California data skewed Labor Dept. unemployment claims report, CA data reveals real unemployment rate, Labor force participation rate 62.4 % dropped more than unemployment rate since Feb 2012
“With a 63.7% labor force participation, “conditions in the labor market are considerably worse than indicated” in July’s report”…economist Joshua Shapiro, WSJ August 3, 2012
“The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command. His heart sank as he thought of the enormous power arrayed against him, the ease with which any Party intellectual would overthrow him in debate, the subtle arguments which he would not be able to understand, much less answer. And yet he was in the right! They were wrong and he was right. The obvious, the silly, and the true had got to be defended. Truisms are true, hold on to that! The solid world exists, its laws do not change. Stones are hard, water is wet, objects unsupported fall towards the earth’s centre. With the feeling that he was speaking to O’Brien, and also that he was setting forth an important axiom, he wrote:
Freedom is the freedom to say that two plus two make four. If that is granted, all else follows.”…George Orwell, “1984″
“And you shall know the truth, and the truth shall set you free.”…Jesus, John 8:32
California has the third highest unemployment rate in the country at 10.2 percent. CA has been getting a lot of press recently for suspicious reporting the prior week that skewed the US Labor Dept. unemployment claims report. What you are probably not getting from the media is the fact that since February 2012, the labor force participation rate has dropped more than the unemployment rate.
First the reporting controversy.
From the Daily Pen October 19, 2012.
“Based on the increase of the denominator in the ratio, the analysts focused on California as the possible state which they believed had been left out because California has the largest population and largest labor force in the U.S. which, if omitted, would indeed cause about a 0.5% fluctuation based on previous report numbers.
In reaction to accusations of impropriety, the California Employment Development Department strongly denied that it had failed to properly document the data.
“Reports that California failed to fully report data to the U.S. Department of Labor, as required, are incorrect and irresponsible,” California Employment Development Department director Pam Harris said in a statement last week.
“The California Employment Development Department, which administers the Unemployment Insurance (UI) program in the state, has reported all UI claims data and submitted the data on time.”
However, it now appears the analysts were right. Early Thursday, the federal government finally revealed that California was indeed the state that had, in fact, underreported jobless claims, as suspected by many, after the weekly Labor Department job report, skewing the national jobless claims results. This week’s updated jobs report corrected the error and showed unemployment claims spiking back up by 46,000.
The intentional omission of California’s data promoted an artificially favorable economic report for the Obama administration because the inclusion of California’s unemployed would have cause the jobless rate to increase by 0.02%, not decrease by 0.48% to 7.8%.
Regardless, the pro-Obama, biased media spread the “good news” quickly, with outlets like CNN and Bloomberg declaring, “Jobless claims fall to four-year low.”
Within hours, the Bureau of Labor Statistics and Labor Department analysts announced that one major state had failed to fully document jobless claims. They declined to name the state.
Now, it has been learned that Marty Morgenstern, the secretary of the California municipal agency that under-reported unemployment claims, contributed to President Barack Obama’s 2008 presidential election campaign.
According to campaign disclosure records, Morgenstern donated $4,600 — the maximum amount allowed by law — to the 2008 Obama campaign, beginning with a $1,000 contribution to Obama for America in February 2008. Morgenstern followed up that donation with a $1,300 contribution in June, and then a $2,300 payout in early September.
Democratic Gov. Jerry Brown appointed Morgenstern to lead the California Labor & Workforce Development Agency in 2011. The state agency oversees the Employment Development Department.
California recent in-state report claims its unemployment rate has dropped from 10.6% to 10.2%.
Analysts are rightly skeptical of the report. “
From the Wall Street Journal October 18, 2012.
“So this week’s initial jobless claims spiked back up, jumping 46,000 to 388,000, a stark reversal from last week’s report and a number that suggests the economy still just flat-out isn’t generating enough jobs.
But more importantly, well, yes, we’re going back to Cali.
When last week’s numbers came out much lower than expected, the explanation from the Labor Dept. was that one large state didn’t report all the quarterly data on time. In the midst of a contentious election season, the issue sparked a minor firestorm and people jumped in trying to figure which state was responsible.
More than one said it was California. California, in no uncertain terms, said it wasn’t them. The Labor Dept. said, last week, that this week’s figures would make it clear which state was responsible. Guess which state the numbers point to.
As Sarah Portlock explained:
There were nearly 5,000 fewer layoffs in the service and retail industries in California for the week ended Oct. 6, according to the Labor Department report.
The Labor Department sets seasonal factors well in advance based on historical trends but that can skew numbers when state-level reporting doesn’t match those established patterns.
“These types of things happen several times a year,” a Labor Department official said Thursday. “It tends to be temporary.”
California maintain today that it did indeed report all data to the Labor Dept. on time, and that the seasonal adjustment was the cause of the skew. The Labor Dept. is saying that last week’s skew was due to a lower-than-expected number of claims from California. It’s possible that this all becomes nothing more than a lot of hair-splitting, elevated to a degree that it wouldn’t be if it weren’t election season, and if that September jobs report hadn’t stirred the wrath of Jack Welch.
The problem with seasonal adjustment is that it aims to correct data that move around in regular patterns. In this case, there’s usually a jump in claims in the first week of the quarter, so the adjustment takes away a bunch of claims. To keep the data smooth, those claims are added earlier in the prior quarter instead. Last week when some of the claims that would usually be filed in the first week of the month didn’t come in, the seasonals still kicked in and made it look like a big drop. The extra claims came in this week instead when the adjustment wasn’t expecting them. That made this week’s claims number look higher.
California’s numbers last week, late or not, skewed the seasonally adjusted data. The skew is gone this week. Bang. Go smell the flowers and forget all this whole imbroglio.
The season factors this month seem to be wreaking more havoc than usual, so if you want a bottom line to all this nuttiness, look at the four-week moving average of claims. That rose to 365,500, from 354,750. Or you could just look at the unadjusted data, and rid yourself of all the seasonal adjustments that are causing all this agita. Unadjusted, initial claims were up 29,000 to 359,000.
The real bottom line is the U.S. economy isn’t generating enough jobs to get it back on a self-sustaining footing, which means the feds and the Fed are going to remain under pressure to pick up the slack.”
Politicians and the media lie, numbers don’t.
The following data is taken from the California Labor Market Review for September 2012.
There is more than suspect reporting in initial unemployment claims from CA. On Page 7 we find the changes in unemployment rate and labor force participation rate from February to September 2012 under seasonally adjusted.
Unemployment rate 10.9 % LF Participation rate 63.3 %.
Unemployment rate 10.2 % LF Participation rate 62.4 %.
The Labor Force Participation Rate dropped more than the unemployment rate.
So the following claim:
“The California unemployment rate was 10.2 percent in September, down 0.4
percentage point from August.”
is very misleading.
The following facts are also interesting.
“By race and ethnicity, the September 2012 unemployment rate for blacks was 18.1 percent, Hispanics 13.2 percent, and whites 10.5 percent.”
“By duration, the largest group of unemployed persons was those who had been unemployed 52 weeks or more (691,000 persons or 35.0 percent of all unemployed). The next largest group was those who had been unemployed 5 to 14 weeks (418,000 persons or 21.2 percent of all unemployed)”
“Persons not in the labor force increased by 45,000 (0.4 percent) in September to 10,745,000. Over the past year, the number of persons not in the labor force increased by 295,000 (2.8 percent).”