The fall in Unemployment Insurance Claims due to Bureaucratic Incompetence, not Economic Improvement

Posted by PITHOCRATES - October 13th, 2012

Week in Review

No president since FDR has ever won reelection with the unemployment rate about 8%.  Which is a problem for President Obama.  For except January of 2009, unemployment has never been below 8% throughout his presidency.  So you can understand how ecstatic the Obama camp was with the September unemployment rate coming in at 7.8%.  And why many in the Romney camp are wondering about the validity of those unemployment numbers.  Because the other economic news is not that good.  Which has caused some people to wonder if the Obama administration is cooking the numbers with the election coming up next month.  Because no president since FDR has ever won reelection with an unemployment rate about 8% (see What Caused Drop in Unemployment Insurance Claims? by James Sherk posted 10/12/2012 on The Foundry).

The news that new Unemployment Insurance (UI) claims dropped sharply to 339,000 last week has raised eyebrows—and aroused suspicion the Department of Labor had massaged the numbers. In truth, there is both more and less to this story than meets the eye. The numbers are incomplete, but because of bureaucratic incompetence, not a grand conspiracy.

The Department of Labor releases information each week on the number of Americans newly filing for UI benefits. These figures shed light on the state of the economy: anything above 400,000 indicates recession territory, while figures below 330,000 show strong economic growth. Since the start of the year around 370,000 Americans have filed for benefits each week—below recessionary levels but still weak. The reported drop would indicate a sharp improvement in the job market.

Except it does not. As the Department of Labor has explained, today’s figures are incomplete. One large state (identified elsewhere as California) did not get all their numbers into the Labor Department on time…

Next week this process will reverse…

Neither this week’s large drop nor next week’s impending jump in UI claims say anything about the state of the economy. They only show that large government bureaucracy’s often cannot get their act together.

So the drop in Unemployment Insurance (UI) claims is not a drop.  The numbers are just incomplete.  And will be corrected next week.  The inaccuracy is due to bureaucratic incompetence.  And not a conspiracy to make the employment picture look better for an embattled president trying to win reelection.  Of course it begs the following question.  Was there bureaucratic incompetence in the September unemployment rate?  In an effort to get the unemployment rate below 8% to help President Obama’s reelection chances?

Such an incompetency, if it existed in the unemployment rate as it did in the new Unemployment Insurance (UI) claims number, would certainly help his chances of reelection.  Especially when this was the last reported monthly unemployment rate before the presidential election.  How lucky for the president that the one time his Labor Department had made a mistake, if they did in fact make a mistake, it’s a mistake in his favor at the best possible time for a mistake.  For the Labor Department will issue the next monthly unemployment rate about a day or two after the election.  Lucky indeed.

Unlucky in domestic and foreign policy but lucky in bureaucratic incompetence.  Will it be enough to help sway those undecided who would not have voted for President Obama had the unemployment rate not fallen below 8% before the election?  Possibly.  Time will tell.

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