While the Obama Administration is touting monthly job gains consistently averaging more than 200,000 and a labor market that they say is at its healthiest level since the turn of the century, at least one analyst says that the recently reported national unemployment rate of 5.6 percent may not be telling the complete story.
Jim Clifton, chairman and CEO of polling firm Gallup, claims in a story on the Gallup website blog entitled "The Big Lie: 5.6 Percent Unemployment" that this figure is misleading, and he spells out why he believes that way.
The nation's unemployment rate has particular meaning for the housing industry because economists and analysts have repeatedly stated that housing recovery depends on economic recovery, and vice versa – and that housing recovery depends in particular on a healthy combination of consistent job gains and wage growth. In fact, many analysts have predicted that millennials (age 25 to 34) will drive housing recovery in the next year, thus making employment among that demographic imperative.
"Right now, we're hearing much celebrating from the media, the White House and Wall Street about how unemployment is 'down' to 5.6 percent," Clifton wrote, referring to the rate the Bureau of Labor Statistics reported for December that actually ticked up to 5.7 percent in January. "The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market."
Clifton asserts that the 5.6 percent unemployment rate is not a true representation of the percentage of unemployed workers nationwide because it doesn't include people who have given up looking for a job – or in his words, "While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news – currently 5.6 percent."
About 30 million Americans are either out of work or severely underemployed, according to Clifton. When the number of Americans in "good jobs" is calculated – or in other words, the number of Americans who have a job with an organization that puts them to work for 30 or more hours a week and provides them with a regular paycheck – that number is a staggeringly low 44 percent, Clifton said.
Another reason why the 5.6 percent unemployment figure is misleading, according to Clifton, is that it does not include those who work part-time and want to work full-time.
"There's no other way to say this. The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie," Clifton wrote. "And it's a lie that has consequences, because the great American dream is to have a good job, and in recent years, America has failed to deliver that dream more than it has at any time in recent memory. A good job is an individual's primary identity, their very self-worth, their dignity – it establishes the relationship they have with their friends, community and country. When we fail to deliver a good job that fits a citizen's talents, training and experience, we are failing the great American dream."
In January, when the BLS announced the 5.6 percent unemployment rate for December, Fannie Mae chief economist Doug Duncan noted that the labor force participation was at 62.7 percent – its lowest level since 1977.
"So far, the diminishing slack in the labor market has not yet translated into stronger wage gains, which sends a disappointing signal to the housing market," Duncan said. "We fear that housing may, again, lag the progress of the overall economy this year. . . While we expect economic growth to strengthen to an above-par pace this year, our view for the housing market remains cautious, as we believe that meaningful income growth needs to occur to spur household formation, which has been frustratingly anemic in the current economic expansion."