When Trump boasted about falling unemployment, he was jumping at shadows
The latest job numbers in the United States are a warning that during this time we need to more than ever keep our heads and not fall for spin or conspiracy.
When analysing Donald Trump, it is never clear if he is lying, ignorant or deluded. Given this is a man who recently said he had been to the bunker under the White House “two and half times”, it is probably best to assume it is a bit of all three.
But when it comes to boasting of his own brilliance he is not all that unusual – he is just an extreme version of a politician.
And so, when late last week the US Bureau of Labour Statistics (BLS) released the latest US jobs report showing unemployment had fallen, it was not surprising that Trump would boast about the figures – any politician would.
And yet, given Trump also tweeted on Monday, “I built the greatest economy in the World, the best the US has ever had. I am doing it again!”, his bluster was couched in more delusion than most politicians would usually attempt.
The latest job numbers from the US were good. But they also highlight how careful we need to be at times of crisis.
In March I predicted that the Covid-19 crisis would destroy the scale of economic data. And so it has turned out. And with that destruction has come a need to look at economic data differently.
The latest jobs figures showed that employment in the US surged 2.9% in May – the biggest one-month gain ever recorded going back to 1948.
Little wonder that Trump would break out the “We’re Number 1” tweet.
And yes, in normal times that would be amazing news. But normal has not only left the room, it has left the building and caught the last train for the coast.
Employment grew 2.9% in May, but it fell 14.4% in April. And it is why sometimes looking at monthly growth can be a bit confusing:
There can be a tendency to quickly look at the above graph and think it means that the job market has recovered – after all it has grown by so much in May!
At such times it is worth looking at total employment.
This is something that is normally rather pointless – it is mostly a straightish line from which you can barely discern any change.
But as I say, the times they are no longer normal:
In May the number of people employed rose by 3.8m, but that only means that instead of having the fewest people employed since July 1999, now there are only the fewest people working since December 2002.
And of course the population of the US is much larger now. When we look at the percentage of adult Americans in work we see the true horror of the situation:
May saw the biggest one month jump in the employment rate ever recorded, but anyone boasting about that is living in a demented dream world.
Prior to April the lowest percent of adults employed in America since the second world war was 54.9%, way back in October 1949 – a time when just a third of women were in the labour force, compared with around 57% now.
Now, even after the improvement in May, just 52.8% of Americans have a job.
We are going to see the same type of thing occur here in Australia. When there are such wild falls, as for example in the retail sector, all it will need is for shops to re-open and we will see wild rises:
Of course we cannot ignore the monthly figures but more than ever we need to look beyond the headline-grabbing numbers.
Yes, monthly employment in the US rose by a historic amount, but the annual growth remains historically low:
Context is going to be key.
But what we should not do is start seeing conspiracy or manipulation.
Many reports – such as in the Washington Post – revealed that the BLS had announced there was a “misclassification error” in the latest figures.
In their survey they counted people who were “absent from work due to coronavirus-related business closures” as employed rather than unemployed. The BLS estimated this meant “the overall unemployment rate would have been about 3 percentage points higher than reported” – so 16.3% instead of 13.3%.
It is easy in the time of Trump to see political mischief and malfeasance everywhere.
But this is not what has happened. What has happened is official statistical bureaus around the world are struggling mightily in this incredibly tough time to make sense of numbers from surveys of people who are also struggling mightily to work out if they are “officially” employed, on leave, or unemployed even though they are not working and are not looking for work because they have a job to go back to once it re-opens.
It would not be surprising if both here and in the US we see numerous revisions of economic data over the coming months. That does not mean the numbers are dodgy, but that we need to take more care than usual about jumping at shadows – whether it be massive falls or equally massive rises.
Keep your head, look at the broader picture and avoid swallowing the spin of politicians.
• Greg Jericho writes on economics for Guardian Australia