The employment report for the month of February (the first full month of the Trump administration) was released on Friday and the numbers looked pretty good. The economy added 235,000 jobs and the unemployment rate fell one tenth to 4.7%. President Trump hailed the news and declared that, though the employment reports during the Obama administration were fake, that the February numbers were very real.
Let’s examine that claim. First of all, take a look at this chart: Labor Backlog. Some explanation is in order. “Actual labor force growth” is the growth in the labor force if it had grown at the same rate as the overall population as it does in reality. The “BLS reported labor force growth” is the growth in the labor force that the Bureau of Labor Statistics uses to calculate the unemployment rate. The “change in employment level” is a figure taken directly from the BLS monthly data. It’s the growth in the number of people who report being employed in the household survey. The “labor force backlog” is the difference between the growth in employment level and the “actual labor force growth.” If the employment level grows faster, then unemployment should decline along with the “labor force backlog.”
Note that during the Obama years, the BLS consistently reported less growth in the labor force than what the growth in the population would suggest. Only in 2012 and 2015 did the BLS report labor force growth that was slightly above actual growth. The result is that the “labor force backlog” grew steadily during the Obama administration until it peaked at the end of 2014 at 6,359,000 workers who were unemployed. By the end of 2016, that backlog had fallen only slightly to 5,994,000 workers. In spite of that, according to the BLS, the unemployment rate plummeted from 9.9% in 2008 to 4.7% in 2016. That’s impossible and the only way that the BLS was able to make it appear that the unemployment rate was dropping was by claiming that workers were dropping out of the labor force or by not growing the labor force as the population grew, or through some combination of those factors. Thus, when Trump claimed that the employment data was “fake” during the Obama administration, he was exactly right. If you’ve been a follower of this blog, you know that it’s something that I maintained all along throughout the Obama administration.
OK, so how about Trump’s claim that the numbers now are “real?” So far, in January and February, the BLS has reported growth in the labor force of 416,000 workers. The actual growth in the labor force – if it grows in proportion to the population – is only 89,000 workers. In other words, so far in 2017, the BLS now claims that 327,000 “missing” workers have reappeared in the work force. That supports Trump’s claim that his numbers are real. But time will tell. Two months’ of data isn’t nearly enough to judge how honest the Trump administration is being when it comes to the employment reports. It’s something I’ll watch just as closely as the Obama numbers.