State of the Union Should Offer Bipartisan Solutions to Job Growth

Soaring equity markets and surging confidence on Main Street appear to have combined with misleading unemployment data to put a positive spin on the nation's job situation -- which is likely to be reflected in President Barack Obama's State of the Union address on Tuesday. However, the reality is that the job situation deteriorated significantly in January, meaning that hopes of finding a job today are no better than they were a year ago. Whatever tone the president uses to describe today's job situation, he should do more than offer partisan solutions, instead seeking a bipartisan approach to job growth.

While the government reported a modest uptick to 7.9% in the seasonally adjusted unemployment rate in January, the unadjusted rate increased to 8.5% -- up nearly a full percentage point from December's 7.6%, and just 0.3 points below the 8.8% unadjusted rate of a year ago. While seasonal adjustments smooth out the unemployment numbers as intended, they tend to distort real-world job market conditions -- those faced by job seekers. These are better reflected by unadjusted unemployment rates that show jobs were a lot harder to get in January.

A deeper dive into the government's unadjusted unemployment data shows that the number of employed Americans declined by 1.4 million in January, while the ranks of the unemployed increased by 1.3 million. As a result, the 0.1-point decline in the participation rate was unable to head off a surge in last month's unadjusted unemployment rate.

Unadjusted unemployment data year-over-year shows the job situation hasn't really improved much over the past year, with the labor force increasing by 1.3 million year-over-year while the number of employed Americans increased by 1.7 million -- meaning the number of unemployed decreased by just 360,000 over the past year. This was enough to keep the unadjusted unemployment rate below that of a year ago -- but not by much.

This lack of improvement in the real job situation year-over-year is best reflected by Gallup's Payroll to Population (P2P) employment measure, which shows no change at 43.6% in January 2013 vs. January 2012. P2P also shows deterioration in the real job situation since the summer and fall of 2012.

The January 2013 Wells Fargo/Gallup Small Business Index shows small-business owners continue to hire fewer workers than they let go. Gallup's Job Creation Index fell to an 11-month low in January.

While today's distorted view of job market conditions may help the bulls on Wall Street, it is unlikely to influence monetary policy -- the Fed will continue to flood the economy with money, whatever the spin on jobs. However, the same may not be the case as far as the president and the Congress are concerned.

If you assume that the job situation is improving, albeit slowly, it may not be too difficult to look to partisan solutions to job growth. In this scenario, each side pursues its own partisan approach -- and if nothing happens legislatively, each blames the other side politically. This may not be good economics but could be good politics. However, if you recognize that the job situation is actually worsening, then the political stakes of seeking a partisan solution -- rather than a bipartisan one -- increase significantly.

The president may be more positive about the job situation in the State of the Union than is warranted by the real job data. Regardless, the true test is whether the State of the Union will reflect job reality and seek bipartisan solutions -- or instead, accept the positive spin and adopt a partisan approach to job growth.

More of Dennis Jacobe's columns at Gallup can be read here.

Dennis Jacobe is Gallup's Chief Economist and writes the column, "The Behavioral Economy," providing unrivaled insights into the state of mind of U.S. consumers, workers, and job seekers, and the health of the U.S. economy, based on behavioral economic metrics Gallup tracks and analyzes every day. Copyright © 2013 Gallup, Inc. All rights reserved. The content is used with permission; however, Gallup retains all rights of republication.