Sparks fly over unemployment drop

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October 5, 2012, 7:38 pm
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(NECN: Peter Howe, Boston/Hanover, Mass.) - On the nation’s jobs recovery, they were new numbers Friday that economists, experts and political partisans had a hard time squaring: The unemployment rate dropped by an unusually large 0.3 percent to 7.8 percent last month.

The number of Americans reporting they have a job soared by the most in any month since 2003.

And yet, the U.S. economy created only 114,000 jobs in September, a far cry from the 300,000 to 500,000 a month normally needed to take a big bite out of the jobless rate.

"The real head turner was the unemployment rate," said Jason Lilly, director of portfolio management for Rockland Trust. "If you look at the data and you look at the two surveys, we’ve got some question marks."

The issue appears to be the same one that has led to weird anomalies in jobs and joblessness reports over the last four years of recovery: The "number of jobs created" report comes from an exhaustive survey of 114,000 employers, checking how many people they have on their payroll.

But the unemployment rate and "do you have a job?" data come from a separate survey, basically a public opinion survey polling 1 of every 5,000 American households and extrapolating from that the national unemployment rate and September’s stunning funding that suddenly 873,000 more Americans say they have a job, the biggest one-month increase since 2003.

"What raised our eyebrows was the household survey, which historically has been pretty volatile, and that’s the number that keys in on the unemployment rate, one the job participation rate, and that’s the number that was really eye-popping," Lilly said.

Some smell a rat, like former General Electric CEO Jack Welch, who took to Twitter to say, "Unbelievable jobs numbers. These Chicago guys will do anything. Can’t debate, so change numbers."

Others said it seemed awfully, suspiciously convenient that 36 hours after President Obama was by most observers’ estimates thumped by Republican Mitt Romney in their first debate, the jobless rate suddenly dropped below 8 percent for the first time Obama’s been in office.

Bureau of Labor Statistics officials roundly denied that it was even possible the numbers – collected each month by professional economic bureaucrats – could be monkeyed with for political purposes.

Taping this Sunday’s NECN "This Week in Business" show Friday morning, I H S Global Insight chief economist Nariman Behravesh said he thought it was "not impossible" but "highly unlikely and difficult" the numbers could have been manipulated, and said it appeared to be an explainable statistical variation.

"This kind of anomaly is not so unusual," Behravesh said. "The timing is a little, sort of, awkward, shall we say, in terms of the election, but you do get these kind of mixed signals out of the employment reports because they are two very different kinds of surveys."

While it’s most typical to see no change or a 0.1 percent monthly move in the unemployment rate, a 0.3 percent move isn’t unprecedented. From July to August and from November to December, the unemployment rate dropped 0.2 percent, and from November to December 2010, it fell 0.4 percent in one month.

At the Boston office of staffing giant Robert Half International, who helps place accountants and information-technology professionals with businesses, Brigette Felago said the new numbers do feel right when she compares the current economic and hiring environment to two or four or six months ago.

"I’d say that's consistent with what we're seeing over the past 30, 60 days," Felago said. "We're all kind of waiting for some strong indications that the economy is really turning, but overall, I'd say it's positive."

Lilly’s conclusion: While the 0.3 percent drop in the unemployment rate may have a big quotient of statistical-variation noise in it, "The economy's getting better. More people are going back to work, but not as dramatically as the household survey suggested. But, what's great is, both” the employer survey and the unemployment-rate reports “are positive, both are in the same direction and it does suggest things are getting better here."

With videographer John J. Hammann.

Tags: Boston, barack Obama, United States, economy, Peter Howe, Mitt Romney, politics, unemployment rate, economists, partisans, Jack Walsh
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