The first debate was an overwhelming victory for Mitt Romney
but this is not the time for Romney supporters to begin celebrating
victory. President Obama is still
President and as President, he has access to many resources that could
influence votes in this election. The
recent employment numbers are a prime example.
The day after the debate, the government released the September
jobs numbers. On the surface, they show phenomenal
job growth. The unemployment rate dropped
below 8 percent, which is the magic number pundits have used in order for
unemployment not to be a hindrance to the reelection chances of President
Obama. The report also shows that the
number of unemployed people dropped by 456,000 and that 873,000 people found
jobs in September. (1)
As an accountant, I practice professional skepticism when
looking at a set of numbers. This does
not mean that I am accusing someone of fraud when auditing something, only that
I understand the numbers contain estimates that may, or may not be based on
sound models. I also understand that people
compile numbers and people can commit errors.
Of course, there is also the possibility of fraud.
The first phase of any audit is to perform a review of the
numbers to determine if anything looks unreasonable. This step shows the auditor what areas may
need further review. So, let us take a
few minutes to perform a review of these job numbers to determine if they
appear reasonable.
The last time the economy added 873,000 jobs in one month
was in June of 1983. During the second quarter
of 1983, the economy grew at a rate of 9.3 percent s and added 900,000 jobs. (2) It would be reasonable to believe that the
economy would add 900,000 jobs with that level of growth so I would expect to
see a high level of growth for September 2012.
However, the economic growth for the third quarter of 2012
is expected to be only 1.5 percent. This
raises a red flag for a professional skeptic like me so I believe we need to
investigate how the September jobs numbers were compiled.
However, we do not want to launch an investigation based on
just one factor so we need to look at other factors to determine the
reliability of the numbers. If there were
this high of a level of economic growth, we would see impacts in the economy as
a whole. We should be seeing people
going off unemployment, food stamps, and beginning to spend causing retail
sales to skyrocket.
Unemployment has dropped to 7.8 percent, which would fall in
line with the creation of 873,000 jobs, but food stamp use continues to
skyrocket. In 2008 there were 1.9
million households on food stamps and the number grew to 3.9 million in 2010. (3) This fact does not appear to fall in line
with a massively growing economy and is unreasonable. Numbers that are more recent show that there
are over 45 million households dependent on food stamps or around 15 percent of
the population. (4)
We also are seeing growth in the number of people going on
Social Security Disability. According to
the July 16, 2012 press release issued by the U.S. Senate Budget Committee
Republicans Senator Jeff Sessions (R-AL) stated.
U.S. Sen. Jeff Sessions (R-AL),
Ranking Member of the Senate Budget Committee, issued the following statement
today upon receipt of a report from the Congressional Budget Office about the
immense growth in the Social Security Disability Insurance program. Over the
last three months, more Americans have begun receiving SSDI benefits than have
found jobs:
“Today’s report from the
Congressional Budget Office reveals a dramatic increase in applications and
awards for Social Security disability, placing the disability trust fund on a
fast-track to insolvency in just four years. Amazingly, while fewer Americans
are working than at the end of 2008, 3.6 million Americans have been awarded
SSDI benefits over the same period. The growing number of people on disability
and other federal benefits, combined with weak economic growth, raises serious
concerns about the sustainability of the American economy.
“It is clear there is a great need
to distinguish between proper and improper disability claims, and to better
incentivize and find acceptable work for those who are able. Today only 1 percent
of Social Security disability recipients ever return to work. The
administration of this program must be improved to avoid sinking our country
deeper into debt, to ensure the program remains viable for those with
disabilities, and to protect Social Security itself. (4)
Mort Zuckerman summarized it well when he stated
“We are experiencing, in effect, a
modern-day depression. Consider two indicators: First, food stamps: More than
45 million Americans are in the program! An almost incredible record. It’s 15%
of the population compared with the 7.9% participation from 1970-2000.
