, to address this number out there about the manipulation. Jack Welch, as we saw, raised it. I don't know how -- I don't know if others -- it is getting a lot of traction there. And I know you have been following it all day.
What do we know about something -- whether something like something like that is possible?
NEIL IRWIN: You know, the Bureau of Labor Statistics is one of the really highly respected government agencies. It's not operated by political operatives or people influenced by the White House or appointed by the president. It's run day-to-day by all of these nonpartisan functionaries who do their job, they do it well.
It's very possible the numbers are wrong. But if the numbers are wrong, it's because of statistical variance because of the difficulty of capturing what is going on in a nation of 300 million people every month.
It is really unlikely that there is any kind of deliberate manipulation of the numbers or monkeying with the numbers.
JEFFREY BROWN: Diane Swonk, what do you think about that?
DIANE SWONK: Well, you know, I have served on the statistic committee for the National Association for Business Economics. I have met with all these statisticians. I have done congressional testimony on the quality and improving the quality of economic data.
The last thing you ever get -- you get in a room of statisticians, you don't get any politics. You may get some turf battles between the different agencies, but you certainly don't get any partisan politics. And that is the last thing on their mind.
In fact, to think that they could be coordinated enough -- like Neil said, 60,000 households, they have to survey -- they have to call over 100,000 households, 2,200 people making those calls.
That is a lot of coordination to assume the government could actually get to, to get to some kind of conspiracy in that household survey to get the unemployment rate to come out as, in some people's words, the jobs numbers were cooked.
It's just not, not possible to organize these people in that way. It's like corralling cats, and like Neil said, highly respected economists that are doing the best they can.
These are bureaucrats, lifetime people devoted to one thing, making the best economic data they can with sometimes very limited resources.
If the data is wrong, it's because sometimes they don't have -- they are not measuring the economy right and they haven't been able to innovate because the government hasn't given them the means to do that or even gain efficiencies in the way they do the data.
JEFFREY BROWN: All right.
DIANE SWONK: But it's not because they are deliberately trying to cook the books.
JEFFREY BROWN: All right, so just in our last couple of minutes here -- and, Neil, starting with you -- we are in a political campaign. And you see both sides picking up.
Are there things here that they are both -- well, we see that are there things here that they are both looking at and picking up on, right, and grabbing on to.
NEIL IRWIN: Right.
So, the president, President Obama has a very easy story, his campaign, out of this report: The unemployment rate came down, and for good reasons, because people got jobs, not because people dropped out of the labor force.
What Mitt Romney has is a case that has some merit as well: Look, unemployment is 7.8 percent. That's still way too high. That's much higher than what we want to see. The broader definition of unemployment called U6, that includes people working part-time who want full-time jobs, people who have given up looking out of frustration. That's at 14.7 percent. That was unchanged last month.
This is a better report than most people expected. Happy days are not here again. And that's what they will be arguing about on the trail.
JEFFREY BROWN: And, Diane Swonk, I think you told one of our producers today it was a tale of two economies still, so that's clearly what the candidates are seeing.
DIANE SWONK: Absolutely.
I mean, unfortunately, this is still a very -- we're in a recovery. That's the good news -- still a very uneven recovery. And at the end of the day, it's still subpar.
There is no one popping champagne corks out there over this economy. And I wish there were. It would be nice to see a trend more in the right direction in that, no matter who wins.
JEFFREY BROWN: But I think you are still expecting to see those ads come from both sides, right?
DIANE SWONK: They're not going to go away any time soon, and we're not going to see a major shift in that trend before the election.
Let's face it. You can't fool the American public. They know what is going on. At the end of the day, they look around, they see their houses are no longer falling in price. That is good news.
If they get a couple of jobs, that's good news. It's not enough good news to make everything OK again. We are still digging ourselves out of a hole from a very severe crisis.
JEFFREY BROWN: All right, Diane Swonk and Neil Irwin, thanks both very much.
NEIL IRWIN: Sure.
DIANE SWONK: Thank you.