Guest Post: Don't Be Fooled: Unemployment Rate "falls" – Because Work Force Shrinks

Posted on December 2, 2011 by


This is a guest post by Freedomworks intern Celia Bigelow.

Before President Obama and Washington rejoice over the decrease in the unemployment rate they need to face a harsh reality: America is still not gaining jobs.

In fact, the main reason unemployment “fell” is because the workforce has shrunk.

The Bureau of labor statistics reported this morning that the unemployment rate fell by 0.4% to 8.6%—what the Obama Administration would call a success. However, one key fact was left out of this report: the work force has decreased immensely since President Obama has taken office.

“We lost the equivalent of the entire city of Pittsburgh, PA in the labor force last month alone. This is unacceptable,” Reince Preibus, Chairman of the Republican National Committee, announced via twitter.

Obama Employment

This is the tragic side of the stalled Obama “recovery”: people are losing hope.

The Associated Press reports that, “more than 300,000 people stopped their job searches last month and were no longer counted as unemployed. That contributed to the drop in the unemployment rate. The rate could rise in future months if they resume looking.”

Also contributing to the decrease in the unemployment rate is the increase in demand for seasonal jobs during the holidays. “More than half the jobs added last month were by retailers, restaurants and bars, a sign that holiday hiring has kicked in,” AP also reported.

The BLS report claims largest job gains in the private sector came from retail trade (+50,000), professional and business services (+33,000), leisure and hospitality (+22,000), and health care (+17,000).

Although this sounds great, it is important to compare the labor force statistics from November with past numbers. Jim Pethokoukis of AEI tweeted this morning:

“If labor force size was same as Oct., U-3 [i.e., core] unemployment rate would be 8.9% [now]; [if labor force size was] same as when Obama took office, [then U-3 unemployment would be] 11%.”

Eleven percent unemployment would be staggering. The only reason it appears to be 8.6% is because the workforce has contracted.

These latest government statistics should not fool people. The workforce has shrunk because American people have lost faith that Washington will implement job-creating policies. Those who have given up looking for jobs are not included in unemployment statistics.

The graph above shows the incompetence of the Obama Administration’s economic policies. The dark blue line is where the Obama Administration promised we would be, thanks to its massive stimulus package. The gray line is where they said we would be without the stimulus package. The red dots show where we have been—a deeply disconcerting reality.

This is unacceptable, and today’s report of “falling unemployment” gives false hope to the American people. President Obama’s “Hope and Change” economic policies are not providing hope, and we certainly are not seeing change. We must not let the White House and the media skew these statistics and deliver the wrong message to America.

5440 Note: Don’t expect this message to be reported in The Oregonian or any other legacy media outlet. Your best bet is to try to scour financial news sites for a few nuggets that suggest this.