Smoke and Mirrors: The Truth About US Unemployment

This article was co-authored by Robert Paquin III, a state government relations manager at The Heartland Institute and the former executive director of the Rhode Island Republican Party.

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In a subtle but obvious attack against Wisconsin Gov. Scott Walker, President Barack Obama mocked “trickle down” economics and praised Democrat Minnesota Gov. Mark Dayton’s tax hike on higher income earners and his plans to raise the minimum wage.

“According to the Republican theory, all that kind of stuff would have been bad for the economy,” Obama said during a July 2 speech. “But Minnesota’s unemployment rate is lower than Wisconsin’s. ... Minnesota’s winning this border battle.”

U.S. President Barack Obama speaks before signing a memorandum directing the Federal Government not to discriminate against long-term unemployed job seekers at the White House in Washington, D.C., January 31, 2014. (Jim Watson/AFP/Getty Images) 

Obama’s use of the unemployment rate as a weapon to inflict political damage on Republicans is nothing new. For most of Obama’s presidency, he’s been touting his economic policies and how successful they have allegedly been at reducing unemployment rates (when in fact all recession recoveries reduce unemployment rates), all the while intentionally misleading people about what the unemployment rate actually represents.

Contrary to the popular impression, the unemployment rate is not the percentage of the population looking for work. The unemployment rate is simply the percentage of a state or nation’s economy that isn’t employed and doesn’t fall into one of a number of excluded categories.

A person who has “given up” looking for work, for instance, is not considered “unemployed” by the Bureau of Labor Statistics, even if that person is still interested in getting a job. Individuals who retire early because they can’t find a good job are also excluded. In addition, state unemployment figures can be quite confusing at times because people who leave the state because they can’t find work are not counted as “unemployed.”

In short, unemployment rates often change in large part because the labor force pool grows or shrinks, not because of actual economic growth. Even when economic growth does occur, it often looks more impressive than it actually is because of the way unemployment is calculated.

Despite all of Obama’s praise for Minnesota, there are good reasons to believe Walker’s Wisconsin has actually experienced better economic development over the past year. According to BLS, the number of unemployed in Minnesota has fallen by an unimpressive 4,600 since June 2014, even though the unemployment rate has fallen slightly. Over that period in Wisconsin, by contrast, the number of unemployed fell by more than 26,000.

Unemployment data in other states are even more misleading.

In Vermont, lawmakers have been happily touting a not-seasonally adjusted unemployment rate of 3.6 percent for June, according to the BLS. This figure is down significantly from 2010, when the state’s unemployment rate hovered around 6 percent. What Vermont officials fail to mention, however, is if the same number of people were in the labor force today as there were in July 2010, the unemployment rate would be 7.7 percent.

Whoever said “numbers don’t lie” didn’t spend much time working at BLS.

Further proof the unemployment rate is a poor indicator of economic success or failure is found by looking at the number of people enrolled in the Supplemental Nutrition Assistance Program, also called food stamps.

From 2010 to 2014, the average number of people enrolled in SNAP in the United States increased by more than six million. And although the national unemployment rate decreased by 30 percent from January 2013 to December 2014, the average number of people in SNAP decreased by only 2.3 percent.

If the economy is enjoying a major recovery, you would think there wouldn’t be so many people still needing government assistance to pay for something as common as milk and eggs.

Unemployment rates are highly complex and appear to be designed to mislead the public into thinking the employment situation is much better than it actually is. This is a problem to which both parties have contributed, and the public should become aware of this and stop buying into the hype and praise that inevitably come every time unemployment rates are announced.

These nearly useless statistics are almost always taken out of context and exploited for political gain, while jobless and underemployed Americans continue to struggle to find quality work that will put food on the table and keep the lights on.

Justin Haskins (Jhaskins@heartland.org) is editor of The Heartland Institute. Robert Paquin III (Rpaquin@heartland.org) is a state government relations manager at The Heartland Institute and the former executive director of the Rhode Island Republican Party.

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