As certain as the sun rises in the East it’s a sure bet that the media is going to spend the day trumpeting the announcement that the economy has recovered simply because the unemployment rate has dipped all the way down to 5.1%. Therefore, regardless of anything said to the contrary this number represents definitive proof that Obama has saved us all and is thus destined to go down as the greatest President since Betty White sliced her first loaf of bread. In reality that narrative only works on “mindless morons” and I’ll be more than happy to explain why.
The 5.1% figure that’s destined to pop up all over the media is a government measure known as the U3. It is one of many various methods that the government uses to test the labor markets on a regular basis. Why the media fell in love with this particular figure years ago still baffles me simply because it is the most useless statistic there is. The U3 number basically measures who is applying for unemployment benefits at any given point in time. However, as unemployment goes it doesn’t take into account those that have exhausted their benefits, those that don’t qualify to collect benefits (i.e. 1099 subcontractors), nor does it consider those that have recently attempted to enter the work force for the very first time (i.e. recent graduates) that still haven’t found fulltime employment. Therefore, it is just as likely that this number gets lowered because people have exhausted their benefits as have actually found jobs.
Personally, I have advocated for years that the far more meaningful statistic that should be used as the benchmark measure is the Labor Force Participation Rate. The LFPR is a far more meaningful statistic that doesn’t play games. It simply takes a measure of all able bodied persons between the ages of 16-64 (those who theoretically should be in the labor force) and compares how many actually are versus how many aren’t. Unlike the U3, with the LFPR a higher number means a better economy. The typical historical average of this statistic is in the 67-68% range since it views everyone the same regardless of whether or not they are justifiably out of the labor force (i.e. college students). The average the month Obama took office was 65.7% (granted not a good number). However, since he was sworn in that number has been on a slow decline all the way down to its current average of 62.6% which is the lowest it’s been since the Carter “malaise” era of 1978. In other words in labor terms we currently have 3.1% less of a labor force now than on the day he was originally sworn in. If that’s what the media wants to celebrate as good news then they truly are clueless.
As I stated in my book numbers are amazing things. Used properly they can unlock the secrets of the universe. However, used improperly they can just as easily be used to promote a nefarious agenda. The important thing isn’t to just blindly accept numbers as facts, but to understand their true meaning by asking challenging questions to those that attempt to use them. Otherwise, all you’re doing is allowing yourself to fall prey to the simplest form of propaganda. In other words, you’re earning the title “mindless moron”.