Truly anemic payroll growth was reported on Friday Morning September 07, 2007. After a plethora of manipulation, the August 2007 growth in employment was negative 4,000 jobs. Every month we need around 125,000 new jobs to be created and filled to keep up with working age population increase. Every time we produce fewer new jobs, opportunity contracts. The short hand way such things are measured is on our broken and defective unemployment rate. Across August 2007 we produced about 130,000 to few jobs. We missed our target by 104%! The national unemployment rate must have risen, right? Wrong. It stayed the same.
Our measure of unemployment is clearly and badly broken. We had 4.5%-4.6% unemployment for the last few months as job growth stagnated and turned down. The average new job creation from June-August is now 44,000 per month. That royally stinks. Our metric, unemployment, stinks even more as it has entirely failed to capture this. 592,000 more of your fellow American were not in the civilian labor force in August, as compared to June. They are not counted as employed or as unemployed. The civilian labor force declined by 340,000 across the last 3 months. Our unemployment measure obscures this from view. Nice measure!
Our official unemployment rate is a widely reported mis-measure. There are many reasons for this. A simple introduction to the problem must include the following. We only count people that are not employed, have actively looked in the last 4 weeks and are in the labor force. It has become very easy to fall out of the labor force. All those folks falling out of the labor force fall out of work and out of consideration. Numbers are then adjusted up for an estimation of all the folks that must be getting hired by themselves with new business start-ups. This is called the birth/day provision and involves scaling down the official unemployment numbers to account for folks starting their own business. People are also said to be working if they did any paid work at all or, unpaid work over 15 hours on a farm, in a family business etc. Everything about our measure is designed to push down the reported unemployment rate.
No amount of magic made the August numbers look good! Let's check in with wages and salaries and see if that was a bright spot. Perhaps you will be cheered to know that your fellow Americans are, on average, taking home an extra $1.69 per week. This should really help offset the damage from a weak job market, housing turmoil and rising interest rates on adjustable rate home mortgages. One very special person thinks it will, your President.
The fundamentals of America's economy are strong - economic growth is healthy, wages are rising, and unemployment is low. -- August 31, 2007 Press Briefing.
As housing markets continue down and economic contagion spreads pain and disappointment we will be watching to see how candidate opinion and proposals shift. Now, more even than a few weeks ago, the economy looms large in election 2008.
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