Free Markets, Free People
A good job report this month drops the “official” unemployment rate to 8.3%. That, of course, will be touted as significant progress and, on one level, it is. The number of jobs created is above the maintenance level. That means a real net gain.
While the job creation is “well above expectations”, there’s another record that masks the real unemployment number.
Namely 1.2 million workers (another record) fell out of the labor force. That’s one reason the official rate looks good.
And, probably the most important number to be considered – the labor participation rate – fell to 63.7% which is a 30 year low and reflects the loss of those 1.2 million workers from the work force. Neither of those numbers are good.
That said, the report on the numbers of jobs created is a good report and may signal some growth. It is, for a change, above the maintenance level of jobs. But you have to keep in mind that in overall terms, and despite the official numbers, the job situation still has a very, very long way to go.
Speaking of the record compiled under the Obama administration, the CBO provides plenty of ammo for the GOP:
The Congressional Budget Office on Tuesday predicted the deficit will rise to $1.08 trillion in 2012.
The office also projected the jobless rate would rise to 8.9 percent by the end of 2012, and to 9.2 percent in 2013.
That’s because it has revised its previous estimate as the GDP growth numbers for last year were revised down.
Additionally, and reading between the lines, it also means that the administration and Congress has yet to even begin to get a handle on the main problem – spending.
Of course part of that stands to reason when you take into consideration the Democratic controlled Senate hasn’t passed a budget in over 1,000 days.
The Hill, ever the master of understatement, gives you a peek at what should be obvious:
A rising deficit and unemployment rate would hamper President Obama’s reelection effort, which in recent weeks has seemed to be on stronger footing.
“Hamper"?” It should put it in the crapper. Or so you would think. But then there’s the GOP primary going on, huh?
CBO Director Doug Elmendorf told reporters that Congress will have to make important choices this year regarding the supercommittee trigger and tax policy that will have huge effects on the deficit.
While unable to recommend choices, Elmendorf said that addressing the deficit sooner rather than later is easier.
The deficit was $1.4 trillion in 2009, $1.3 trillion in 2010 and $1.3 trillion in 2011. The largest deficit recorded before that was $458 billion in 2008.
Well, of course addressing the deficit sooner rather than later is a lot easier. Haven’t we been saying that for years? Decades?
Anyone think it will be addressed in this next year? Consider what the CBO recommends:
The deficit will be much higher if Congress takes several actions that many expect.
If the Bush tax rates are extended, for example, the deficit would rise.
It would rise if Congress patches the Alternative Minimum Tax, which lawmakers have routinely done to prevent higher taxes from being imposed on middle class taxpayers.
It would also rise if Congress continues to pass the “doc fix” that prevents a cut to Medicare payments to doctors, something that Congress has done on a near-annual basis.
Finally, if Congress does not follow through on cuts mandated by the failure of the supercommittee, the deficit will grow. Lawmakers are already talking about canceling scheduled cuts to the Pentagon’s budget.
So, let’s see – raise taxes, lower taxes, subsidize and cut spending. Or is that last one, cut projected spending?
The “doc fix”, unless passed, will see Doctors leave Medicare in droves. I certainly would if I were in their shoes. Any guesses how that turns out?
And while the Democrats only want the “rich” to pay higher taxes, if the current tax rates (also known as the “Bush tax cut”) are allowed to revert to their prior percentages, taxes will increase 30% on everyone by 2014. Catch 22?
The amount of money the federal government takes out of the U.S. economy in taxes will increase by more than 30 percent between 2012 and 2014, according to the Budget and Economic Outlook published today by the CBO.
At the same time, according to CBO, the economy will remain sluggish, partly because of higher taxes.
You don’t say? Stupid if you do, damned if you don’t? Nice position we’ve gotten ourselves in, no?
And finally, sequestration will “cut” 10% across the board, to include defense which has already taken that sort of a cut. Dangerous.
However, for the rest of the government, I expect the usual accounting tricks with no real cuts in spending if sequestration is enacted.
As for taxes increasing, the increase is fairly dramatic at a time the economy can’t absorb such increases:
The anticipated percentage increase in federal tax revenue is not only large when calculated in dollar terms but also when calculated as a share of GDP. The jump from 15.4 percent of GDP in fiscal 2011 to 20.0 percent of GDP in fiscal 2014 equals an increase of 29.8 percent. The jump from 16.3 percent in fiscal 2012 to 20.0 percent in fiscal 2014 equals an increase over two years of 22.7 percent.
