Which is more important: “Creating New Jobs” or Putting Americans Back to Work?

Eric Ruark | NumbersUSA

The Bureau of Labor Statistics released its monthly unemployment figures this morning. The headline of the press release read: “Payroll employment increases by 156,000 in September; unemployment rate little changed

It’s true that little on the jobs front changed from August to September. This would be good news if, to borrow Senator John McCain’s famous 2008 declaration, the fundamentals of the economy were strong. But they are not.

The take on Wall Street is that the report was disappointing because new jobs fell short of expectations by 20,000. However, the number of people working increased by 354,000 over the previous month, outpacing the increase in the size of the working-age population by 117,000. That much is welcome news, but it comes nowhere close to alleviating systematic unemployment in the United States.

Unemployment ticking up from 4.9% to 5% isn’t really anything to worry about. This likely indicates that there was an increase in the number of people seeking jobs, which is a prerequisite for being included in the official unemployment number, or the U-3. At this point, the U-3 is not an accurate indicator of how the labor market is performing. Many economists look at the U-6 figure, which remained steady at 9.7%, or 15.7 million.

Other important numbers to look at are the percentage of the working-age population employed or looking for work (Participation Rate), and the number of working-age population out of work who are not looking for a job (Not in the Labor Force).

These two numbers tell us that the economy is performing very poorly, as the percentage of the working-age population participating in the workforce is hovering around a forty-year low (62.9%), and the number of working-age persons outside the labor market is at an historic high (94.2 million).

Most importantly, the conversation we have about the performance of the economy should not be about how many new jobs were created each month, but about how many people gained employment relative to the increase in the working-age population.

Jobs vs. Employment is Very Much a Distinction with a Difference

Of course there is a correlation between job creation and increased employment, though they remain distinct categories. One would be hard-pressed to find a politician or member of the mainstream media who could explain that distinction.

The conflation of job growth with employment gains was highlighted in the recent Vice-Presidential debate. When Governor Mike Pence pointed out that the post-recession period of Obama’s presidency was the “slowest economic recovery since the Great Depression,” Senator Tim Kaine twice interjected in rebuttal by saying “Fifteen million new jobs?”

Kaine was using the standard Democratic talking point in trying to tout the revival of the economy under Obama Administration policies. Hillary Clinton has also used the 15 million new jobs line many times on the campaign trail, and at the State of the Union Address back in January, President Obama said “more than 14 million new jobs” had been created under his administration.

These claims have been “fact-checked” by various media outlets, and the conclusion has been in all cases: it depends on when one starts measuring jobs gains. In order to arrive at the 15 million number, Democrats are starting their count during the second year of President Obama’s tenure, after the massive job losses suffered during the first year of his presidency had ceased.

It is not surprising that Democrats are measuring in a way that reflects most positively on President Obama. No doubt a Republican administration would do the same if it were in office. Whichever party is in power credits its policies for economic gains, and blames the other party when things go south. But the debates over how many jobs were created, who should take credit, and the “fact-checking” that accompanies it, are ultimately distractions from the real issue.

Who’s Counting and How?

The “fifteen million new jobs” figure comes from the Current Employment Statistics (CES) program which surveys:

…approximately 146,000 businesses and government agencies, representing approximately 623,000 individual worksites, in order to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls.

The statistics gathered and published by the CES are known as “Establishment Data” and are published monthly by the Bureau of Labor Statistics. According to the CES (Table B-1), surveyed employers reported 14.9 million more employees on payrolls in August 2016 than in February 2010. The claims of job growth made by Kaine, et. al., while true according to the statistics collected by government agencies, mean next to nothing when presented as a stand-alone data point.

The CES only indicates the number of new payroll employees reported by employers surveyed. It does not contain a count of the U.S. population, the working-age population, or those who are employed, unemployed, or out of the labor market altogether. Those figures come from theCurrent Population Survey (CPS) and are referred to as “Household Data.”

According to the Household Data, during the same period (February 2010 to August 2016) Kaine is using to tout job creation under President Obama, the working-age population in the United States increased by 16.8 million while the number of employed increased by only 13 million from– a deficit of 3.8 million. While the number of the “officially unemployed” (U-3) did decrease by 7.3 million, those Not in the Labor Force, people who have dropped completely out of the labor market and who are not counted as unemployed, rose by 11.1 million.

             Bureau of Labor Statistics, Historical Data, Table A-1

Politicians are free to tout job creation, but they should not ignore the fact that the U.S. working-age population is growing at a faster rate than the labor market can absorb it. Even when there are months when the number of newly employed outpaces overall population growth, it is not enough reverse the long-term trend.

From September 2000 to September 2016, the working-age population grew by 25.9 million more than the number of people who gained employment.

The BLS includes everyone in the United States over the age of 16 (not incarcerated or institutionalized) in its count of the working-age population. If we concentrate only on those aged 18-64, the numbers look even more disheartening.

       Steven Camarota, The Employment Situation of Immigrants and Natives in the First Quarter of 2016

As indicated above, there were 15.9 million more people of working age in the United States who were not employed in the first quarter (Jan-March) 2016 than during the same period in 2000.

There are multiple causes of the unemployment crisis in the United States, but no one can seriously argue that immigration policy is not one of the causes, if not the major one.Immigration is driving population growth faster than our economy can keep pace, and Americans workers are suffering the consequences.

Below are employment numbers from the preceding chart broken down to show the difference in in employment gains by native and immigrant workers from 2000 to 2016.

From the first quarter to 2000 to the first quarter of 2016, the foreign-born accounted for 64 percent of all employment gains. During that same time, the number of natives not in the labor force increased by 10.8 million.

To put all of this into perspective, during the 79 months in which there were 15 million new jobs created under President Obama, the average monthly employment level increased by 144,500. If the United States is to get back to pre-recession employment levels, which were not great but were much, much better than today’s numbers, the average monthly increase over the next 79 months will have to jump by 55 percent to 224,625, if population growth remains constant.

ERIC RUARK is the Director of Research for NumbersUSA

Updated: Fri, Oct 7th 2016 @ 3:00pm EDT

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