Perhaps a by-product of the declining workforce participation rate? But wait, we’re supposed to be focused on the rising employment rate and ignore the fact that more and more people have completely given up looking for a job (not to mention the massive underemployment problem).
If you don’t read anything else this week, make certain you read 3 Key Metrics That Show Why We Can’t Avoid Recession by Joseph Stuber.
Joseph offers 3 charts that not only show why a recession is coming, but also clearly demonstrates how ineffective fiscal stimulus has been. In part:
The U6 unemployment number in January 2009 was 14.2%. Last month, the number was 14.6%. We have made no gains at all since President Obama took office in 2009 based on that metric. In January 2009, the participation rate was 65.7%. In October 2012, the participation rate was 63.6% — a drop of 2.1%.
The net takeaway from these numbers is that the U6 number would be even worse than it is if the participation rate had remained at 2009 levels. Consider that the BLS doesn’t take into account those workers who have simply given up. If those representing the 2.1% drop in participation rate were included in the number, the U6 figure would be even larger than 14.6%.
$7 trillion in borrowed money and almost $3 trillion in monetary stimulus has accomplished nothing to date to improve the unemployment situation. At what point do we accept reality? Government stimulus is not helping to resolve the problem and is, in fact, going to make it that much worse when natural market forces outweigh all other forces and we enter into a protracted recession.
Exactly. Now go check out ShadowStats.com.
Via Business Week comes the unbelievable news that Obama wants to double vehicle fuel efficiency standards. Just what we need in a struggling economy, more expensive cars, leading to fewer sales, leading to few jobs for production, transportation, sales and so on:
Government aims to double fuel efficiency. The Obama administration has released its final fuel efficiency standards for cars and trucks, requiring each automaker’s fleet to reach an average 54.5 miles a gallon by 2025, nearly doubling current levels. To meet the standard, automakers will need to introduce new technologies and sell more alternative fuel vehicles. Critics say the rules will add thousands of dollars to new car prices.
The Orlando Sentinel asks its readers what they think of Obama’s jobs plan:
The White House announced this week that President Obama would unveil a new plan to create jobs in a speech to a joint session of Congress on Sept. 7. While the announcement didn’t include details of the plan, Obama said in an interview this week that it would stress "putting people to work rebuilding our roads, our bridges, our schools all across America." In a letter to leaders of Congress, Obama also indicated his plan would include tax cuts for "middle class and working Americans." What, if anything, do you think the president should be proposing? Would you rather see government-fund construction projects, or tax cuts, or both? Do you think the nation can afford a big jobs plan?
Remember, this is a state that was so evenly divided in 2000 that Al Gore almost successfully litigated his way into the White House via hanging chads. Yet here are the results of the poll embedded on the page linked above:
57% of respondents have the sense to tell Obama to make it easier for business or to get out of their pockets altogether.
I like that.
Just an observation. America currently has 14 people in the “official” unemployed category. This is a greater number than the total population of several countries, including Singapore, Norway, Ireland, El Salvador, Denmark, Finland, and many more. 111 more, to be exact.
Put another way, America has more people standing in unemployment lines than over half of the countries on Earth has citizens.
In fact, if you take all 225 countries on Earth, sort them by population, and add up the population for countries 159 through 225 (i.e., the bottom 67 countries), you will come up with a number that is less than the number of unemployed in America.
How’s that hopey/changey thing working out for you? Because it’s not working out so well for America’s jobless, especially the 6 million that have been looking for work for 27 weeks or more.
Any healthy economy of a modern industrialized nation continually adds jobs as the economy chugs along, steadily growing GDP year after year.
The current number of non-farm payrolls is below those of 1999-2001. The population has grown from about 280 million in 1999 to approximately 312 million today. So, adjusted for population growth, employment is in much worse condition than the above graph indicates.
The following graph shows the non-farm payroll data normalized to total population.
While the U.S. stock market can be supported in this massive depression by global earnings, if global economic activity slows down where will support for current earnings come from? And more earnings growth?
Europe is definitely slowing under the austerity demands stemming from the sovereign debt crisis. Asia is slowing under the attempts of central banks to stem inflation.
Where is the growth going to come from?
Excellent question, John.
