Unemployment Rate Falls: Obama’s Premature Celebration

By: Wendy Chavez

President Obama seemed very pleased in announcing that U.S. employers added 151,000 jobs last month, and that the unemployment rate is currently below 5%.[1]  And who can blame him?  A few months into Obama’s presidency, the unemployment rate reached 10%,[2] which marked the first time in twenty-six years that the unemployment rate reached double digits.[3]  According to U.S. Department of Labor, the unemployment rate is currently at its lowest since President Obama took office in 2009.[4]  On Thursday, Obama declared that “[t]he United States of America right now has the strongest, most durable economy in the world,”[5] and ceased the opportunity to make a few jabs at Republican members of Congress and Republican presidential candidates: “[h]ad we adopted some of the policies that were advocated by Republicans over the last four, five, six years, we know that we probably would have done worse.”[6]

So what does the unemployment rate actually mean?  Is the economy truly improving?  First, let us look at how the unemployment rate is calculated.  The official unemployment rate is determined by a monthly survey called the Current Population Survey (CPS).[7]  The U.S. government takes a monthly sample of households (approximately 60,000 households),[8] and reviews “how many people have a job, who’s ‘actively looking,’ and who’s waiting to get called back after a recent layoff.”[9]  It is understandable why the U.S. government does not count every household; such a survey would be impracticable and obnoxious.  However, it is important to be aware of who is considered (and not considered) “employed” versus “unemployed.”[10]  For instance, the U.S. Department of Labor counts a person as “employed” if they are working full-time, part-time, or have a temporary job at the time of the survey.[11]  Interestingly enough, the Department does not consider people who do not have a job and have not looked for one in the past four weeks as “unemployed”; rather, these people are considered to not be in the labor force, and therefore not accounted for in the survey.[12]  There are many critics of the CPS, claiming the survey is “extremely misleading”,[13] calling the Department’s unemployment rate a “big lie.”[14]

In the end, despite the President’s claimed victory, Americans remain skeptical of the economy’s progress and stability.[15]  Their fear is justified and well founded.  After all, the U.S. manufacturing industry continues to suffer post-recession effects, U.S. companies are losing money (demonstrated by the drop in U.S. companies stock prices and profits), and Americans continue to spend less (according to a January 2016 report).[16]  The economy has come along way, and the unemployment rate is a sign of a recovery.  However, we do not need to look far to find middle class families who are just getting by,[17] students graduates still looking for jobs,[18] or people who cannot find jobs even though they have been looking for a long time.[19]  Like Chris Matthews states, the unemployment rate is “simply one statistic among many that we use to judge the health of the economy.”[20]

[1]See The White House, President Obama Delivers a Statement on the Economy followed by the Press Briefing, YouTube (Feb. 5, 2016), https://www.youtube.com/watch?v=2PkUKJNkq0U&feature=youtu.be.

[2] Unemployment Rate, Dep’t of Lab. (last visited Feb. 6, 2016), http://data.bls.gov/timeseries/LNS14000000.

[3] Peter S. Goodman, U.S. Unemployment Rate Hits 10.2%, Highest in 26 Years, N.Y Times (Nov. 6, 2009), http://www.nytimes.com/2009/11/07/business/economy/07jobs.html?_r=0.

[4] President Barack Obama on Friday used a new jobs report to continue his victory lap on the economy _ and jab at the Republicans vying for his job, Associated Press (Feb. 5, 2016), http://www.usnews.com/news/business/articles/2016-02-05/president-barack-obama-takes-victory-lap-on-economy.

[5] Jeremy Diamond & Kevin Liptak, Obama fights for credit as unemployment rate hits new low, CNN (Feb. 5, 2016), http://www.cnn.com/2016/02/05/politics/obama-unemployment-rate-economy-credit/index.html.

[6] Id.

[7] U.S. Bureau of Labor Statistics, How the Government Measures Unemployment 2 (2014), http://www.bls.gov/cps/cps_htgm.pdf.

[8] Id.

[9] Dan Diamond, Donald Trump says the ‘real’ unemployment rate is 42%. He’s really, really wrong, Vox (Aug. 22, 2015), http://www.vox.com/2015/8/22/9191001/donald-trump-unemployment-rate.

[10] How the Government Measures Unemployment, supra note 7, at 4-5.

[11] Id.

[12] Id. at 7.

[13] Chris Matthews, Is the unemployment rate really just a ‘Big Lie’?, Fortune (Feb. 4, 2015), http://fortune.com/2015/02/04/unemployment-rate-gallup/.

[14] Id.

[15] Jeremy Diamond & Kevin Liptak, supra note 5.

[16] See Patrick Gillespie, Cracks in America’s economy are growing, CNN (Jan. 29, 2016),

http://money.cnn.com/2016/01/28/news/economy/cracks-in-the-us-economy/?iid=EL.

[17] See, e.g., The American Middle Class Is Losing Ground, Pew Res. Ctr. (Dec. 9, 2015), http://www.pewsocialtrends.org/2015/12/09/the-american-middle-class-is-losing-ground/ (discussing that the middle class shrunk to its lowest share of the U.S population since 1971).

[18] See Nelson D. Schwartz, Wages Rise as U.S. Unemployment Rate Falls Below 5%, N.Y. Times (Feb. 5, 2016), http://www.nytimes.com/2016/02/06/business/economy/jobs-report-unemployment-january-fed-interest-rates.html?partner=rss&emc=rss.

[19] See U.S. Bureau of Labor Statistics, The Employment Situation — January 2016 2 (Feb. 5, 2016), http://www.bls.gov/news.release/pdf/empsit.pdf (“The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged in January, at 2.1 million, and has shown little movement since June. These individuals accounted for 26.9 percent of the unemployed.”).

[20] Chris Matthews, supra note 13.

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