Federal tax revenues have averaged “about 18 percent of GDP for the past 40 years,” according to CBO. So, in the next two years federal tax revenues will rise from a level that is below the modern historical average to a level that is above it.
Again I’m reduced to saying “what a freakin’ mess”. When I say over and over again, “we’ve been ill served by our political class for decades”, it is this to which I point.
Yes, all of this and the never mentioned additional 200 plus trillion in unfunded future mandated liabilities that have been amassed.
Context is one of those tricky words for some. Because, when applied, it tends to trip up their attempts to shade news a certain way. Without it, they’re much more able to do their shading than when context is added to their formulation.
Take the unemployment numbers – the “official” unemployment numbers. We’re supposed to believe that everything is getting better because that number has come down from 10% to its current “official” level of 8.5%.
But when one digs into that number, it becomes apparent that one can only get to 8.5% if one is willing to write off over a million American workers who’ve somehow “vanished” from the labor force.
Or in other words, in context, with those workers being added back in as they should be, our unemployment rate is much higher than 8.5%. Dale has explained this many times. I’ve pointed it out a few times. Investors Business Daily does it this time:
In the 30 months since the recession officially ended, nearly 1 million people have dropped out of the labor force — they aren’t working, and they aren’t looking — according to data from Labor’s Bureau of Labor Statistics. In the past two months, the labor force shrank by 170,000.
This is virtually unprecedented in past economic recoveries, at least since the BLS has kept detailed records. In the past nine recoveries, the labor force had climbed an average 3.5 million by this point, according to an IBD analysis of the BLS data.
"Given weak job prospects, many would-be workers dropped out of (or never entered) the labor force," noted Heidi Shierholz of the Economic Policy Institute in her analysis of the BLS jobs report issued last Friday. "That reduces the measured unemployment rate but does not represent real improvement."
According to the BLS, the "labor force participation rate" — the ratio of the number of people either working or looking for work compared with the entire working-age population — is now 64%, down from 65.7% when the recession ended in June 2009. That’s the lowest level since women began entering the workforce in far greater numbers several decades ago.
That “labor force participation rate” hasn’t changed significantly. In fact, given our expanding population, it has probably remained at least the same. What the “official” number does is ignore the missing million plus workers and thereby misrepresent the true level of unemployment in this country. That official number also hides the real problem that IBD’s chart shows us – something unprecedented in past recoveries:
Labor force growth, as you might imagine, is one of the indicators of a recovering economy. Instead we seem to be in the middle of fooling ourselves that such a recovery is happening by viewing a falling “official” unemployment number as an indictor of progress in that area. I’m not sure how one can make that argument – in context, as provided by this chart.
IBD goes on to outline what this all means in the long run:
Not only does the shrunken labor force mask the real size of the unemployment problem in the country — since only those actively looking for work are counted as unemployed — it likely means that economic growth will be subpar going forward.
The weak job market has also helped depress wages. Real median annual household income has dropped 5.1% since the recession ended, more than the 3.2% decline during the recession itself — according to a new Sentier Research report.
The smaller labor force is just one of the problems with the current unemployment number. The other is that the jobs being created aren’t keeping pace with population growth. Since June 2009, the economy has added 1.4 million jobs, which is below the more than 2 million needed to keep up with population growth and far below the gains experienced at the same point in the previous 10 recoveries — which saw job gains average more than 4 million.
So, what has happened? Well there are all sorts of explanations being bandied about – Baby Boomers choosing retirement instead of seeking work, etc. But the fact remains, as IBD points out, “the labor force had been climbing until Obama took office. In fact, it peaked in May 2009, the month before the recession officially ended.”
That sort of dampens the “Baby Boomer retirement” explanation and leaves us again searching for an answer.
The whole point of this post, however, isn’t so much wrapped up in the answer, but the context of the problem. Or said another way, you’re being led down the primrose path with the “official” unemployment number and here’s why.
Context. A dirty word to those who would prefer to feed you false sunshine via their “official” numbers. But when you look at their numbers remember that you’re mostly looking at contextless nonsense.
Oh, and if you’re not depressed enough:
The Economic Policy Institute calculates that when you add the number of jobs lost in the recession and the growth in the working age population over the past few years, the "jobs deficit," as EPI calls it, "remains well over 10 million."
