How Obama Goosed the Jobs Numbers and Why It’s Much Worse Than Media Portrayals

by Darwin on March 29, 2013

As long as I can remember, people have always complained about the accuracy of government-reported statistics and claims.  For instance, every year, the government reports that the measure generally regarded as a barometer for inflation everyday Americans face, the CPI, is always much lower than people feel they’re experiencing in their everyday lives.  Sure, while flatscreen TVs and crap toys continue to get cheaper each and every year, we’re paying record prices at the pump, for healthcare and other daily expenses.  And these annual increases are WAY above the low single digit inflation reported in the CPI (here’s the source data from BLS).  Anyway, while those complaints may seem to have merit, the bottom line is that at least the index is based on a pre-set mix of categories and the government can’t really do too much to manipulate them.  And administration after administration has been criticized for using a crappy mix of indicators to consistently report a low inflation rate, so at least it’s not even a partisan issue.  However, the jobs numbers have been grossly manipulated by Obama’s policies and it’s easy to see how, but supporters choose to ignore it.  Here’s how he does it:

  • Definition: First, starting with how the mainstream media reports the “unemployment rate”, they tend to report only the U-3 measure which is the most favorable.  It excludes discouraged workers who have stopped looking for work from the equation.  So, when a long-term unemployed worker throws in the towel because there’s no hope, they no longer count in the equation.  Let’s see how easy it is though to enact policies that entice people to behave in a manner that improves the reported U-3 rate.
  • Artificially Increasing the Numerator – Obamacare: Aside from the monstrosity that will ultimately bankrupt the country, let’s consider for a moment what impact Obamacare has on the unemployment rate.  Because a provision requires that healthcare coverage or penalty kicks in for workers clocking over 30 hours per week, guess what employers do to get around it?  They simply cut all their full-time 40 hour workers down to 30.  Pretty crappy for the employees, but as a business owner, why not?  After all, why would you voluntarily pay for your employees’ health care if there’s this easy solution out there – and if your competition is doing it?  Heck, aside from corporations, even STATES are cutting worker hours to 29 per week to avoid the costs involved.  What is the net impact?  Well, if you have 100 workers at 40 hours per week, you need to hire a few more if they’re all working only 30, right?  While you might lose some efficiency in training, sick days per worker, etc., roughly, you’d think companies have to hire about 25% more employees in the retail/lower-end sectors to maintain the same coverage.  So, that’s what we’re seeing.  Increased hiring in low-paying jobs, thus artificially increasing the number of people reporting income.  So, that’s a fake improvement in the numerator brought about by Obama, now here’s how the denominator keeps being suppressed.
  • Artificially Decreasing the Denominator with Disability Fraud and Government Gimmes: There have never been more people (net number or as a percentage of any ratio you can think of) on disability.  It’s simple, if you don’t want to work or can’t find work, but want to collect a check, just claim you’re disabled.  In this economy, where the only jobs are crappy ones, you can appreciate why people are incentivized to do this.  If you don’t believe me,  just read about the facts – it’s a giant scam. There’s an example of a whole county in Alabama where 1 in 4 (yes, a full 25% of the population) receives disability checks.  That is insane.  And the states love it.  They actually pay firms to find people they can shift off their own welfare rolls into the federal disability assistance system.  It’s shocking, shameful, and it’s in full-swing.  If people were already not counted, no change, but when people see everyone around them living off disability, they decide to throw in the towel and join up as well – after all, it pays about the same as a crappy minimum wage job anyway.  So, by jumping onto the bandwagon, these people all drop out of the numerator of the equation, artificially improving the reported jobs number as well.

Has the administration done anything to try to combat this abuse?  Of course not!  Why would they?  This sort of handout forces people to get out and vote – they can at least get out of the house to do that!  And it would hurt the reported unemployment rate if, you know, able-bodied Americans actually counted in the equation.

Now, anyone can surmise just what the real unemployment rate would be if able-bodied people were actually looking for work (or working) instead of living off the government dime and whether companies would really be hiring more people if they didn’t have to chop 40-hr/wk workers down to 30 hours per week to avoid Obamacare penalties but the bottom line is, the reported rate would be WAY worse each month.  So bad, that we’d look more like some struggling European countries rather than what you might derive from the rallying US stock market.  People tend to equate strong equity performance with a strong economy and jobs market but nothing could be further from the truth.  You can thank relentless job-cutting and Uncle Ben for investors throwing money at the risk trade since there’s nowhere else for capital to flow.

Do You Really Believe the Unemployment Rate Tells the True Story?

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1 Hunter Lauzure March 30, 2013 at 10:19 am

You used to have interesting insight, but your hatred for Obama seems to be your motivation now and it is very unappealing. With so many complicated economic issues around the world, you’ve decided to talk about the unemployment rate and Obamacare. If you had written this in 2010 it might at least be relevant. . I would no further trust your analysis of the economy than any of the other political pundit puppets on the web.

