This morning, the Bureau of Labor Statistics released the latest job numbers. They aren’t good. But they’re also pretty much what anyone who doesn’t subscribe to Keynesian economics expected.
To put it succinctly, the economy sucks.
To explain why, you don’t have to look further than Adam Smith and basic supply-and-demand laws.
First, making sense of the data: according to BLS, the last two months have seen a net total of 278,000 jobs added to the economy with average wages actually declining by 0.1% over that time. The number of people who gave up looking for work outpaced those landing a job by a 4:1 margin. There are now over 94 million Americans not working, almost equaling the number of Americans who are working.
This is what the progressive version of economics has rendered: national debt now exceeds 100% of GDP, for the first time in our history. Yet despite all of that largess (which the Keynesian’s insist would boost the economy), wages continue to sag and new employment opportunities can’t keep pace with population growth. By the BLS’ own estimate, the economy needs to add 250,000 jobs per month just to match population growth; the most recent data indicates that we’ve added 222,000 too few jobs.
So how does this affect you? Well, the pressure is still on the employed, not the employer. As a result, wages either sink or stay put. If you ask for a raise, keep in mind there is somebody out there desperate enough to do your job for less than you’re earning now. Even if you’re unaware of that, your boss isn’t.
Add in the regulatory spree that progressivism claims is needed to protect you from yourself, and businesses that are already feeling the pinch of reduced demand are further squeezed. Profit margins are not some whimsical thing that can be created by government edict, as much as statists like to think so. They are very much the result of income after costs – and in a bad economy, adding more costs certainly isn’t going to improve employment, demand or prices.
So, to summarize, Mr. Obama has the economy he asked for. Oh, I know he didn’t ask for these results. But this is the real world, not some theoretical research paper written by left-winged professors, and these are the real-world results of putting those policies in action. Despite record debt (the cornerstone of the Keynesian model) the economy has seen negative aggregate demand. There are as many people without a job as have one. A large number of those people with a job aren’t getting paid enough to increase demand and thus increase employment opportunities, or wages.
In other words: the labor SUPPLY still outstrips the DEMAND for labor. Until that changes, the economy cannot be said to be in “recovery.” That is Mr. Obama’s economy.
On Friday, the latest “jobs report” was released by the Bureau of Labor Statistics.Naturally, the White House jumped on the headline numbers to show how wonderful Obamanomics is working. 223,000 more jobs! Unemployment down t0 5.3%!
Except…the numbers aren’t nearly that rosy. Even long-time supporters in the financial media are taking notice that something smells as rotten at the BLS as a fish left out in the summertime Washington sun. Consider these headlines:
FiveThirtyEight: “Don’t Let The Disappointing Jobs Report Distract From the Long-Term Trend”
MarketWatch: “A ‘Soft’ June Jobs Report on Balance, Economists say”
Huffington Post: “That 5.3 percent Unemployment Number Makes the Jobs Market Look Better Than It Is”
If you’re a liberal President hoping to convince the American people about the wonderfulness of your economic program and you can’t even fool the devout Keynesians at HuffPo, it’s time to admit defeat, I would think. But I digress.
So, how has it come to this point? How have the BLS’ headline numbers become essentially meaningless? The answer is those numbers have been filtered, altered and cranked so much over the past five years that they really don’t have any meaning any more. Unlike the past, that 5.3% unemployment figure doesn’t really track the number of Americans who need a job, nor does it represent the number of jobs Americans are actually getting.
The unemployment rate and employment numbers were once based on hard data, taken from a sampling of the F1000 and 150 selected smaller companies. Since 2011, it’s based on a phone survey: literally, the BLS calls 1,000 Americans and asks them if they’re working, when they were hired and what kind of job they have, and how much they get paid. No wonder the headline employment numbers and unemployment rate is revised more often than I go food shopping. In the latest report, for instance, the BLS revised the employment numbers down by some 60,000 jobs over previous reports (more on this in a moment). Quite frankly, the government’s main jobs accountability office doesn’t really know how many people are working, where they’re working, when they get hired and when they get fired. Their data doesn’t lie, but it is actually too volatile to be a predictable indicator of what’s happening.
Second, the unemployment rate was once a solid indicator of the number of Americans who were, well, unemployed. But in 2003, the BLS changed the definition of an unemployed person from somebody who wasn’t working, but eligible to work, to somebody who was out of work and actively seeking employment. Seems like a subtle difference, but in today’s job market it’s proving to be very consequential. Additionally, BLS never counted part-time employees as “fully employed” until 2011 (funny how that date keeps coming back, more on that later, too). In the current BLS reports, all part-time employees are counted as fully employed, even if the employee would rather work full-time but can’t because their employer isn’t offering them full hours. So, that %.3% looks pretty good. It is certainly within historical norms, until you recognize that the old methodology used to get that number was much more restrictive – and accurate – than the current one.
