The mainstream media continues to advance knowing sins of omission in its economic reporting as evidenced by Friday’s erroneous report that 1.64 million new jobs were created in the United States in 2011. The real gain was more along the lines of 440,000 jobs.
Why? Because zero is not zero in monthly job creation. It’s 100,000.
That’s how many new jobs must be created each month just to keep pace with our fast-growing national population, which has expanded by 33 million people to 314 million since former President George W. Bush took office Jan. 1, 2000. Anything above 100,000 new jobs a month represents a “net gain.” Anything less represents a net loss.
Friday’s rosy jobs report from the Bureau of Labor Statistics, which reported the addition of 200,000 new jobs in December and 1.64 million new jobs in all of 2011, is based on the fiction that our national population is stable. It was written for financial and economic professionals who understand how such statistics are impacted by population growth. However, it was regurgitated by the mainstream media for a national audience that does not.
The result is a jobs report that looks far better than it really is. A report that exploits the ignorance of an American population with limited math skills and little patience for the kind of research needed to cast intelligent votes for politicians who truly represent their interests.
“We take too narrow a look at job creation and we do need to do a better job of relating it to total population growth in this country,” said John Silvia (above right), chief economist at Wells Fargo. The former chief economist of the U.S. Senate Banking, Housing and Urban Affairs Committee estimated that the monthly correction for population growth may be even higher than 100,000 jobs a month. It may be as high as 120,000 jobs, he said.
The Great Recession, which officially claimed 7.43 million jobs, began in December of 2007 and lasted 18 months. The true number of jobs destroyed during that time span is at least 9.33 million once the data is adjusted for the 100,000 jobs that must be created each month to keep pace with population growth.
That’s 1.2 million new jobs every year just to tread water.
Once we subtract that 1.2 million figure from the 1.64 million jobs created in 2011, we’re left with a net gain of only 440,000. At that rate it will take 21 years for the U.S. labor market to recover from the Bush presidency.
Twenty-one years. Two. One.
“We’re definitely still recovering from the damage he’s done,” said economist Dean Baker, a member of the reality-based community who is co-director of the Center for Economic and Policy Research in Washington, D.C. “It’s Obama’s economy because he has to craft the response to this mess, but we’re in this situation because of the mismanagement that preceded his presidency.”
The real significance of Friday’s job report is that it represents the first time nonfarm payrolls have posted an annual net gain since 2007, suggesting the world’s largest national economy is finally starting to slowly recover. The gain occurred just three weeks after the last convoy of U.S. combat troops pulled out of Iraq to end an unnecessary conflict Bush sought at a cost of 4,500 American lives and at least $800 billion, much of which was funneled to politically connected private contractors like Halliburton and the former Blackwater mercenary firm.
The tax breaks, deregulation and industry bailouts the Texas oilman forced through during his time in office on behalf of the wealthiest 1% prompted the U.S. housing market to collapse and global lending to seize up, undermined middle class families, and helped create societal imbalances that led to the creation of the Occupy Wall Street movement.
National economies are like ocean liners in the sense that neither turns on a dime, and the $15.2 trillion U.S. economy is the planet’s largest and most influential.
Financial advisor Patrick Mauro, another member of the reality-based community, gives Obama a “B+” for economic policy and Bush an “F.” The chief investment officer of Oakbrook, Ill.-based Patrick Mauro Investment Advisor, Inc., which has $45 million under management, gives the mainstream media a “D” for economic reporting.
“Bush simply was not in charge,” says Mauro, who takes a dim view of the unprecedented tax cuts for the rich Bush engineered in the middle of the wars in Iraq and Afghanistan. “The oil industry and Wall Street had their way. Cheney ran the foreign desk as you know. Karl Rove (below right) truly was Bush’s brain.”
Unusually favorable economic data was a hallmark of the Bush presidency, particularly with regard to monthly job creation. These inaccuracies often were corrected with little fanfare, long after the data had been shared with voters by a docile mainstream media.
It’s normal for monthly statistics to be revised as more information is collected. An average of 15,000 jobs have been added to the annual totals for the the 12 monthly job creation reports released each year since record-keeping began in 1979.
Cumulative downward revisions have only occurred four years because the data was too favorable. Two of those downward revisions took place on Bush’s watch.
The Bush administration also has the dubious honor of producing the most inaccurate job creation reports in U.S. history. Ten of its 12 monthly reports were overstated during the 2008 election year and a record downward revision of 75,000 jobs was needed to fix them.