Darwin Reply:

Disability fraud and the sly impact of Obamacare is more relevant now than ever. First off, we’re in this great supposed recovery, years in now, and we have the same number of workers in the workforce that we had in the 80s. That’s pretty pathetic. I cited plenty of facts, linked to sources; choose to ignore them and cover your eyes and ears…

2 Hunter Lauzure March 30, 2013 at 10:38 am

“It’s simple, if you don’t want to work, but you want to get a check, just collect unemployment.”

This is completely false. You obviously either don’t have any idea how unemployment works in this country, or you intend on perpetuating this lie to strengthen your argument.

Besides, only one in three unemployed people are eligible, and the check they receive is 1/5 of what they would get if they were working.

You write with a lot of emotion, but very few facts. Perhaps it’s time you looked for a job where you don’t have to invent a separate reality to validate yourself.

If it doesn’t work out, you can just collect unemployment, right?

Darwin Reply:

Sure, thanks for pointing out a typo. That whole paragraph is about disability fraud, so I corrected the sentence.

You should check for facts as well; unemployment checks are not 1/5 of your old income. It is formula-based and depends on your old salary. For those at the lower end of the earning spectrum, an unemployment check can approach 50%. Add in that you no longer pay a payroll tax and such for 7.65%, then you pay less in federal income taxes (usually zero at that point), you’re collecting food stamps to the tune of a few hundred bucks a month, eligible for all sorts of other government assistance programs and it’s practically a wash. Seriously. Someone who is earning ~$20,000 – $40,000 a year and then gets laid off has very little incentive to work when you consider the marginal difference in working and collecting post-tax income and losing all the government subsidies versus simply taking the 99 weeks of gimmes. The facts bear this out, it is simple math.

Speaking of emotion, you re-read and re-commented a few times so the article obviously struck a nerve with you. While you claim I hate Obama, I haven’t written about him since 2012. And when I did? I claimed that if we won the election, it would have no negative impact on stocks or my investment approach. That’s not an attack, it’s an objective assessment and I was completely correct – the market is up another 9% this past quarter.

3 Keith Fox April 1, 2013 at 9:58 am

I have to agree with Hunter on this one. Your articles are generally non-partisan and objective, but this one sounds as if you’re railing against Obama. In my opinion, you should be careful not to politicize the financial issues you discuss, because I’m assuming a political debate is not your primary intent here and is beyond the scope of the point you’re trying to make here.

I do agree with you that disability fraud is a growing problem in this country. However, the article you cited in reading “about the facts” on current trends in disability insurance (DI) fraud is a blog, which is not necessarily factual. Furthermore, neither the blog nor the NPR report which it cites makes any mention of Obama’s policies or Obamacare specifically as being a contributing factor or driving force.

In fact, there was a recent press release by the CBO which states the Affordable Care Act “is likely to influence [DI] application rates” although it’s “difficult to predict” what the impact will be. This doesn’t provide much useful information, but keep in mind the CBO is the non-partisan federal agency which provides economic data to Congress regarding the economic effects of legislation. If the effects of Obamacare on DI are unclear to them, how are you so sure Obamacare is artificially skewing the UR? Besides, combating DI fraud is not the intent of any of the primary provisions of Obamacare. I strongly agree it’s an issue that should be addressed, but that’s beyond the scope of your article and it’s not specifically the result of Obamacare.

As for employers reducing their maximum hours per employee to avoid providing health benefits, this part of the law didn’t even go into effect yet so it’s speculative at best. I do believe the law is flawed in many ways and your prediction may very well actually happen, but I blame Republican obstructionism for the lack of comprehensive reform rather than a lack of vision/competence from the Obama administration. There seems to be no mention of this. Perhaps placing the blame of flawed legislation with a more fairly balanced approach would be more appropriate?

Lastly, I think your formula may be backwards. Increasing the numerator and decreasing the denominator leads to a larger number, not a smaller one. Are we using the same formula here?

Unemployment Rate = (Unemployed Workers / Total Labor Force)

Darwin Reply:

Thanks for your comment; I don’t really care about Obama personally, it’s the fact that these unemployment numbers are nowhere near as favorable as the metric being used to measure them. Obama’s our leader. He should be doing something to addressing this growing disability fraud issue which has never been this bad. ever. but he makes no mention of it, nor any efforts to adjust. And then Obamacare no doubt has goosed the numbers per above. correct on rate, I suppose I should have said “improved the numerator/denominator” to not confuse the “employment rate” vs “unemployment rate”

4 Elena April 6, 2013 at 11:09 pm

The economy is pretty bad and the jobs are limited. Statistics never show the right numbers, it’s more about the average numbers. But I would like to mention that every person who is seriously looking for a job, sooner or later will find it. I am not even talking about the fact that everyone should have an emergency fund for such critical situations, but very few do. If you don’t want to help yourself, don’t blame it on the government…

5 Charles Clarkson April 13, 2013 at 4:13 pm

“Heck, aside from corporations, even STATES are cutting worker hours to 29 per week to avoid the costs involved. What is the net impact?”

Perversely, this may be a very good thing. Employer provided health care has been a standard tax deduction since shortly after income taxes were introduced in the US. This reaction may finally lead to divorcing healthcare insurance and employment and perhaps lead to a personal tax deduction for healthcare insurance.

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