Food-stamp enrollment has been rising at a rate of 400,000 per month over the
past four years.
“Second, Social Security
disability—another record. More than 11 million Americans are collecting
federal disability checks. [Many] of these beneficiaries have signed on since
President Obama took office more than three years ago.
“These dependent millions are the
invisible counterparts of the soup kitchens and bread lines of the 1930s,
invisible because they get their checks in the mail. But it doesn’t take away
from the fact that millions of people who had good private-sector jobs now have
to rely on welfare for life support.”
“Not only does the surge in SSDI
beneficiaries jeopardize that program, it also hammers Medicare. When a person
has been disabled two years, they automatically receive Medicare benefits
regardless of age. The CBO report states that in 2011, DI expenditures totaled
$128 billion and Medicare costs for SSDI recipients were an additional $80
billion.” (4)
Consumer spending did climb in July 2012 but this was the
first climb in three months. (4) However, these figures are from July 2012 and
were not published until August 30, 2012.
I would expect that when the September consumer spending numbers are
released some time towards the end of October, we would see a massive increase
in consumer spending to mirror the massive increase in jobs. However, this would mean that the estimates
of only 1.5 percent in economic growth are grossly underestimated. We are also entering the Holiday season and
would expect increases in consumer spending driven by spending for Halloween,
Thanksgiving, Christmas, and Hanukah so we need to seasonally adjust the
numbers in order to compare them with previous quarters in the year.
These numbers do not appear to be in line with the current
slow growth economic climate. We also
are not seeing a decrease in people dependent on the safety net to survive so
we must question whether people are finding employment that can support their
economic needs. We are seeing increases
in consumer spending but do not have the numbers yet to reflect consumer
spending for September 2012.
Therefore, over the next couple of weeks, I will be digging deeper
into these numbers in order to determine if there are errors in the methodology
used in developing the numbers. This is
an election year and in order for voters to make the correct decisions on who
will lead our country, they need to have reliable numbers. The jobs number affects almost everyone in
the nation so I believe the voters deserve a fair representation of the job
situation in our economy.
1. Newsbusters.org. Total Employment Rises
873,000 To Highest Level Since December 2008. newsbusters.org. [Online]
Newsbusters.org, October 5, 2012. [Cited: October 6, 2012.] http://drudgegae.iavian.net/r?hop=http://newsbusters.org/blogs/noel-sheppard/2012/10/05/number-employed-people-rises-873000-september-highest-december-2008.
2. Pethokoukis,
James. 873,000 jobs? Last time, the economy added that many, it was growing
at a white-hot 9.3%. www.aei-ideas.org. [Online] AEIdeas, October 5,
2012. [Cited: October 6, 2012.]
http://www.aei-ideas.org/2012/10/873000-jobs-last-time-the-economy-added-that-many-it-was-growing-at-a-white-hot-9-3/.
3. Klein, Philip.
CRS report: number of able-bodied adults on food stamps doubled after Obama
suspended work requiremen. washingtonexaminer.com. [Online] The
Washington Examiner, September 19, 2012. [Cited: October 6, 2012.]
http://m.washingtonexaminer.com/report-able-bodied-adults-on-food-stamps-doubled-after-work-requirement-suspended/article/2508430.
4. Weller, Mark R.
‘Dramatic Surge In Americans Receiving Disability Insurance’. homelessphilosopher.wordpress.com.
[Online] September ` 9, 2012`. [Cited: October 2012, 2012.]
http://homelessphilosopher.wordpress.com/2012/09/09/dramatic-surge-in-americans-receiving-disability-insurance/.
5. Kowalski, Alex.
Consumer Spending in U.S. Climbs for First Time in Three Months. businessweek.com.
[Online] Bloomberg businessweek, August 30, 2012. [Cited: October 6, 2012.]
http://www.businessweek.com/news/2012-08-30/consumer-spending-in-u-dot-s-dot-climbs-for-first-time-in-three-months.
No comments:
Post a Comment