There’s also the problem of people who want full-time work not being able to find it. The BLS offers a different unemployment measure that counts not only those currently looking for a job, but those who’ve given up looking, as well as those who are underemployed because of the soft job market.
That measure has unemployment at a whopping 15.2%.
But don’t look for this administration to ever tell you that.
Today’s economic statistical releases:
The big number today is the monthly employment situation. The BLS released the headline as "Unemployment rate falls to 8.6% in November; payroll employment rises by 120,000". The numbers behind the headline are less impressive. Actually, the headline isn’t all that impressive, considering that 120,000 new jobs is, at best, an anemic rate of job growth. Also, it’s the time of year when a fair amount of hiring is seasonal, for temporary Christmas jobs, which can make the employment situation look better than it actually is, despite the seasonal adjustments to the data employed by BLS. Looking deeper, the labor force participation rate continued to fall -0.2% to 64% as nearly half a million workers left the labor force.If the labor force participation rate was at the historical average of 66%, the unemployment rate would be 11.41%. 2.6 million persons were marginally attached to the labor force, about the same as last November. The average workweek is unchanged at 34.3 hours, where it has been since September. Even worse, average earnings declined this month with the average hourly wage dropping 2 cents an hour to $23.18. So, I think we can say that the drop in the unemployment rate is mainly due to people leaving the labor force, as the rate of job creation is weak. Also, the lack of change in the workweek, and decline in wages implies that hiring pressure among firms is essentially non-existent as there has been no increase in the workweek for three months, and a glut of labor still exists as upward pressure on wages reversed this month. The only positive thing I can glean from this report comes from the household survey, where the number of respondents who are employed rose 278,000 to 140,580,000.
Monster.Com reports their employment index fell 4 points in November to 147 as online recruitment slowed.
I think I’ll check, but I’d guess that if you ever looked up the definition of the term “gas bag” you’d be likely find the picture of ex-Speaker of the House Nancy Pelosi next to it. She’s much more illustrative of the term than say some generic bag filled with hot gas.
“But I’ll tell you this,” said Pelosi, “if President Obama and the House congressional Democrats had not acted, we would be at 15 percent unemployment. Again, no consolation to those without a job, but an important point to make."
At her Oct. 6 briefing, Pelosi said: “Without the Recovery Act and accompanying federal interventions, whether from the Fed or ‘Cash for Clunkers’ or other initiatives, this unemployment rate last year at the time of the election would’ve been 14.5 percent, not 9.5 percent.”
Between her and Debbie Wasserman Shultz, you could compile a book length list of the groundless claims they’ve made. And this is right up there in the top 10 for Pelosi. Of course she doesn’t cite any basis for this claim but there it is nonetheless.
So what about her numbers? Well, lets look at the numbers an agency which at least ran some came up with:
A report published by the Congressional Budget Office in August estimated that in the fourth quarter of 2011, the stimulus signed by President Obama in 2009 would have the impact of reducing the national unemployment rate between 0.3 points to 1.1 points from what it otherwise would have been. The report also said that although CBO initially estimated that the stimulus would cost $787 billion, CBO had subsequently increased its estimated cost to $825 billion.
It was on the basis of these numbers that Barack Obama made the claim that spending this money would keep the unemployment rate under 8%. It went to 9.5% from about 4.8%. In real math, that’s 4.7 points. So essentially Pelosi is just adding the two (9.5 and 4.7 and adding a few tenths) to get her "14.5%” number. There is obviously no backing for this claim.
Oh and cost per job? Well, pick your number but whichever you choose, these were expensive jobs:
According to the CBO report, 600,000 to 2 million people have jobs as of now that were "created or retained" because of the $825 billion stimulus. If the maximum number of 2 million is accepted, that works out to a cost of $412,500 per job. If the minimum number of 600,000 is accepted, that works out to a cost of $1,375,000 per job.
So any way you slice it, expensive. But back to Pelosi. Even if you accept the higher number of 2,000,000 and add that into the unemployed while subtracting it from the employed total and divide it out, you come up with roughly 10.5%. Even if you accept the projection’s top end estimate that 2,000,000 more jobs would have gone, you can’t get to her number from there.
Also note the “points” the CBO report claims might have been shaved by the so-called stimulus. They are nowhere near the 4.7 Pelosi wants you to believe in.
