Friday’s employment data had a number of people in an uproar. After Mitt Romney scored a victory in the first Presidential debate, many thought that our sudden and steep drop in unemployment (from 8.1% to 7.8%) was a little fishy. After all, it was the largest one-month drop in the unemployment rate in roughly nine years, leading many to question whether or not those numbers were skewed in Obama’s favor. It seems highly unlikely that the data was in any way fixed, but a closer look beneath the surface reveals the report as a negative one nonetheless [for more economic news and analysis subscribe to our free newsletter].
Peter Schiff took a close look at September’s jobs numbers and broke it down for investors and analysts across the country. The first thing he points out is the fact that we only gained 114,000 jobs on the month, a figure that can sometimes see the unemployment rate increase. He states that of the total jobs added, 10,000 of them were actually government positions while we lost 16,000 manufacturing jobs in September. Schiff quickly pointed out that “we are losing the jobs we need and gaining the ones we don’t” as he feels that we do not need more people working for the government, as they derive their salaries from the private sector.
Schiff states that government jobs are non-productive and that they actually make us poorer as a nation because they add to the overall tax burden and trade deficit. The government employees create an imbalance in economy, according to Schiff, as they do not produce anything, which will force the jobs to be lost when the economy restructures. So if this is the case, how was the unemployment rate able to fall so rapidly? [see also Why U.S. Unemployment Figures Are a Complete Lie].
According to a household survey conducted, 873,000 jobs were added in September, the largest of its kind in nearly 30 years. Schiff adds the caveat that a large number of these were part-time employment. Mr. Schiff goes on to rather bluntly hypothesize that the massive jump in part-time work came from those who have finally used up unemployment and were forced to go out and find some kind of work. The U-6 unemployment rate, a much more effective measure of our actual employment, was virtually unchanged for the month, staying a tick under 15%. Just another reason that we all need to take official unemployment numbers with a grain of salt.
Finally, investors should note that we are approaching the holiday season, meaning that part-time work will spike and could potentially decrease the unemployment figure even further, much to the dismay of experts like Schiff.
Disclosure: No positions at time of writing.