Economists are worried the Trump administration isn’t going to trust its own jobs numbers.
White House press secretary Sean Spicer sidestepped a simple question about the national unemployment rate. Trump’s nominee to run the Labor Department has written that the government should ditch the figure because it’s “misleading.”
And Trump himself has said the unemployment rate is a hoax, even claiming once that he had “heard” it could be as high as 42%. It was a hair over 5% at the time.
Economists find this pattern concerning. For decades, the unemployment rate has been one of the basic barometers by which America’s economy is judged. While no single metric is infallible, economists say, the unemployment rate does a pretty good job.
And they say trying to delegitimize it would be bad news.
“I think it’s very, very dangerous. The Bureau of Labor Statistics does an excellent job,” said Bill Rodgers, a professor at Rutgers’ Center for Workforce Development and chief economist for the Labor Department from 2000 to 2001.
Bob Murphy, a White House economist under former President Bill Clinton who teaches at Boston College, said the process and statistical analysis that go into producing the unemployment rate are “rock solid.”
When Spicer was asked to provide the national unemployment rate at Monday’s briefing, he skirted the question — and wouldn’t say an official number for the record.
“Too often in Washington we get our heads wrapped around a number and a statistic,” Spicer said. “And we … forget the faces and the families and the businesses that are behind those numbers.”
The president, he said, is “not focused on statistics as much as he is on whether or not the American people are doing better as a whole.”
Steven Mnuchin, Trump’s pick for Treasury secretary, also questioned the validity of the current measure during his confirmation hearing last week. “The average American worker has gone nowhere,” he said. “The unemployment rate is not real.”
During the campaign, Trump himself inveighed against the unemployment rate with far more colorful language.
“The 5% figure is one of the biggest hoaxes in American modern politics,” Trump said during a speech in August, when unemployment was at 4.9%.
It has fallen even further since, to 4.7% in December. In October 2009, just after the end of the Great Recession, unemployment was as high as 10%. That’s one of the ways economists know just how bad the downturn was.
Labor nominee’s record of skepticism
This skepticism will likely be compounded if fast food CEO Andrew Puzder is confirmed by the Senate to lead the Labor Department. Part of his job would be to oversee the Bureau of Labor Statistics, which publishes the unemployment rate on the first Friday of each month.
Since 2012, Puzder has written or co-written a host of op-eds blasting the bureau’s method for crunching national job numbers. He claims it exaggerated the economic recovery under former President Obama.
“The official unemployment rate taken alone has become a very poor indicator of economic growth,” Puzder wrote in a 2012 op-ed for the conservative website Human Events, though few economists look at the measure in isolation.
Puzder’s beef is that someone who stops looking for work is no longer considered part of the labor force, and therefore not reflected in the unemployment rate. He has also noted that the measurement ignores people with part-time jobs who may want full-time jobs.
“The numbers seem inconsistent with what people are experiencing and many people are simply losing interest,” Puzder co-wrote in a 2013 op-ed for conservative site Townhall.
This, in and of itself, isn’t novel criticism.
“I think that’s exactly right. It’s too much to ask of any one statistic that it would tell you everything you want to know in a very complicated labor market,” said Katharine Abraham, BLS commissioner between 1993 and 2001, during the Clinton administration.
But the Labor Department publishes statistics each month that account for part-time work and discouraged workers who have stopped looking for a job. Today that figure — one measure of underemployment — is 9.2%. The figure hit 17.1% in October 2009.
Puzder says the Bureau of Labor Statistics should use a different ratio: The growth in the total number of jobs over the past year divided by the growth in the population over the same time, excluding people who are institutionalized.
The idea is to track whether job creation is keeping pace with population growth — and it supports Puzder’s conclusion that unemployment under Obama was more dismal than the official figures showed.
According to Puzder, the growth ratio for the recovery period has been 0.96. In other words, job growth on average didn’t keep up with population growth.
“In a real recovery, the economy creates enough jobs to repair the damage done and keep up with population growth,” Puzder and Michael Talent, a recent college grad who served as an economic adviser to Mitt Romney’s presidential campaign, wrote in National Review in 2013 in an article headlined “Fire the BLS’s Unemployment Rate.”
How the government compiles its numbers
It would be unusual for an administration to talk down the numbers its own employees are tallying. The government has used the same basic method for calculating national unemployment — a monthly survey — since 1940. The BLS is transparent about its methodology, and economists put a lot of stock in it even though it doesn’t paint a full picture of the economy.
Each month, the Census Bureau contacts 60,000 sample households, carefully selected to reflect geographic, industrial and agricultural diversity. Census workers ask questions to determine whether respondents have a job, are looking for a job or are not currently seeking work. Survey responses are adjusted to reflect the country’s demographics.
People with a part-time or full-time job are considered employed, while people who are jobless, looking for a job and available for work are considered unemployed. The employed and unemployed make up the labor force. Those who have no job and are not looking for one are not considered part of the labor force.
The unemployment rate is the number of unemployed people as a percentage of the labor force.
Economists trust this metric — and say knocking it down would be a big problem.
“You don’t want to throw out the baby with the bathwater,” Rodgers said.
Industry professionals say it does its job as well as any single measure could.
“Not only has the average American come to rely on their understanding of the employment rate, but people like me have come to expect certain data streams,” said Russell Price, senior economist at financial planning company Ameriprise Financial.
Besides, they point out, the BLS already publishes data that addresses Puzder’s concerns with the official unemployment rate.
And Puzder’s growth ratio has its own problems. As the Baby Boomer generation gets older, many people are leaving the workforce not because they are discouraged but because they are retiring. Puzder’s statistic wouldn’t reflect that.
“If you actually adjust for demographics, it’s not going to look like there’s that much slack in the economy,” Murphy said. In labor economics, “slack” refers in part to the people who could be working but aren’t.
In 2014, the New York Federal Reserve put out a report highlighting this concern. Turning Puzder’s criticism on its head, it said that, in fact, the employment-to-population ratio is “a misleading indicator for the degree of the labor market recovery.”