Ba-Humbug! Why we can’t take the drop in unemployment at face value

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What? So you’re telling me you didn’t graduate from college to sort greeting cards? And yes, I know that in spite of the resume-friendly name, wrapping presents in a warehouse probably isn’t the path to your dream job. But hey, it’s less degrading than dressing up in an elf costume and “frolicking” in an airport terminal.

If you’re feeling a little discouraged by the lack of viable career choices you’re probably not alone. While unemployment is hovering at 8.6 percent nationally, unemployment among those aged 20-29 is nearly twice that. Many of these young people are recent college graduates with four-year degrees and little promise of finding a job.

Sadly, these are the sorts of jobs that President Obama is touting as evidence that his stimulus policies are finally working. Granted, the Obama Administration has been in desperate search for some good news of late. A recent Gallup poll found that his approval rating had fallen to 43 percent, a new historic low.  It comes as little surprise then that Obama has been taking a victory lap ever since the Bureau of Labor Statistics released a report revealing that unemployment fell from 9.0 percent to 8.6 percent in November.

The spin machine went into overdrive touting the lower unemployment numbers as evidence of the recovery finally taking effect (even if it was a couple years later than promised). But the fact is, it doesn’t take a veteran economist to understand that the lower jobless claims and overall unemployment in the month of November is partially due to seasonal employment. That’s right: Santa needs elves and gift-wrappers.

Evidence for this trend can be seen in the fall of average hourly earnings, suggesting that more people were filling lower wage jobs. Moreover, the data reveals that much of the gain (50,000 jobs) was in the retail sector, in which jobs are notoriously seasonal.

Another, potentially more worrisome, factor behind the reduced unemployment number is the percentage of people who simply gave up and left the work force. An “unemployed person” is defined as someone actively seeking work but not finding it, meaning the number does not reflect those actually out of work since many have left the labor force completely.

Over the past month, the labor force participation rate dropped from 64.2 to 64.0 percent. While 0.2 percent may seem insignificant, that is the equivalent of 315,000 people who have stopped looking for work in the last month and are no longer included in the unemployment percentage.

American Enterprise Institute scholar James Pethokoukis ran the numbers and found that if the participation rate was the same as October, the unemployment rate would be 8.9 percent. That number would jump to a devastating 11 percent if the participation rate was the same as when Obama took office.

As unabashed liberal Matthew Yglesias tweeted, “Decreasing unemployment by shrinking the labor force is not exactly winning the future.” We couldn’t have said it better ourselves. But at least Santa’s hiring… for the next month, that is.

Alex Schriver is the Chairman of the College Republican National Committee, the largest organization of young conservatives in the country.

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