A dose of bitter truth from Howard Davidowitz, CEO of Davidowitz & Associates. I love the bit where he says:
Typically we’ve had a cyclical economy. But we’ve never been in a situation that I’ve ever seen where in a matter of a couple of years a guy increases the debt by 40%, GDP growth is on the way down, Food Stamps are up 40%, and to accomplish this we spent $4 trillion. This guy spent four trillion dollars! And this is what he’s got. He’s got millions more unemployed, millions more under employed, and he spent four trillion dollars!
Watch the video for more:
Read Return of Mass Layoffs a Grim Sign for U.S. Workers for more (it’s where I stole the video from).
John Mauldin prints an analysis from his friend Barry Habib on the topic of unemployment reduction. Habib not only looks at the current situation, but throws in an analysis of historical unemployment numbers over the past 50 years. [Unless you are a glutton for bad news, skip past the analysis of European woes to the heading The Problem of U.S. Employment.]
First calculating the number of unemployed in the U.S. today, Habib notes that the workforce is growing at 115,000 new workers each month through young people coming of age and legal immigration. [The next time the government crows about reported job growth, remember to subtract 115,000 to asses the impact on the helping the some 15.3 million people that are looking for work.]
Habib next turns to history to asses the probable timeline of taking our current 9+% unemployment to the historic “normal” level of 6%:
We often hear of a return to a 6% unemployment rate. Well if the goal is to do this in 4 years, then the US would need to create just under 250,000 jobs per month on average during this period. There are 47 rolling 4 year periods during the past 50 years. For example 1961 – 1964 is one. Then 1962 – 1965 is the next, and so on. During this time, a level above 250,000 jobs per month average for a 4 year rolling period only happened three times. There were a few more times when the numbers were close, but the chance of this happening was less than 10%. If history is a guide, the promises and projections we have been hearing, will have a very low probability of becoming a reality.
History tells us that bringing unemployment down to 8% over 4 years is just about 50/50.
Mauldin chimes in, throwing a cold dose of reality on these optimistic figures:
The times Barry talks about, of large job creation, were during periods of either high innovation or significant home and infrastructure building and increasing leverage. That is just not in the cards now. It requires an economy rocking and rolling north of 4% GDP growth. We are barely at 2%.
Then, finally a bit of common sense that our politicians evidently lack:
We keep hearing about what the government should do to create jobs. And the reality is that it can do precious little. Private businesses create jobs, and nearly all net new jobs for the last two decades have come from start-up businesses. What government can do is create an environment that encourages new businesses, get rid of red tape (especially in biotech, where the FDA is mired in the 1980s!), stop creating even more rules that make it costly for new businesses to hire, and so on. I could go on, but the fact is, we are in for a rather long period of higher-than-comfortable unemployment. And that means lower tax revenues and a more difficult economy.
Exactly. As Ronald Reagan once noted, government is not the solution, it is the problem.
Rasmussen finds that only 25 percent of likely voters think the financial bailouts were a good idea. A full 56% think they were out-and-out a bad idea. [Note: the 19% who are still undecided on the issue should have their voter registration cards taken away. How can you not have an opinion on this vital issue by now?
Unsurprisingly, political insiders don’t share this view:
There also continues to be a strong divide between the Political Class and Mainstream voters. While a strong majority of Mainstream voters are still against both of the bailouts, at least half of the Political Class think they were a good idea.
This dichotomy is supported by a recent Politico poll:
Only 27 percent believe the country is headed in the right direction, compared with 61 percent who think the nation is on the wrong track. Likewise, when asked whether the national economy is heading down the right or wrong track, just 24 percent chose the right track, compared with 65 percent for the wrong track.
Yet among the 227 Washington elites polled, more think the country is on the right track, 49 percent, than the wrong track, 45 percent. On the economy, 44 percent of elites think the country is on the right track, compared with 46 percent who believe it is not.
Politico also found that compared to mainstream Americans, the political elites were more supportive of Obama, less supportive of Palin, and tended to think of the Tea Party movement as a “fad”. And that’s just sad.
Further, a Bloomberg poll shows that 7 out of 10 Americans see even more joblessness and an increasing deficit, believing that the country is mired in recession.
Seven of 10 Americans say reducing unemployment is the priority. At the same time, the public is skeptical of the Obama administration’s stimulus program and wary of more spending, with more than half saying the deficit is “dangerously out of control.”
