Upside surprise: Employers add 151,000 jobs in October , the USA Today reported about the Bureau of Labor Statistics Friday. And it is true: the establishment survey of U.S. businesses did report that 151,000 jobs were created last month. But as The Heritage Foundation’s James Sherk and Rea Hederman note there was also some troubling news in Friday’s report:
Taken in isolation, the October household survey paints a worrying picture of the U.S. labor market. It reports that employment fell by a net 330,000 jobs and that the number of unemployed workers grew by 76,000 in October. The median length of time workers stay unemployed rose from 20.4 weeks to 21.2 weeks.
The unemployment rate remained unchanged at 9.6 percent only because a net 462,000 Americans dropped out of the labor force and thus do not count as unemployed. The labor force participation rate fell by 0.2 points to 64.5 percent. That is the lowest rate since November 1984, a time in which fewer women participated in the labor force. Over one in four adult men (26.2 percent) are neither working nor looking for work—the highest rate of labor force non-participation recorded in the entire postwar era.
So how can the jobs report show both 151,000 jobs created and 333,000 fewer jobs? Hederman and Sherk explain:
The household survey has greater statistical error than the establishment survey and typically reports much more volatile numbers. For now, that gives greater credence to the modest signs of recovery in the establishment survey. If the household survey continues to show a weakening labor market, then policymakers will need to pay closer attention to it.
Even if the establishment survey is correct, however, it only shows signs of a tepid recovery. At this rate, it will take years for the economy to recover the nearly 8 million jobs lost during the recession. Policymakers need to improve the business climate to encourage businesses to expand and hire.
Unfortunately, President Obama appears bent on making the business climate worse. Sherk and Hederman again:
Before Tuesday’s election, President Obama wanted to raise taxes on those who make over $250,000 a year and claim that other Americans would not be affected. However, raising taxes on entrepreneurs and small businesses affects everyone. When taxes on saving and investment are increased—which the Obama tax hikes do by increases in capital gains, dividends, and the death tax—businesses do not expand as fast or as much, and other businesses are never created, because they are no longer seen as profitable.
The Obama tax hikes on the “rich” would result in 238,000 fewer jobs in 2011, and the U.S. economy would average 693,000 fewer jobs each year over the next decade. The loss of potential jobs affects other workers as wages do not increase as fast. For a typical family, disposable income would be $1,000 lower each year for the next five years. Business investment and personal savings would fall by over $70 billion each year for the next five years. These lost jobs and incomes would make it even harder for the economy to reach its full potential.