Here it is, folks: The final jobs report before the 2012 Presidential Election. The Labor Department announced this morning that the U.S. economy added 171,000 jobs in October, and that the unemployment rate ticked up one-tenth of one percent to 7.9%, besting the consensus prediction of 125,000 new jobs. And with the announcement, the government’s monthly Employment Situation Report can now revert back to its usual status of being just another data point among many which help paint a picture of the state of the economy.
Sure, payroll data will always get more attention than, say, GDP growth, because it’s more tangible to the lives of news readers. But like much else in a heated election season, this number was elevated to mean much more than it was ever intended to: a numerical indicator of the President’s success as a policy maker. This is silly for many reasons, not the least of which being that national economies are much more than the sum of its various public policies. Presidents have much less effect on monthly job creation than they (or, sometimes, their political opponents) would like you to believe.
In addition, the Bureau of Labor Statistic’s monthly job estimates are imprecise, with huge margins of error. The Labor Department does its best to approximate the number of jobs added each month, polling 140,000 employers each month, and to determine the rate of unemployment in the country, which it does by polling 60,000 households each month. These are massive sample sizes, but when measuring something as complex as a $14 trillion economy that employs hundreds of millions of workers, you can only be so precise.
What veteran economists and investors will tell you is to look at the trends. And the dominant trends in the American labor market have been apparent for many months now. On the negative side, we have far too many workers stuck working poor-paying, part-time jobs, and — most tragically — far too many workers are either long-term unemployed or marginally attached to the workforce. These workers, who number 7.4 million in all, have been unemployed for more than 27 weeks and/or have given up looking for work on a regular basis because of the lack of jobs. These workers face a particularly difficult time finding their way back to gainful employment, and the longer they remain unemployed, the more likely it is that they will be unable to find work in the future.
But despite all these depressing figures, the fact remains that the labor market is improving, and this report reinforces that fact. In addition to the 171,000 estimate for October, the Labor Department revised its estimates for job creation in September and August to show that we had added 84,000 more jobs in those months than previously thought. In addition, the labor participation rate — or the percentage of able workers who are part of the labor force — ticked up 0.3%, which indicates that previously discouraged workers are rejoining the search for jobs. There are more jobs today in America than in January of 2009, and the unemployment rate – even when taking into account marginally attached workers and workers working part-time jobs because they can’t find full time work – has been declining for some time now.
In other words, the report tells us once again what we already knew: That we have a manifestly improving economy, but one with real flaws that generate an unacceptable amount of human suffering.
Political campaigns will get to work straight away spinning this data to make it paint the picture of America that serves their purposes. The irony here is that while government policy usually has less of an effect on job creation than politicians like to believe, there are real things Washington could be doing now to help improve, or simply not hamper, the employment situation going forward. For instance, the set of spending cuts and tax increases set to go into effect in January — the so-called fiscal cliff — could be easily avoided if warring Democrats and Republicans could put aside their differences and come to a sensible compromise. Here’s to the idea that immediately after the election, our leaders in Washington will do just that.