The Bureau of Labor statistics announced today that the U.S. labor market added 120 thousand jobs in October and that the unemployment rate dropped from 9% to 8.6%.  The number of jobs added and lost and the unemployment rate often seem to be out of step as adding or losing  jobs can have a varying impacts on the unemployment rate.  How can this be?

It is important to note that the number of jobs gained or lost by the economy is determined by a survey of established payrolls while the unemployment rate is calculated from a survey of households.  A survey is conducted of employers to determine if they added or subtracted from their payrolls to determine the number of jobs added by the economy.  To get the unemployment rate, a survey is conducted of households to determine if they are employed, looking for work, or have given up looking for work.

This explains why employers adding 100k jobs one month can lead to an increase to the unemployment rate while adding 100k jobs in another month can decrease the unemployment rate.

So, what accounted for the drop in the unemployment rate from 9% to 8.6% in October?  It was not the 120 thousand jobs added.  According the the Bureau of Labor Statistics, 315 thousand people left the work force in October and the number of people not in the labor forced increased by 487 thousand.  Had those people stayed in the work force, the unemployment rate would have remained 9% or dropped to 8.9% depending upon the calculation.  If the workforce participation rate been the same as when Obama took office, the current unemployment rate would be 11%.

Look for the administration to hype the drop in unemployment while not mentioning the number of people who have given up.  As a reminder, here is a great chart that shows the Obama administrations prediction of where things would have been with and without the stimulus and the actual numbers.

Update: Here is another chart showing the labor force participation rate barely above a 30-year low.

The results fall far below the  7/7 ADP report that had expected unemployment to hold steady at 9.1% with employers adding over 100,000 jobs.

This comes as more bad news to the Obama administration as it attempts to make the case that President Obama deserves another 4 years in office.

Since Obama took office, the economy is down 2.5 million jobs with the jobless rate above 9% for 24 of the past 26 months.  And some are calling the current situation the worst economic recovery since the 1930′s.  The unemployment situation continues to look bleak with long term unemployment not declining and the number of short term unemployed rising sharply.

The Obama administration faces an uphill battle to convince the American people that the Obama policies should continue with Obama possibly facing the highest unemployment rate of any post-war president.

Since Obama took office, the country has suffered:

• Rising unemployment
• Rising energy costs (in line with the President’s desires)
• Rising food costs
• Record deficits
• Errosion of freedom

Look for President Obama to use the struggling economy to make that case for more spending and heavy taxation of businesses and the wealthy as the cure for the current economic situation.  Hopefully the President’s “spread the pain around” approach to fixing the economy will not be well received.

The November unemployment rate of 9.8% represents a seven month high as non-farm payrolls increased a dismal 39,000 while economists were expecting a 140k increase in employment.

As the economy improves, the unemployment rate could be expected to raise as discouraged workers or those who have given up looking for jobs return to the workforce are counted again.  However, the numbers reflect a rise in the unemployment rate due to job losses rather than a return of people who have given up hope for finding employment.

Austan Goolsbee, chairman of the White House Council of Economic Advisers indicated that these numbers indicate just how fragile the recovery is and advocated the immediate extension of tax cuts for the middle class and an extension of unemployment benefits.

Mr. Goolsbee’s comments underscore the lack of understanding that by rasing taxes on “the wealthy”, the government will crush many small businesses that can create jobs and lower the unemployment rate.

The simple fact is that the government does not create jobs.  The sooner that the Administration and Congress understand this, the sooner we can expect the economy to improve.

The trendline of initial jobless claims has been steadily rising since October.  This initial jobless claims chart shows how the weekly number moves up and down, but the trend is continually increasing.

The massive hiring of census workers over the last few months has somewhat masked the worsening picture.  The growth of hiring in the public sector has kept the unemployment rate from moving away from 9.7%.  It is also important to note that the census jobs are temporary and will end is several months.

Small businesses and large corporations need to start hiring in order for the unemployment rate to decline.  Raising taxes and creating new credits a few thousand dollars will not lead to new jobs being created.  Hiring in the public sector is also not the answer as those jobs are funded by taxes collected on the private sector.

