Freedomnomics

Article published Friday, April 2, 2010, at Fox News.

Unemployment Numbers Are a Mixed Bag

More jobs are becoming available, but the unemployment rate remains constant.

By John R. Lott, Jr.

The new unemployment numbers released today are decidedly mixed news news. On the one hand, the unemployment rate remained constant at 9.7 percent in March and the share of the workforce taking part-time jobs because they couldn't find full time unemployment rose by a tenth of the percentage point.

For the second straight month, the broadest measure of unemployment rose, this time to 16.9 percent. This measure includes people who have left the labor force because they can't find a job as well as part-time workers who couldn't find a full-time job.

On the other hand, the Bureau of Labor Statistics survey of households shows that 264,000 people got jobs. Yet, the number unemployed also rose by 134,000. So how can you have both more people getting jobs and being unemployed? There is a simple reason for it. Over the last year, a lot of workers got discouraged, stopped looking for a job, and were no longer counted as being in the labor force.

Taking those discouraged workers out of the labor force made the unemployment numbers look better than they actually were. Now the reverse is happening. Workers who had given up looking for work are now trying to look again. And that is good news.

Many of the new jobs are not particularly great ones. Besides the increase in part-time work, about half the improvement in the number of jobs is due to either people taking temporary jobs or to new government jobs. The large hiring in temporary Census workers probably accounts for the increase in government jobs. While temporary jobs might eventually turn into permanent employment, how frequently that occurs remains to be seen.

Ultimately though, the government's unemployment estimates are just one survey, and other surveys are getting different results. ADP, the giant firm that handles payroll services for private companies, estimates that nonfarm private employment fell by 23,000 in March.

Gallup also released a survey showing that the unemployment rate stood at 10.4 percent, an improvement from 10.6 percent in February. But that was more than offset by the 0.7 percent increase in part-time workers wanting full-time work. According to Gallup, the broad measure of unemployment and underemployment isn't 16.9 percent, but 20.3 percent and rising from 19.8 percent.

The stimulus created a lot of chaos and churning in the labor market. Moving a trillion dollars from the firms and industries that consumers were going to spend their money on to where the government wants it spent means that the jobs associated with that spending had to also move. The problem is that people don't instantly move from one job to another. But that increase in unemployment is temporary. Finally, the chaos created by that government spending is subsiding.

These jobs created by government spending also aren't as productive as the jobs that they replaced. After all, there is a reason that people wanted to spend their money elsewhere. When the stimulus ends many of these jobs will end and unemployment will tend to increase again.

The huge increase in discouraged workers created over the last year will take some time to work through. Some 2.3 million fewer Americans are in the labor force today as compared to a year ago. Having people re-enter the labor force will continue offsetting new jobs being created. The bottom line is that while jobs will increase, the unemployment rate will decline only slowly.

John R. Lott Jr. is a FOXNews.com contributor. He is an economist and the author of "More Guns, Less Crime (University of Chicago Press, 2010), the third edition will be published in May.".

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