Decreasing Unemployment By Shrinking the Labor Force Isn't "Winning the Future"

Looking for a job? Here are some want ads I stumbled across this week:

  • Greeting Card Merchandiser: “Needed part-time to service 1 store in Tooele, UT. Duties include replenishing, straightening, and tracking inventory of every-day and seasonal greeting cards and may include additional items such as gift-wrap and party supplies.
  • Temporary Gift Boxing Associate: “Are you looking to make some extra $$$ for the holiday season?? Then please read on for an immediate opportunity: As a Gift Boxing associate you will: Work in a warehouse setting unwrapping boxes, Work efficiently to then wrap small boxes with holiday wrap, Prepare packages for shipment, Creativity a plus!”
  • Lapland Elf: “A comprehensive and constant commitment to the Santa story is essential. There are four main elf activities: (1) Assist Santa Clause during family visits, (2) Meeting and greeting guests at the airport. Elves will frolic and play in the arrivals hall to welcome guests to Lapland. (3) Elf Sightings: time and rotas permitting, elves will participate in sightings. (4) Elves are responsible for ensuring that Santa’s presents are all wrapped and delivered to the Activity Centers.”

What? So you’re telling me you didn’t graduate from a four-year school to sort greeting cards? And could there a more resume-friendly euphemistic expression of a gift wrapper than a “temporary gift boxing associate?” Still, I guess it’s less degrading than dressing up in an elf costume and “frolicking” in an airport terminal.

Sadly, these are the sorts of jobs that President Obama is touting as evidence that his stimulus policies are finally working.

Obama’s spin machine got cranking because of a new Bureau of Labor Statistics report showing that the unemployment rate fell from 9.0 percent to 8.6 percent in November.

Undoubtedly, Obama was thrilled. The latest Gallup poll showed that Obama’s approval rating in November was 43 percent – the lowest of any modern president with the exception of Jimmy Carter (which is not exactly an accomplishment). In other words, the Obama campaign team was looking for some good news. And they seized on the BLS numbers as conclusive proof that all those hundreds of billions of dollars in stimulus money had finally kicked in (just, ya know, a couple of years later than expected).

But once you dig past the spin, the reality is a lot less appealing. The BLS data reveals two big problems. One, much of the jobs gains appeared to be seasonal – meaning that unless you never grew out of your dreams of being an elf when you grew up, you’re not going to be finding an enduring career in this market.

While unemployment fell, so too did average hourly earnings, meaning people were filling lower wage jobs. Moreover, the data reveals that much of the gain (50,000 jobs) was in the retail sector, whose jobs are notoriously seasonal.

Second, this is just another example of the “Antarctic Labor Market Miracle,” meaning that the drop in unemployment is due in large part to people giving up and leaving the labor force. As the Washington Post’s Ezra Klein explains,

“[The unemployment rate] is calculated by dividing the number of unemployed people by the size of the workforce, where an “unemployed person” is defined as an individual actively seeking work but not finding it. It excludes anyone who isn’t actively seeking work – a population captured by the labor force participation rate. And when it comes to that indicator, things don’t look as good. Over the past month, the labor force participation rate dropped from 64.2 to 64 percent, indicating that fewer Americans are looking for work and simply giving up on their searches.”

While 0.2 percent may not seem like much – that means that 315,000 people (roughly the equivalent of the whole city of Pittsburgh) stopped looking for work in the last month and are no longer included in the unemployment percentage. James Pethokoukis ran the numbers and found that if the participation rate was the same as October, the unemployment rate would be 8.9%, if the participation rate was the same as when Obama took office, the unemployment rate would be a devastating 11 percent.

As unabashed liberal Matthew Yglesias tweeted, “Decreasing unemployment by shrinking the labor force is not exactly winning the future.” We couldn’t have said it better ourselves.