If Obama’s “stimulus” had actually created jobs instead of rewarding failure, the recession might be in the rear view mirror and public opinion would be much different. Instead, 70 percent think the economy is still in recession and 13 percent think we are headed for a double-dip. Meanwhile, real unemployment hovers just short of 22 percent.
Amity Shlaes compares today’s economy with that of 1932, the end of Hoover’s presidency and just when things started getting better. She notes that although there are factors that differenciate the two, there are a number of similarities. Read the whole thing, but here’s the money quote:
The takeaway from 1932? Resetting the euro’s criteria for existence and member countries’ obligations when it comes to bailing out one another should happen sooner rather than later. Democrats and the president should ignore unions and cut trade deals with Latin America. John F. Kennedy, a Democrat, supported tax cuts. Obama can too, or at least block rate increases. The president might also want to suppress his lawyer- Keynesian reflexes and reconsider policy when it comes to wages. But the 1932 crisis talk actually impedes such consideration.
If anyone believes that these can take place in today’s partisan environment just hasn’t been paying attention. Get settled folks, this recession isn’t going away any time soon.
Technorati Tags: Bankrupting America, Bailouts and Other Bad Ideas, Stimulus and Other Failures, Rising Unemployment in America, Unions and Other Drags on the Economy, Political Elites and Other Yammerheads, Barack Hussein Obama the Dangerous Choice
According to the president’s economic adviser Lawrence Summers, “A good guess…is that when the economy recovers five years from now, one in six men who are 25 to 54 will not be working.”
Leaving aside the scary “five years from now” time frame for economic recovery, the question is what are we going to
So why did the economy generate jobs, yet unemployment increased? Because the government doesn’t include people that want jobs but have simply given up looking until the economy gets better. That’s when they “re-enter” the job market and *poof* unemployment ticks back up.
How long will that keep happening? The “official” long term unemployment is high:
Six and half million workers have been unemployed for more than six months.
Now, how high is the actual unemployment numbers, even those that the government quit tracking so they won’t look so bad? Ask ShadowStats:
Yep, as of April the real unemployment in this country ticked back up to 22%. Now look at the mean and median duration of unemployment — some people just can’t find work (or else they’re claiming to look for work while living on the taxpayer-funded dole).
Where are things headed?
Yet nothing in the textbooks says that the supply and demand for workers will intersect at a wage that is socially acceptable. At the high end, demand for skilled workers and those who rely on their brains will return when the economy does. At the other end, jobs in restaurants, nursing homes and health clubs — the jobs that are hard to automate or outsource — will come back, too.
In the middle, there will be some jobs for workers without much education, for the plumbers, electricians and software technicians. But not enough to go around.
Men who in an earlier era would have been making good money on the assembly line are, and will be, working security or greeting at Wal-Mart, jobs that almost anyone can do and thus jobs that don’t pay well.
That’s because a lot of the jobs that were lost in construction, factories and even offices will never re-materialize. Worse yet, as long as we provide unemployment benefits most of these less-educated workers will not secure a job [note: I am not advocating getting rid of unemployment!]:
On average, surveys find, the unemployed in the U.S. spend 40 minutes a day looking for work and 3 hours and 20 minutes a day watching TV.
The Wall Street Journal article goes on to analyze our choices. Basically:
- Take a long term view and fix education, thus simultaneously reducing the uneducated workforce and increasing the supply of skilled labor and knowledge workers. [A good idea, but impossible to implement in the short term and maybe even the long term as long as one party continues to pander to the teacher unions.]
- Force employers to hire more uneducated workers [hurting our ability to compete on the world market] or limit imports that threaten the jobs of less educated workers [which would initiate similar limits and tariffs on our goods in other countries].
- Spend tax dollars on improving the country’s infrastructure [isn’t that what the “stimulus” was supposed to do?], thus increasing the demand for labor in the short run while the economy improves.
- Tax the employed to support the unemployed. [Remember the 40 minutes a day looking for work stat? This would be another entitlement that would never go away.]
Each approach has shortcomings. So does doing nothing. Sidelining a huge part of an entire generation of men would waste human potential, create economic misery for their families and fuel political discontent.
I would add that back in the day, you had to prove that you actually looked for work (made applications, went on interviews, etc.) in order to qualify for unemployment. How about getting people off the couch and back into society?
Can you think of any other possible paths?