Participation Rate Issue Less Than Meets the Eye - The American Spectator | USA News and Politics
Participation Rate Issue Less Than Meets the Eye

As Aaron Goldstein and I have each noted, today’s jobs report must be a short-term boost to President Obama. Over at, Obama’s betting odds to win re-election in 2012 are up from 55.5 percent yesterday (and 54.5 percent the day before) to 56.8 percent, having traded above 57 percent this morning.

But it’s economics I want to talk about for a minute, rather than politics.

It is all the rage among conservatives, libertarians, and others who, like me, fear and loathe the Obama administration to point out the labor participation rate and suggest that the numbers are being manipulated to the advantage of Barack Obama and that labor statistics are barely-concealed “propaganda.”

One of the leaders of this wave — and a guy who I think is generally quite a good analyst — is Tyler Durden who writes over at A perfect example is here

I have some sympathy to this argument, but I think it’s getting much more traction than it deserves, as you can see in the comments to Aaron’s note and my note about the employment numbers.

But even someone who digs into the numbers as much and as well as Durden does can sometimes miss something important.

In particular, Durden says that the civilian non-institutional population rose by 1.7 million month-over-month but doesn’t mention that almost all of that increase was due to an adjustment by Bureau of Labor Statistics based on the results of the 2010 census, plus smaller annual adjustments.

From the BLS report:

The adjustment increased the estimated size of the civilian noninstitutional population in December by 1,510,000, the civilian labor force by 258,000, employment by 216,000, unemployment by 42,000, and persons not in the labor force by 1,252,000. Although the total unemployment rate was unaffected, the labor force participation rate and the employment-population ratio were each reduced by 0.3 percentage point. This was because the population increase was primarily among persons 55 and older and, to a lesser degree, persons 16 to 24 years of age. Both these age groups have lower levels of labor force participation than the general population.

In other words, the participation rate (employment-population ratio) was reported to have dropped by 0.3%, exactly the amount of participation rate “drop” created by changing the population number used in the calculation (due to updated census data.) Without this once-a-decade adjustment, the change in participation rate would have been reported as…wait for it…zero.

I don’t want to overstate the significance of Durden’s oversight, which conservative voices around the media and the web are also making, namely the idea that the participation rate dropped 0.3 percent and the labor force dropped more than 1.2 million in the past month. Those things are simply not true no matter how loudly people scream “conspiracy” and “propaganda.” (Having been trading financial markets for about 25 years, I’ve heard these same accusations about economic data being manipulated to help the incumbent president — whether Democrat or Republican — so many times, they just bore me now.)

And while the actual participation rate might in fact be this new lower number, that would also mean that prior numbers were lower. In other words, the top-line change — caused almost entirely by using new census population numbers — is an artifact of the new census data, but few people have read to the end of the BLS report to get that important piece of information.

Furthermore, there are cyclical reasons that the participation rate shouldn’t be as high now as it was a few years ago in a different part of the economic cycle, as economist Brian Wesbury (no liberal, he) explains.

Look, I don’t like writing anything that is likely to benefit Barack Obama or his supporters. But the facts are the facts, and the claims of a big one-month drop in labor force and participation rate are simply wrong. If our side is going to call certain data “propaganda,” the least we can do is make sure we understand the data.

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