Yeah, I know, typical political nonsense. I just have to wonder, and the question and her answer are on video at the link, whether anyone in the press even challenged the numbers? Since she’s used them twice recently, I’d guess not. Also note her attempt to again blame Bush and the Republicans with her “300 days the Republicans were in power” and claim they did nothing to create jobs at that time. And then look at the unemployment rate at that time (mentioned above). Duh. Again, I doubt that was challenged.
Typical of the “watchdog press” of today I’d say. And very typical of Nancy Pelosi and the “lets make numbers and claims up out of thin air” crowd.
One of the center pieces of the Obama administration’s recovery plan has been its green jobs program. It was touted by the President as an investment in the future. And he even managed to snooker Congress into including $38.6 of your dollars in a federal guaranteed loan program in the Stimulus bill – a version, in this case, of the government going into the venture capitalism business.
The results, as they say, are predictable:
A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.
The program — designed to jump-start the nation’s clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies.
Half the money is gone and it has created 3,545 “new, permanent jobs”? You do the math – pretty high cost of job creating wouldn’t you say? Oh, and that number is actually down by 1,100 thanks to Solyndra.
So are green jobs, of the type to be found in alternative energy, the best way to approach easing unemployment? Not really, say some experts:
Obama’s efforts to create green jobs are lagging behind expectations at a time of persistently high unemployment. Many economists say that because alternative-energy projects are so expensive and slow to ramp up, they are not the most efficient way to stimulate the economy.
“There are good reasons to create green jobs, but they have more to do with green than with jobs,” Princeton University economics professor and former Federal Reserve vice chairman Alan Blinder has said.
Which is a nice way of saying this is more about political agendas than putting Americans to work, and unemployment is an excuse, not a reason, for pursuing this agenda. And the cost of that agenda has been pretty prohibitive with no real worthwhile results in the ostensible problem it was supposed help solve – unemployment.
Another example of government using your money to pick winners and losers and everyone coming out poorer in the bargain.
UPDATE: No, I didn’t see Dale’s post. My bad. I’ll leave mine, but now that Dale’s putting up a lot more stuff, I’m going to have to discipline myself to look first before I go popping something up (I use Live Writer, so unless I specifically look at the blog, I don’t see a list of what is up).
Another in a long line of polls showing the President’s approval job ratings continue to fall. Some key elements of the latest poll’s findings:
A majority of Americans don’t believe President Barack Obama’s $447 billion jobs plan will help lower the unemployment rate, skepticism he must overcome as he presses Congress for action and positions himself for re- election.
The downbeat assessment of the American Jobs Act reflects a growing and broad sense of dissatisfaction with the president. Americans disapprove of his handling of the economy by 62 percent to 33 percent, a Bloomberg National Poll conducted Sept. 9-12 shows. The disapproval number represents a nine point increase from six months ago.
One reason that the American people don’t believe Obama’s plan will work is because it is simply a rerun of the $800 billion plus stimulus which didn’t work. Additionally, it has since become clear that he is attempting to get his tax increases past the Republican party by making them the funding mechanism for this. Even Democrats are complaining about that (you don’t raise taxes in a recession – Econ 101).
Harry Truman he ain’t.
And again, electorally, here’s the bad news for Obama:
The president’s job approval rating also stands at the lowest of his presidency — 45 percent. That rating is driven down in part by a majority of independents, 53 percent, who disapprove of his performance.
If it stays like that, he’ll be introducing himself as the former president in 2013. In Obama campaign headquarters, aka the White House, these numbers probably have sirens wailing, lights flashing and grown men crying:
The poll hands Obama new lows in each of the categories that measures his performance on the economy: only 36 percent of respondents approve of his efforts to create jobs, 30 percent approve of how he’s tackled the budget deficit and 39 percent approve of his handling of health care.
So on the issues that most concern American voters, he’s not doing well at all.
But back to his latest attempt to push his tax and spend package through:
By a margin of 51 percent to 40 percent, Americans doubt the package of tax cuts and spending proposals intended to jumpstart job creation that Obama submitted to Congress this week will bring down the 9.1 percent jobless rate. That sentiment undermines one of the core arguments the president is making on the job act’s behalf in a nationwide campaign to build public support.
Compounding Obama’s challenge is that 56 percent of independents, whom the president won in 2008 and will need to win in 2012, are skeptical it will work.
