Underlying Truth About The BLS September Jobs Report for September

Bill Smith, ARRA News - This morning the Department of Labor, Bureau of Labor Statistics (BLS) released its jobs report for September. According to the report the U.S. economy added 248,000 jobs in September and the unemployment rate was at a 6 year low at 5.9 percent.

Americans for Limited Government Vice President of Public Policy and Communications Rick Manning after reviewing the report, noted, "The almost predictable Obama Administration pre-election unemployment report did not fail to deliver as the top-line unemployment rate sunk below 6 percent. Unfortunately, this drop in the rate is, once again, largely due to another 315,000 people, or the equivalent of half of the total population of the District of Columbia, dropping out of the workforce. From a limited government point of view, it might seem like a good idea if half of Washington, D.C., no longer was employed or even in the employment market, but unfortunately, these employment market drop outs are not former federal government employees, but instead are folks located across the nation. The very people who D.C. depends upon to pay taxes and produce goods and services to make our economy run.

"The current labor participation rate has gotten so bad, that our nation has not had a smaller percentage of people in the labor force since February, 1978, when Jimmy Carter was President, the Bee Gees song Stayin Alive topped the charts, and the Roger Staubach-led Cowboys defeated the Broncos in Super Bowl X11.

"As Paul Harvey used to say, 'And now you know the rest of the story.'"

In response to the BLS Report, Generation Opportunity releases monthly Millennial (18-29 year olds) Jobs Report and identified that Youth Unemployment at 14.9% in September. The declining labor force participation rate has created an additional 1.955 million young adults that are not counted as “unemployed” by the U.S. Department of Labor because they are not in the labor force, meaning that those young people have given up looking for work due to the lack of jobs. Also, the effective unemployment rate for 18-29 year old African-Americans is 22.3 percent.

Patrice Lee, Director of Outreach at Generation Opportunity, noted that: “14.9 percent of young people aged 18-29 are still unemployed and it's no secret why. Washington is too busy intervening in the market, stifling innovation and entrepreneurship – our best opportunities to succeed. As a country, we must push for policies that put more young people on the pathway to success, not the fast track to joblessness. Let’s turn the tables and fight for government that works for us, not against us.”

Phil Kerpen, American Commitment also responded to the BLS report in the ARRA News Service article: Lower Unemployment, No Thanks to Democrats. Kerpen notes that "According to empirical research by the Federal Reserve Bank of New York: 'most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility.'" .... " The New York Fed report includes an extensive literature review of the studies showing unemployment benefits reduce labor supply by an imposing an implicit tax on work and an incentive for people to choose to collect benefits rather than working. Notably, it finds that this effect, while real, is relatively small.

The much bigger effect comes from the impact of extended unemployment benefits on labor demand, the number of job vacancies created by employers.

“The logic of the model is simple,” the authors explain. “Everything else equal, extending unemployment benefits exerts an upward pressure on the equilibrium wage. This lowers the profits employers receive from filled jobs, leading to a decline in vacancy creation.”

"The extraordinary extended unemployment benefits in recent years created a great natural experiment to test this theory, because states changed their benefits at different times and for different durations of unemployment.

"The researchers compared border counties in states with differing policies to measure the impact of these policy changes on employment. They found: “changes in unemployment benefits have large and statistically significant short-run effect on unemployment.

"Specifically, they found that the average extended unemployment benefits duration of 82.5 weeks for four years had the impact of raising the unemployment rate from 5 percent to 8.6 percent." . . .

"Good intentions are not enough in public policy. It might seem kind and compassionate to spend billions of taxpayer dollars on “emergency” unemployment benefits forever, but the effect is to keep millions of people unemployed. Results matter." . . . [Recommend reading complete article]

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