The Unemployment Rate Goes Down – What A Surprise

Posted by on Oct 5, 2012 in Economy, Politics, Stock Market | 8 comments

This morning the government reported that the unemployment rate for September dropped to 7.8% from 8.1% the prior month (and 8.3% the month before that). This is the lowest figure since March 2009. Hard to believe the government would report such a favorable number a month before the election, right? Hmmmmm.

As reported by the household survey, the number of unemployed persons¬†was 12.1 million, down 456,000 from September. That’s a big decrease. Total employment rose by more than population growth. It was also reported that 114,000 new jobs were added in the month, basically in line with market expectations. And 86,000 jobs were added to the July and August totals by revisions, which suggests that the September number will be revised higher in subsequent months.

Just about any way you look at it, this was a positive number and cannot but help the chances that President Obama will be re-elected. It will also provide further headwind to a stock market already in rally mode. I’m not suggesting that the numbers are fraudulent, but I do believe, as I wrote in my last column, that government statistics cannot be trusted without deeper scrutiny and that they can be manipulated to serve those presenting them. So make of this report what you will.

8 Responses to “The Unemployment Rate Goes Down – What A Surprise”

  1. Thomas Sackmann says:

    I remember in college doing statistics and the entire class given the same load of various data and everyone having to prove contradictory points using statisical analysis. Since then I have always had a hard time with statistical figures provided by the news and government unless the data used has been clarified; which is almost never.

  2. Brian Abeles says:


    How could anyone not agree with your observations! Just pondering the precise timing of such advantageous changes makes the numbers suspect? Among the more problematic issues is that getting the Obama administration to agree there is justification to undertake an investigation or at the very least a substantive review of the component parts of employment reports complied within the study would take an immense amount of influence and pressure. Even if they were under siege to provide explanations they would undoubtedly be able to resist doing so long enough to at least delay the outcome of such an examination and restatement until the election has past.

    The timing is just to coincidental, it is hard to believe what has been offered given what people are willing to do and knowing what is at stake, the numbers should be vetted even if the results come after election.


    • Thanks for the comment Brian. I think it’s the inherent problem of surveys and statistics that they can be subtly (or not so subtly) manipulated. The BLS report is an amalgam of two different surveys and is affected by a smoothing “birth/death ratio” each month. There won’t be any investigations, nor will there by any outcry for any. We just have to live with these imperfect reports because they are all that we have.

  3. What you make of the jobs report could depend on where you sit. If the report had been extremely negative the Democrats would be wondering if Republicans at the Bureau of Labor and Statistics had cooked the books. It does appear that the economy has been improving., but at an anemic pace. I think the cause and affect of why this is happening is less dependent on who is in the White House and more a function of the self correcting nature of capitalism, so I don’t give credit to Mr. Obama.

    • Bob, I don’t believe the BLS is partisan one way or another. And you’re absolutely correct that the economy is improving at an anemic pace. I also agree that general market forces are more responsible than any government policy. I think government tends to get in the way of business more than it helps.

  4. I think that you have to look beyond the ‘publicized’ statistic of 7.8% to see the real story. This is the 3rd month in a row where job creation fell. This is not a good sign. Also, and perhaps most importantly, when a person gives up looking for a job, and/or is unemployed beyond a certain time period (I think that it is a year), the government statistics DROP that person from the count in the unemployment numbers. With the numbers of the chronically unemployed increasing, and the number of people giving up their job search increasing, the unemployment rate can (and as we have just seen….does) go down. So the number LOOKS better, but the reality of the situation is worse. Unfortunately, the press doesn’t explain this to the population as a whole.

    • All true Roger. In my monthly newsletter, I talk about the U-6 unemployment number, which provides a more realistic measure of un- and under-employment. After peaking at 17.3% in January 2011, that rate has fallen to 14.7%. The long term unemployed (those without jobs for 27 weeks or more) account for about 40% of the total number of unemployed workers. As long as you keep looking for work, you are considered unemployed. If you simply give up, even though you don’t have a job, you’re not considered unemployed. A key figure to watch is the “labor participation rate”, which at 63.6 has held relatively flat for the past few months.

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