08 May, 2012

Unemployment Will Be 7.9% On Election Day

Probably even lower.

President Barack Obama (D-USA) and his team feel that this is the magic number that will guarantee them victory. There are several adages about unemployment and Presidential elections. At least one of them will likely be proven false this year. Here are a few that I know of:

  • No incumbent President since FDR has been re-elected when unemployment is higher than 7.3% on election day.
  • No incumbent President has failed to be re-elected when unemployment is lower than 8% on election day
  • No incumbent President has failed to be re-elected when unemployment has fallen in the last 24 months prior to election day.

The causality part of the third will likely be true. Unemployment was 9.5% on November 6, 2010. Unless there’s a complete collapse, or the BLS suddenly starts telling us the truth, unemployment will not be that high.

In fact, it’s clear from the last quarter that the BLS is gaming the numbers to help Obama. They’re working to make the second adage go in his favor. They want to get unemployment down under 8% on election day. If you think I’m just a tinfoil hatter, and I’ve gone off the deep end, let me remind you:

  • Getting unemployment down to 8.1% required eliminating 522,000 people from the workforce in one month.
  • This was after eliminating 333,000 people from the workforce the month before to get it down to 8.2%.

The April report had 506,000 fewer people working than the February report, and yet unemployment was 0.2% lower. Someone is gaming the numbers. I state this as an absolute fact.

So, if we take that as a given, and also take it as a given that they’re going to continue to game the numbers until unemployment is under 8%, what does that mean?

After adjustments, the BLS increases civilian population by roughly 305,000 every month. To get this number I took April 2012’s numbers and subtracted April 2011’s. Then I divided by 13. Now, this number isn’t consistent. Last month it was only about 180,000, for example. That’s why I wanted an average over 13 months.

The other thing to be aware of is that the BLS has artificially lowered the labor force participation rate to 63.6%. This number represents the percentage of people in the United States that the BLS believes either has a job, or wants one. The BLS has lowered that by .6% over the last six months.

If we take these numbers as predictive of the next six months, what does that give us as possibilities for election day? I looked at job growth figures of 150,000 per month, 125,000 per month, and 100,000 per month.

Here are the results:

Add’l jobs per month Labor force Participation Rate Not in labor force Unemployment Rate
100,000 63.6% 89,040,000 8.4%
100,000 63.3% 89,773,000 8.0%
100,000 63.2% 90,018,000 7.8%
125,000 63.6% 89,040,000 8.3%
125,000 63.4% 89,529,000 8.0%
125,000 63.3% 89,773,000 7.9%
150,000 63.6% 89,040,000 8.3%
150,000 63.5% 89,284,000 8.1%
150,000 63.4% 89,529,000 7.9%


Even at a measly 100,000 jobs created per month, the BLS only has to lower the participation rate from it’s current 63.6% to 63.2% to get unemployment below 8%. At 150,000 per month, they only have to go to 63.4%.

But they can make an even bigger impact, if they desire. The last six months, the participation rate dropped 0.6%. There’s nothing keeping them from doing that again. At 150,000 if they dropped the participation rate all the way down to 63%, unemployment would be at 7.4%. If they’re willing to go all the way down to 63%, they can hit an unemployment number of 7.7% with a mere 50,000 jobs added each month. In fact, they can get it to 7.9% if only 10,000 jobs are created per month.

You think it won’t happen? Just watch. But on November 6th, I’m going to be saying “I told you so.”

This will be another post that I will update monthly as the election nears.

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