Outside the Beltway

Spinning Unemployment Statistics

James Joyner · Friday, March 10, 2006 · 3 comments

The new unemployment figures are out today.

Here’s how Reuters reports them:

Unexpected Rise in Jobless Claims: The number of Americans filing new claims for unemployment benefits rose unexpectedly last week, to 303,000, the highest level this year, a government report showed on Thursday.

The increase of 8,000 took the number of initial claims above 300,000 for the first time since the week of Jan. 7, the Labor Department said. Economists had expected claims to dip to 290,000 from the 294,000 initially reported for the week that ended Feb. 25.

The increase pushed the four-week moving average of claims, which smoothes weekly volatility to provide a better picture of underlying trends, up by 6,250, to 293,500 — a level economists still associate with a healthy job market.

So, the job picture is looking bleak, right? Maybe not.

My inbox contains a release from House Ways and Means chairman Bill Thomas:

The creation of 243,000 new jobs offers further evidence that our work in Congress to lower the tax burden on workers and on business capital has produced an environment in which the American economy can thrive. Our policies have helped create 2.0 million jobs in the last year and almost 5.0 million jobs since May 2003, and have made the American economy the most dynamic in the industrialized world.

These facts are especially important as Congress works to maintain the dividends and capital gains tax relief we enacted in 2003.

A press release from the office of Jack Kingston, vice chairman of the House Republican Caucus adds,

For those who say tax cuts do not help stimulate the economy, today’s news emphasizes the fact that President Bush’s tax cuts have now done for the economy what Kennedy’s cuts did in the 60s and Reagan’s cuts did in the 80s. Today’s numbers show that the American people can spend their money better than Washington can. To have continued job growth, you must limit the size of government.

The bottom line is that Republican principles have helped create an environment for opportunity and job creation. Maybe the Republican Party could win an Oscar for our song, ‘It ain’t hard out there to find a job.‘

The DOL’s Bureau of Labor Statistics (BLS) employment report showed that 243,000 jobs were created in February, for a total of nearly five million new jobs since May 2003 and more than two million in the last year alone. The new job growth continued a significant trend that now stands at 30 consecutive months of uninterrupted job growth.

So, we have the press headling the increase in jobless claims while the GOP is emphasizing the rise in gross employment numbers. Both are legitimate things to look at but neither should be taken in isolation. Unemployment figures can be taken in a number of ways, since a drop in claims may represent people just giving up looking while an increase may reflect optimism. Still, “It ain’t hard out there to find a job.” is likely not the right message to be sending.

Certainly, the creation of new jobs is great news. Does it necessarily follow, though, that it happened as a result of Bush’s tax cuts? Or anything that the government did, period?

No.

Let’s look at BLS employment numbers since 1990:

The first thing to note is that the percentage of the over-16 civilian noninstitutionalized population available for employment has remained remarkably constant, never dropping below 66.0 or going above 67.1. This percentage, however, is of a rapidly growing population, which means jobs must constantly be created just to remain level. The percentage of the labor market employed varies relatively litte as well, ranging from 61.5 to 64.4. By contrast, the unemployment rate fluctuates much more widely. Further, it is much higher now that during the dot.com boom of the 1990s.

Choosing 2003 as the baseline is simply disengenous. As is obvious from the chart, it is the worst part of the post dot.com bust, post-9/11 catastrophe period. So, things are bound to be better now than at the worst possible point in the last decade. Further, given that the Bush tax cuts happened well before 2003, it is even more odd to chose that period as the departure point.

It should be noted, too, that the dot.com boom happened after a tax increase led by Bill Clinton, so it’s hard to argue that there is a direct correlation between minor changes in the marginal income tax rate and employment statistics.

The bottom line, as I have argued regardless of whether the numbers are favorable or unfavorable to the sitting president, is that most changes in the economy can not be explained by government policy shifts. Even as much as the federal government spends, it still reflects a comparatively small chunk of the GDP. Changes in the global economy, such as fluctuation in the oil market or the fortunes of major economic players like the EU, Japan, China, or India almost certainly have more impact that tweaks on our end.

Yes, huge tax cuts like Kennedy’s and Reagan’s matter, since they were from top marginal rates around 90 and 70 percent, respectively. Huge changes in the regulatory landscape like Sarbanes-Oxley matter. But let’s quit pretending that every little movement in the economy is in direct reaction to some decision made by the president.

Update: Yet more disengenous quotes submitted by the House Majority Leader.

“The Democrats would rather talk down the economy with the hopes of winning in November so they can raise taxes and skyrocket spending. The House Republican Congress is committed to cutting spending and making the tax relief permanent so that American families will have more money in their pockets and businesses can hire more workers.” -Rep. Dennis Hastert (R-IL), Speaker of the House

“Today’s report once again demonstrates our economy continues to provide robust job growth and new opportunities for our nation’s workers. While our pro-growth policies continue to create new jobs, we must continue to focus on the pocketbook challenges the American people face every day by working for tax relief, affordable health care, and lower energy costs. I’m confident our agenda will continue to create good-paying jobs for American workers and their families and keep our economy keeps moving forward.” -Rep. John Boehner (R-OH), House Majority Leader

“Our agenda in the House is creating jobs and opportunity for Americans. We’ve lowered taxes to grow businesses and create jobs; we’ve passed an energy bill to reduce the cost of doing business and create jobs; we’ve passed a permanent repeal of the death tax to limit the cost of compliance and create jobs. The 109th Congress is on track to be the greatest job-creating Congress in history.” -Rep. Roy Blunt (R-MO), House Majority Whip

[…]

“More people are employed today than ever in the history of the country. The key to creating jobs and strengthening our economy is through fiscal discipline. Constraining the growth of entitlement spending and exercising fiscal restraint will keep America’s economy resilient and adaptable to any challenges we may face.” -Sen. Bill Frist (R-TN), Senate Majority Leader

Now, granted, there are more people, period, than ever before. . . .

Correction: The first paragraph under the BLS table above has been rewritten slightly to reflect a misreading of the table as pointed out by a commenter below.

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Related:

The Economy is Horrible? (Richard Gardner)
Mass Layoffs (Steve Verdon)
193,000 New Payroll Jobs (Steve Verdon)
Full Employment (Steve Verdon)