I would guess its mostly because they recognize the package for what it is, and it is certainly not “new”. It is just another, in a long line of attempts by this administration, to push the same old tax increases through Congress. And despite what Obama claims those tax increases are not something the GOP has agreed to in the past – or ever. He gave them a substantial and supportable reason to oppose the package as Obama has presented it.
Finally the big picture as it stands today:
Forty-six percent of independents say they definitely won’t vote to re-elect the president, compared to 21 percent who definitely will support him. In 2008, Obama was backed by 52 percent of independent voters, compared to 44 percent who backed Republican nominee John McCain, an Arizona senator, according to exit polls.
And enthusiasm for Obama? Waning:
Of the respondents who said they’ve supported Obama at one point since he launched his presidential campaign in 2007, fewer than half say they still support him as fervently. Thirty- seven percent say their support has waned and 19 percent say he lost their backing because they’ve grown disappointed or angry with his leadership.
Almost a third of Democrats and Democratic-leaning respondents say they’d like to see Obama face a primary challenge.
Yeah, grim. He’s been found to be an empty suit by many of his own core supporters. Plus he has to run on his record for a change.
The gift that keeps on giving: The White House’s chart of unemployment predictions in the Stimulus/no Stimulus world. Superimposed is the graph of actual unemployment, but now, with wall street economists predictions for the near-term future.
I think a big speech will help, though. ‘Cause that’s what we’ve been missing. Speeches.
The analysis of that speech is pretty straightforward and simple. We’ve spent $800 billion for TARP, $1.4 trillion in the stimulus package, and $2 trillion in quantitative easing from the Fed. Now, if we spend another $430 billion on the American Jobs Act, that’ll be the fix we’ve been looking for, and everything will be peachy.
The president’s child-like faith in the power of government is touching. And frightening.
The Unemployment situation is the big report today, but it’s not the only one.
The Monster Employment Index rose slightly from 144 to 147 as the number of job want ads increased a bit.
Big deal. The headline number today is, of course, the Bureau of Labor Statistics’ report on the national employment situation, and it’s not good. The headline unemployment rate remains unchanged at 9.1%, and no net new payroll jobs were created last month. Last month’s increase in jobs was revised downward to 85,000.
To the extent there is any positive news to this report, it is in the underlying data. The labor force participation rate rose very slightly, from 63.9% to 64%. The U-4 unemployment rate (Total unemployed plus discouraged workers, as a percent of the civilian labor force) fell from 10% to 9.6%. The U-6 rate (Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force) also fell from 16.3% to 16.1%. The number of employed persons also rose from 139,296,000 to 139,627,000.
The bad headline number, though, pushed the Dow down more than 200 points as of 6:40 this morning.
Jobless claims again surprised the “experts” with an “unexpected” jump.
The number of people who filed for unemployment assistance in the U.S. last week rose unexpectedly, official data showed on Thursday.
In a report, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending August 19 rose by 5,000 to a seasonally adjusted 417,000, confounding expectations for a decline to 405,000.
The previous week’s figure was revised up to 412,000 from 408,000.
Continuing jobless claims in the week ended August 13 fell to 3.641 million from a revised 3.721 million in the preceding week. Analysts had expected continuing jobless claims to decline to 3.700 million.
Tyler Durden provides the Bureau of Labor Statistics justification for the unexpected rise:
Naturally, the BLS is there to provide a justification for the spike, with 8500 jobs apparently "lost" due to the Verizon strike: "Special Factor: As a result of a labor dispute between Communications Workers of America and Verizon Communications, at least 12,500 initial claims were filed in the week ending 8/13/2011 and at least 8,500 initial claims were filed in the week ending 8/20/2011."
Durden also points out why the unemployment total percentage isn’t worse:
In other news, continuing claims came below expectations of 3700K at 3641K, a number that will be revised higher as was last week’s from 3702K to 3721K. The collapse in extended benefits, as the 99 week cliff claims more and more, means that 20K people fewer collected post Continuing Claims benefits, with those on EUC and extended benefits down from 5.8 million a year ago to 3.6 million: this is 1.2 million Americans that no longer can collect anything from Uncle Sam.
It also means they’re no longer counted among the unemployed in the official numbers.
Yeah, it’s worse than you thought – and getting worse still. Can’t wait to see Obama’s jobs plan — after he has his vacation, of course.