This article was poking fun at a recent report about the inability of American to pass a citizenship test. At the bottom of the article there was a link that read “RELATED: Are you smarter than a Fox News viewer? Take our quiz.” I clicked the link and was presented with a quiz, the first question being:
1.Is it your impression that most economists who have studied it estimate that the stimulus legislation:
1) Saved or created several million jobs
2) Saved or created a few jobs
3) Caused job losses.
I stopped after reading this question because I remembered this from somewhere. My suspicions were correct when I read the pages fine print.
“…American voters were quizzed on their knowledge of issues and facts raised in the 2010 midterm elections, in a survey by World Public Opinion, a project managed by the Program on International Policy Attitudes at the University of Maryland.I remember hearing about this “study” and a subsequent rebuttal by Lee Doren on his “How the World Works” YouTube channel. Please go watch it after you read this article.
Respondents were also asked where they get their news from: Fox News, MSNBC, CNN, newspapers, network TV news, public broadcasting.
The survey found that "substantial levels of misinformation were present in the daily consumers of all news sources." But Fox News viewers were significantly more likely to be misinformed than those who get their news from other sources. And, greater exposure to Fox News increased the degree to which viewers were misinformed…”
It was this first question that go me dander up and inspired my to put forth this quick and dirty report on how to refute the “Saved and Created Job” myth.
Did the ARRA (American Recovery and Reinvestment Act) create for save jobs? The answer is “sort of” and “absolutely not,” depending on how it is evaluated. Yes people were hired and others not fired because of money provided by the act. I will not address the fraudulent tabulation of the exact number because there are plenty of other articles that already address this issue. What none of the reported numbers takes into consideration is the impact of the “Crowding Out Effect,” which is “any reduction in private consumption or investment that occurs because of an increase in government spending…” For jobs this means the administration and CBO have not counted the “Destroyed or Prevented” jobs that have resulted from the ARRA. You can not count it one way and not the other and still be intellectually honest.
The following articles address this in more detail:
Caroline Baum of Bloomberg: “Obama Omits Jobs Killed or Thwarted from Tally”
Joseph Lawler of the American Spectator: "Destroyed or Prevented"
What I will focus on is simply the annual raw employment data points for Presidents Carter, Reagan, HW Bush, Clinton, GW Bush, and Obama. The specific data points I will be looking at are employed persons, unemployed persons and the labor force. These are defined but the Bureau of Labor Statistics (BLS) as follows:
Civilian Labor force:
This group comprises all persons classified as employed or unemployed in accordance with the criteria described above…
Employed Persons:
All persons who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees, worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family, and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs… Each employed person is counted only once, even if he or she holds more than one job...
Unemployed persons:
All persons who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week…
With this data I will show how many people are employed and unemployed during each president’s term(s).
The three things to note about President Carter’s job numbers are that during his administration 10.55 million more people were working, however there were 10.78 million people in the labor force. This means that even though there were added jobs the increase did not keep pace with the people entering the labor force to the tune of 210 thousand people.
President Reagan saw the economy add 15.67 million jobs during his presidency, which means 1.83 million more jobs, were created than there were people entering the labor force. This is manifest in a lower unemployment percentage. Just as with Carter, Reagan had an increase in the labor force, in this case 14.56 million.
Under George HW Bush there was a 2.9 million person increase in unemployment despite the economy adding 3.5 million jobs. This was due the corresponding labor force increase of 6.4 million people.
President Clinton, like President Reagan had a more new jobs created then there were people added to the labor force, 3.9 million to be specific.
President George Walker Bush saw 8.5 million jobs added during his two terms, however during that same time the economy added 11.7 million people to the labor force. This resulted in a larger unemployment number.
The data for President Obama is limited to two years plus a partial year. Please keep in mind the 2011 data will change as the seasonal adjustments average out over the full year; this could have positive or negative impacts on these numbers. The data as shown indicated that there are 5.9 million less people working today than when President Obama took office. However, there is something very interesting about these data. Note that the labor force indicates a 1.1 million person decrease. Since 1940 there has been an average annual increase of 1.38 million people in the labor market. There have been occasional monthly decreases, such as following 9/11 but annual decreases have only been seen during WWII and the Korean War when the “civilian labor force” was depleted due the military drafts.
Historically the BLS assumes that a certain number of people enter the labor force. Occasionally they also adjust due to census and other population data that becomes available. Any decreases result from when observed data indicates a loss greater than the assumed number. For example during WWII it was pretty clear the many people were leaving the civilian labor force so the numbers decreased. See John Crudele's Faux job numbers could lead to real trouble at the New York Post for more details on assumed jobs.
If the standard assumptions were made there should be 156.5-157.3 million people in the labor force (based on participation rate and historical increases). Given current employed numbers they unemployment rate would be 10.8-11.3% not the current 8.9%.
Hat Tip: American Thinker’s Steve McCann: "The phony drop in unemployment"
Another way to think of it is to imagine a basketball area that holds 10,000 fans. If 9,000 seats are filled then the empty percentage is 10%. Now imagine the arena manager wanted a lower number. What would happen to the percentage if he just decided that there were only 9,500 seats? His percentage of empty seats goes from 10% down to 5.26%, even though there are no more fans.
This is why we now have an 8.9% unemployment rate instead 10.8%. It is not because of significant increase in jobs rather it is because the administration has decided that there are less people in the civilian labor force. Despite this obvious fudging of employment numbers, the Obama administration has presided over an economy that has lost 5.9 million jobs. The change in the labor force has (so far) only mitigated about 1.1 million of the 5.9 million.
Another interesting fact is that during the last three months of the Bush administration the economy shed 1.5-2.5 million jobs. It can be argued employers began to shed jobs due the impending election of President Obama. See chart below. Case in point Caterpillar shed thousand of jobs immediately following the election and thousands more during the early part of 2009.
Those running for office in 2012 should keep these points in mind.
- When President Bush left office 8.4 million more people had jobs than when he entered office; this despite inheriting a recession, 9/11 and the recession that started in 2007 (BUSH ADDED 8.4 MILLION JOBS)
- President Obama has 5.9 million less people working today then when he took office (OBAMA HAS LOST 5.9 MILLION JOBS)
- The Obama administration has fudged down the labor force number to make it appear like unemployment is decreasing
- When people bring up the job losses during Bush’s final months, remind them that it is because corporations believed candidate Obama when spouted anti-business rhetoric during the campaign, i.e. Cap and Trade. Caterpillar is a great example
In summary when people say “Save or created…blah blah blah”. Stop them and say nonsense, absolute balderdash, then explain why. Finally remember that crowding out causes jobs to be destroyed or prevented and you can’t count saved or created unless you count those as well.
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