Unemployment for dummies

There is an often cited figure that since taking power Bush has presided over the loss of 3 million jobs. With the last two published figures for unemployment being better than analysts expect I can see El Shrubo jumping up and down for joy that the figure is now significantly less than 3 million. However, since I happen to be studying economics right now I was over at the Government Printing Office site browsing some economic indicators. Low and behold looking at the March figures I noticed the following interesting facts (totals in thousands)...

Date	2000	March 2004
Civilian noninstitutional population	212,577	222,550
Civilian labor force	142,583	146,650
Civilian employment	136,891	138,298
Unemployment	5,692	8,352
Not in labor force	69,994	75,900
Not in labor force %	32.9	34.1
Unemployment %	4.0	5.7

Why so interesting? Well this represents the change in employment between 2000 when Bush entered the Whitehouse and today. What we see is that the number of people unemployed has increased from 5.69 million to 8.35 million, yes thats 2.66 million more... However much worse than that is the number not in labor force which has zoomed from 70 million to 75.9 million, which is another 5.9 million.

So, what does "not in labor force" mean? Well basically it means the number of people who, when the phone rang and they were asked "Did you work last month" said "No" and when asked "Did you look for a job last month?" also said "No". These people are eligible to work but didn't bother to look for work, they are also known as discouraged workers. Now at the end of the Clinton era this represented 32.9% of the "noninstitutional population". At the end of the Bush era (we hope) it now represents 34.1% of the population. So basically what we've seen is that while unemployment is 2.7 million higher than before Bush, the number of disgruntled workers has skyrocketed 5.9 million.

Yes, its true that the civilian population has increased by ten million (from 212.6 million to 222.6 million) since Bush started, however that's just a growth in population caused by immigration, more babies, fewer people retiring etc. etc. Normally those people just add consumers to the big economic machine and more consumers means more consumption, and more consumption creates more production, which means more jobs, which means the unemployment rate doesn't increase. However you should be able to see that under Bush this didn't happen. The increase in population went largely straight into the "not in labor force" category largely because increases in production occured without hiring more people, quite the contrary actually - people were laid off, inventories were plundered, and manfacturing jobs went overseas. So what happened was unemployment went from a record low of 4.0% to the current figure of 5.7%, and the discouraged workers "not in labor force" went from 32.9% to 34.1%. Thus a total of 2.9% more of the population are now either unemployed or just plain not looking for a job any more.

Why do I bother mentioning this? Well according to my economics teacher, since 1940-something statistically, if unemployment is decreasing mid-year before the presidential election, then the encumbant (or presumably the encumbant party) will be re-elected. Right now unemployment is decreasing - people are finding jobs - so I'm really not happy to hear my teacher say something like that.

But the fly in the ointment for Bush is that once people starting realising there are some jobs out there at last, all those "discouraged workers" start thinking about finding a job too. So off they jolly well go and start looking for one and we all know its much easier to look for a job than actually find one. Right now jobs mostly find you, not the other way around. Which means come the end of the month when the phone rings and the Bureau of Labor statistics asks "Did you look for a job this month?" they'll have to say "Yes" and bingo, they are no longer counted as "discouraged" but are instead now part of the "unemployed" group, hence the unemployment rate goes up!

Note, these figures are quite different from the number of people actually claiming unemployment benefits which is not really useful at all except to measure recent job loss and how many people still have benefit payments left to spend. For the unemployment rate all that really matters is whether someone is eligible to work (noninstitutionalized), whether they are working, and whether they looked for work. So despite the fact that unemployment is currently decreasing I still have some hope that by the middle of the year all those discouraged workers will rush out to look for jobs and manage to temporarily screw up Bush's hopes to have the unemployment rate decreasing. Remember someone looking for a job and not finding one is going to be as unhappy as someone who hasn't bothered looking for one at all because the impact of failure and rejection on ones morale is generally quite negative. If that other 1.2% of discouraged workers comes out of their fallout shelters thinking the era of fear, uncertainty and doubt is over that will actually cause the unemployment rate to skyrocket into the 6% zone and beyond.

Fingers crossed...