More on those 'implausible' unemployment numbers

More and more people seem to be noticing that today's interestingly-timed labor department statistics showing a decline in unemployment to 7.8% just don't make sense. Here was the scene on Joe Scarborough's show this morning:



As a commenter on the above video at YouTube puts it, "These numbers are so suspect, even MSNBC can't swallow them."

Here is economist James Pethokoukis on the numbers- which he calls "implausible... a statistical quirk:"

This report is a tale of two labor markets. The establishment survey (payrolls) painted a picture of moderately growing employment over the last three months but at a marginally slower pace than over the last year. At this pace of job creation, the unemployment rate should be barely drifting lower given underlying demographic trends. In contrast, the household survey painted a picture of a sharply falling unemployment rate—down 1.2% points over the last 12 months. Such a rapid decline in the unemployment rate would be consistent with 4%–5% real economic growth historically but much of the decline is accounted for by people dropping out of the labor force (over the last year the employment-population ratio has risen to only 58.7% from 58.4%). We believe part of the drop in the unemployment rate over the last two months is a statistical quirk (the household data show an increase in employment of 873,000 in September, which is completely implausible and likely a result of sampling volatility). Moreover, declining labor force participation over the last year (resulting in 1.1 million people disappearing from the labor force) accounts for much of the rest of the decline. With this report, the ISMs, and vehicle sales, the September economy is off to a better-than-expected start but nowhere near as good as suggested by the decline in the unemployment rate.

Pethokoukis predicts that the final pre-election report will show unemployment once again over the 8.0% mark.  If so, the impact of the report, coming only days before the election, might well prove devastating to Mr. Obama's re-election prospects, which received a boost from today's numbers after taking a body blow as a result of Wednesday night's debate.

HT: Real Clear Politics