Expect Higher Unemployment Rates As The Employment Situation Improves

On Friday, it was reported that the unemployment rate held steady at 8.3%. This was despite adding 227,000 new jobs in February and despite adding another 62,000 jobs that were previously under-reported for January and December. So why not a drop in February? After all, the it fell two-tenths of a percent in January with almost the same number of jobs being added to the economy as were added in February.

The reason lies in "how" the Bureau of Labor Statistics (BLS) under-reports the unemployment rate by "not" counting workers who are so discouraged that they stop looking for work. February's rate held -- despite adding jobs -- because some of those formerly discouraged workers came off the benches and started looking again. We know this from the BLS' own press release where it was noted: "The civilian labor force participation rate, at 63.9 percent, and the employment-population ratio, at 58.6 percent, edged up over the month." As a result, the base on which the unemployment rate is calculated increased enough to completely offset the addition of any new jobs and it remained at 8.3%. Actually, if just a few more discouraged workers had started job seeking, the unemployment rate could have easily edged upwards to 8.4%; thus contradicting any increase in newly added jobs.

But, this phenomenon of higher unemployment rates in an a supposedly improving employment situation is the punishment for having under-reported the true rate through the exclusion of discouraged workers. Right now, those non-job-seekers are hearing from this President and the mainstream media that the jobs picture in this country is improving. Of course, most of this commentary is being done for political gain in this, an election year. Whether or not the jobs picture is actually improving remains to be seen. But, if discouraged workers actually "think" the jobs situation is better, more and more of them will start looking for work and the size of the workforce will grow. In doing so, the unemployment rate will either hold or actually go up. This is why I think that those who seem to think Obama will have unemployment below 8% by the November elections are all wet. When you really think about, Obama's talking up the economy for political gain might actually have the opposite effect by increasing the unemployment rate; and he could very well lose the election for that reason. If that should happen, it will, again, prove that honesty is the best policy. In other words, those who live by a lie will (figuratively) die by a lie.