Institutionalized distortion is not limited to economic data for job creation. It also occurs in the U.S. unemployment rate and in housing activity. The latter has never been adjusted for population growth, which means that when the December data for new home sales is released Jan. 26, the mainstream media is likely to inform the world it fell to a record low in 2011 without ever mentioning that the American population has expanded by 125 million people since record-keeping for this economic indicator began in 1963.
What’s the difference?
About 22 percentage points. The decline in new home sales from 1963 to 2011 is likely to be about 45% in the absence of an adjustment for the change in population. The decline steepens to 67% once the data is adjusted to reflect home purchases per million Americans.
We’re going to see about 978 new home sales for every million Americans in 2011, compared with 2,958 in 1963, by my rough estimate. It will be the first time in history that less than 1,000 new homes have been sold per million Americans.
Likewise, the inaptly named U.S. unemployment rate also makes the economy look better than it really is. The unemployment rate, which fell to 8.5% in December from a prior 8.7%, is really a measure of short-term turnover. It doesn’t measure true unemployment, because it doesn’t track some people who have given up looking for work or stopped collecting unemployment benefits. The national unemployment rate was 4.2% when Bush took office.
“Part of the reduction in the rate (from November to December) can be attributed to a reduction in the labor force, which is less encouraging than just a reduction in the number of unemployed,” said Diane Swonk, who is the daughter of a retired U.S. autoworker and chief economist of Mesirow Financial.
In other words, the percentage of people in the U.S. labor force without jobs appears smaller when the overall pool of workers gets smaller, as it did in December.
The labor force shrank by 138,550 people to 153,887,000 in December as unemployed workers exhausted their benefits and stopped looking for work. Meanwhile, the overall population was expanding by 470,000 people to 314 million. In a healthy economy the labor force would expand with the overall population.
Once again, the ballyhooed improvement was exaggerated by complex factors that are rarely shared with a general news readership.
The employment-to-population ratio used by the World Bank and by many European nations is a better measure of joblessness than our unemployment rate, because it’s less complicated and therefore less subject to manipulation. The ratio simply measures the number of people who have jobs against the overall population.
The employment-to-population ratio held steady at 58.5% in December, but was at 64.4% when Bush took office.
Another way to determine what’s really going on for yourself is simply to contrast the growth of the national population with that of the national labor force since Bush took office in January 2000. The overall national population has increased 12% to 314 million Americans during that time, but the U.S. labor force has expanded by less than 1% to 132 million. Unless children have stopped growing up, something is dreadfully wrong with that discrepancy.
These painful truths are rarely shared with middle-class readers by the Wall Street cheerleaders that pass for economic journalists and financial experts these days. Their routine sins of omission are one reason why the lives of most decent hardworking Americans never seem to match up with the economic good times they read about.
The real question is why a news industry which is supposed to serve as a government watchdog and counts government adversary as one of its key roles seems incapable of challenging government economic claims and analyzing them on behalf of middle-class readers.
“Too many journalists are ill informed on business and economics and do not want to do the digging to figure this stuff out,” Mauro said. “It is not simple stuff and you have to be motivated.”
The official monthly gain of 200,000 jobs in the December payroll report is no exception. The real December gain is more along the lines of 58,000 jobs after 100,000 jobs are subtracted for monthly population growth and a further 42,000 seasonal courier jobs are extracted from the tally.
“The problem is that this 42,000 gain is part of a seasonal pattern that fully reverses itself each January,” economist John Williams of Shadow Government Statistics said, noting that the couriers were hired to deliver holiday gifts.
Still, the modest net gain that occurred in December beats posting a net loss of jobs, which is what the U.S. economy did in 42 of the past 60 monthly payroll reports after they were adjusted for population growth.
“It’s a mixed report,” Baker said of the 200,000 new jobs officially created in December. “We’d like to be seeing 300,000 to 400,000 jobs a month and those are not unrealistic numbers.”
Baker estimates that federal lawmakers could heal the economy in two to three years if they made the right economic moves and worked together for the greater good. But we’re unlikely to get back to normal until 2017 or 2018 so long as President Barack Obama has to work with an obstructionist Congress, he said.
Obama is a self-made man, who grew up without a silver spoon wedged between his jaws.
By contrast, half the U.S. Senators and Representatives were millionaires in 2010, according to an analysis by the nonpartisan Center for Responsive Politics. They had a median net wealth of $989,000 in 2009-2010, not counting the value of their primary homes. That compares with a median U.S. household income of $50,046.
“The prospects of our getting back to normal are not very good,” Baker said.