Why 'Full Employment' U.S. Jobs Stats Are Misleading

Why 'Full Employment' U.S. Jobs Stats Are Misleading

Do not believe politicians and reporters who claim the United States has achieved “full employment.”

As Marshall Auerback of the Independent Media Institute noted this week, a recent report that the unemployment rate has dropped to 3.9 percent does not tell the whole story. The figure, derived from payroll data the Bureau of Labor Statistics compiles, ignores the reality that wages are failing to keep up with the cost of living.

Those who accept the official unemployment estimate may have an inflated sense of the nation's economic vitality. Many Americans who are looking for work, or struggling to make ends meet with their stagnant incomes, are all too aware that the picture is not as rosy as the government would have them believe.

Rising interest rates, higher credit-card fees, and costly mortgages are among the financial challenges that people are facing. Far too many workers can find only low-paying, part-time jobs that do not provide health insurance or other benefits.

As a result, job security and consumer confidence are declining. The situation could worsen significantly if the nation's soaring debt leads to a recession.

The massive tax cuts that President Trump and congressional Republicans recently gave to corporations forced the government to borrow additional money, raising the debt and making the United States more dependent upon foreign lenders.

To help cover the cost of the tax bill (and the new budget's large increase in military spending), lawmakers are being forced to find ways to reduce spending. Social Security and Medicare, as well as programs serving the poor, are at risk.

In an article that Alternet published, Auerback pointed out that Congress relies on information like unemployment and job reports to determine policy. That's a big problem if the numbers are not accurate.

“There are hints that employment is not as robust as the payroll and household survey measures have hitherto suggested,” Auerback wrote. “This disparity might also help to explain why wage growth remains so tepid, in spite of the repeated characterization that we are close to full employment.”

One of the factors that the numbers overlook is that the labor-participation rate (the percentage of Americans who are employed or actively looking for work) has not rebounded much since the 2008 financial crisis. The official jobless rate counts part-timers as employed, and fails to take into account those who have given up looking for work.

Before the Bureau of Labor Statistics released its latest estimate, the San Francisco Federal Reserve wrote:

“Involuntary part-time work was running nearly a percentage point higher than its level the last time the unemployment rate was 4.1 percent, in August 2000. This represents about 1.4 million additional individuals who are stuck in part-time jobs.”

The agency noted that “these numbers imply that the level of involuntary part-time work is about 40 percent higher than would normally be expected at this point in the economic expansion.”

Wages are increasing only about 2.3 percent per year, which is below average historically. During previous periods when the official unemployment rate was about 4 percent, wage growth ranged from 3.5 percent to 4 percent.

Many employers are exploiting what the Federal Reserve described as an “army of partially employed” Americans by refusing to raise wages. The large number of people seeking full-time work creates demand that deflates workers' pay.

If more part-timers and unemployed people found full-time jobs, wages would improve. According to Philippa Dunne of The Liscio Report, “a one-point rise in the participation rate adds about (four-tenths of a) point to the growth in average hourly earnings.”

Though since taking office Trump likes to take credit whenever the economy appears to be improving, he has often called jobs reports “fake.” He once described the official unemployment rate as “totally fiction.”

In September 2012, long before deciding to enter politics, Trump was right when he explained that the jobless figure had “dropped because more people are out of the labor force and have stopped looking for work.” The real-estate mogul added: “Not a real recovery; phony numbers.”

The following month, Trump tweeted that the then-7.8 unemployment rate was “a complete fraud.” He argued that the “real” rate was “at least 15 percent.”

The Washington Post recalled that Trump wrote in June 2015: “Our real unemployment is anywhere from 18 to 20 percent. Don't believe the 5.6. Don't believe it.” Two months later, he increased his estimate of the actual rate to 42 percent.

In September 2015, Trump claimed that the then-5.3 percent rate was “the biggest joke there is in this country.” The following month, he declared: “Nobody has jobs. … It is not a real economy. It is a phony set of numbers. They cooked the books.”

In March 2016, as a presidential candidate, Trump tweeted: “The numbers are phony. These are all phony numbers; numbers given to politicians to look good.” That August, he called the government estimate a “hoax.”