The Obama administration needs to get serious about creating jobs.  A first step would be a massive cut in government spending eliminating the deficit and attacking the debt. 

Income tax cuts for individuals and companies would further stimulate the economy.  This would be accomplished through reductions in the tax rates and not through credits which only transfer money from the 53% of people who income taxes to the 47% of people who do not pay income taxes.

Sadly, the odds of this happening are low as these steps place more power in the free market and takes power away from Washington.

On Friday, the labor department reported that unemployment rose to a 26 year high of 9.7 percent.

Hotair.com has a great post that shows the following chart that shows what the Obama administration predicted that unemployment would be with and without the stimulus.

This begs the question of how good is the Obama administration at predicting economic trends.  Several months ago, they put out the chart showing what would happen with and without the stimulus.  Within a month of the chart being created, it was wrong.  This is compounded by the fact that according to the administration, doing nothing would have been better than passing the stimulus.

Vice President Biden was out telling the public on Thursday that things would have been worse and that the stimulus has saved hundreds of thousands of jobs.  This same logic could be used to say that the stimulus cost us all the millions of jobs that we would have created if we did something different.

The fact is that massive government spending and doubling the deficit and national debt doesn’t help the economy in the long run and can be ineffective in the short run.

The next argument will be that the stimulus needs more time since over 80% of the money hasn’t been spent.  An interesting conspiracy theory would be that the congress is holding the spending until 2010 to get a bump in the economy prior to the 2010 elections.

Eventually the government will learn that giving us money doesn’t help us, but letting us keep more of the money we earn will help the economy.

Krugman Blames Conservatives for Murders - Paul Krugman explains why conservatives are responsible for several recent murders.  He doesn’t seem to blame himself of the left for other recent events, but then again, he often refuses to make any sense.

Reading Rights to Terrorists?- I was shocked to see earlier this week that a congressman visiting Afghanistan witnessed captured terrorists being read their Miranda rights.  This seems to be a return to the days of treating terrorists and foreign fighters as criminals rather than military targets.  An argument could also be made that since they don’t wear uniforms or fight under a flag, they are spies.  Don’t we shoot spies?

IRS Considers Taxing Your Cell Phone- Many employees have employer provide cell phones.  The IRS would like to consider 25% of your cell phone a benefit similar to income for tax purposes.  This would mean that if your company pays $40 per month for your cell phone, the IRS believes that you just made $10 in income.

Stimulus Fails to Slow Unemployment - We were told that we had to have a stimulus “NOW” or risk economic ruin.  President Obama indicated that without the stimulus, unemployment could soar over 8%.  Well we have the stimulus and we have unemployment over 9%.

White House Appoints Pay Czar- The administration believes that everyone should be equal.  However, they don’t necessarily believe in rising people up, but rather taking aim at people at the top.  We are now seeing the first steps toward government mandated pay scales for everyone.

We were even told that if we didn’t pass the stimulus “now”, unemployment could reach as high as 9%.  So in the middle of the night, the so called stimulus bill was released.  Many of our elected representative voted for the bill without even reading it.  Either that or they were for the AIG bonuses that so outraged them a few months later that they all voted to protect.

A great post over at hotair details how we have gotten exactly what we wanted to avoid. 

On Friday, the jobs data indicated that unemployment had reached 9.4%.

The post included a chart from Innocent Bystanders that updated the figures put forth by the Obama administration.

With the maroon triangles showing the actual numbers, it appears that not only did they not accurately predict the impact of the stimulus, they neglected to catch that fact that the stimulus would lead to unemployment numbers worse than they predicted without the stimulus.

The bulk of the stimulus money has not been spent yet.  Several critics of the plan pointed that out prior to the passage of the bill.  Perhaps if the bill were posted to the public for 5 days as we were promised, more Americans would have realized the details of the bill.

Instead, the American people were sold on a $800 billion that had to be passed immediately or else.  With the “purpose” of the bill to keep unemployment below 9 %, it apparently is a huge failure.

Perhaps we will all remember this when the next “emergency must pass now” bill is pushed out in the middle of the night.