Now, regarding that revised employment number. First, to understand what even the original number means, you have to understand that every month the US adds more people to the work force. Yes, the “Baby Boom” generation is retiring, but what you rarely hear about is that the number of “Millenials” actually outnumbers the number of “boomers.” Left-of-center economists and commentators are doing their best to make it sound as if the percentage of working age Americans is shrinking. In reality, it’s a population growing at a rate not seen since the 1960s, around 215,000 more people get added to the workforce than leave through retirement each month. In order to maintain employment levels, that means that number of jobs needs to be added to the economy each month. Fall below it, unemployment should rise. Come in above it, unemployment should fall. A 223,000 jobs gain should have kept unemployment essentially flat. Losing 60,000 jobs should have made unemployment go up. And a newly revised job gain of 664,000 for the quarter vs. working population growth of 645,000 should mean that unemployment dropped by 0.05% for the quarter. Yet, it dropped by 0.2%. Eh, what?
This comes back to the magic of not counting everyone who’s unemployed as unemployed, Today, Barack Obama’s government either calls them “marginally attached” or ignores them completely. The “marginally attached” are those that would like a job, but have simply given up hope of ever finding one. By BLS own estimate, that’s 1.9 million people. In June, the Obama administration moved over 400,000 people from unemployed to “marginally attached,” based on a phone survey yhat probably ignored them altogether. And it lends itself to another number the boys at Obama’s Labor department haven’t figured out how to fudge yet: the labor participation rate. That’s the number of Americans of working age who are, in fact, working. It’s also been dropping for the past six years, even as the unemployment number keeps dropping. If that seems like a contradiction, that’s because it is. Obviously, if the working age population is growing but the percentage of people working is dropping, unemployment should be rising. And when the LPR is at a level not seen since the Great Depression (in June, according to BLS, it stands at a 72 year low of 62.6%. The last time the LPR was this low was in the late 1970s, when unemployment reached a staggering 13.5%). it stands to reason that the unemployment number should be in the double-digits. Look, there’s a little followed, “unofficial” unemployment number called the U-6. It actually counts the “marginally attached” as unemployed. And it currently stands at…12.1%.
The idea that more than a third of working age Americans are choosing not to work is ludicrous on it’s face. But the government tells us unemployment is falling. No wonder that smell from the doors of the Labor department keeps getting stronger.
As mentioned, the changes that have allowed employment numbers to be spun so dramatically were implemented in February 2011, shortly after Barack Obama’s policies were soundly rejected in the 2010 midterm elections. I mean, that could be a coincidence. I suspect, however, there was a conversation in the Oval Office that demanded better employment numbers, that couldn’t be easily refuted by economists and could be easily embraced by Keynesians and newspapers. He got what he wanted: a way to lie, to spin, and to let his Sunday morning spokespeople lie and spin, without actually lying.
That smell coming from the Oval Office is not dissimilar from the one coming from BLS, and the President may want to check his trousers. Obama may have reached the end of this propaganda cycle. The papers have begun to notice some things that all economists, whether left or right, know to be true: full employment should yield higher wages and more hours. But hours worked fell throughout the second quarter and wages remained flat. They also know their favorite boogeyman, the evil Wall Street CEO stealing workers wages, doesn’t really fly when the stock market has also remained essentially flat. In other words, with all that extra productivity from all of those new workers, there should be a lot more money entering the economy – but there isn’t. And it isn’t ending up in the mega-bank vault, either. It just doesn’t exist.
With the biggest lie ever told by a President finally being exposed (even bigger than, “If you like your plan…), all I can do is wonder what Obama is going to throw at us next.
Perhaps because I’ve never believed our nation is a bunch of redistributive idiots at heart, I’ve watched as the country plunged headfirst towards Obamacare with fascination. Maybe because nearly all my adult life is partly defined by my battle with Crohn’s Disease, I pay an inordinate amount of of attention to the Battle for Health Care Reform. Could be because I am even now lying in a hospital bed in the latest go-round with Crohn’s, I’m amazed at the dizzying pace of lies pouring forth from the administration of President Barack Obama over the past four weeks.
What is most sad is that a sizable chunk of the American people are just sitting back and taking it. Despite the evidence of their own eyes from the past four years, they continue to loll about and let the administration get away with the greatest government take-over of American life in history. I’m stupified by the willingness of the American citizenry to just play ostrich when they should at least get to strutting like Foghorn Leghorn.
Then it hit me.
With all the force of a Superstorm, it hit me square in the face. After 40 years of war, debt, moral erosion and political scandal, the American people are tired of dealing with it all – and longing for something they never experienced. The Founding Fathers left us a political and economic system that only works if everyone (or nearly everyone) participates. Most people don’t participate unless they have either a very personal interest in a particular program or they’re corrupt enough to look upon governement service as a way to create individual wealth.
More later. As mentioned, I’m typing this from a hospital bed. In the meantime, am I on the right track? Is the reason most Americans just don’t care because we’ve spent four generations being battered into submission?