Free Markets, Free People
Not only the real numbers, but the real reason:
Labor-force participation, the share of Americans who are working or looking for jobs, has fallen to its lowest percentage since the mid-1980s. That’s partly because people have grown discouraged about their ability to find jobs and have given up looking. With those workers on the sidelines, the unemployment rate has been lower than it otherwise would be.
The official unemployment rate hit 9.1% in May. Including all of those who had part-time jobs but wanted to work full-time as well as those who want to work but had given up searching, the rate was 15.8%.
Of course Dale has been saying that for some time with his own calculations. Discouraged workers, however, may also have taken another option – retirement – since it is the age of Baby Boomer retirement. So it’s not clear yet how many of those who were workers and lost their jobs are “discouraged” workers or retired workers. Bottom line, though – a lot of people have seen their lives drastically changed.
Here’s the inherent problem in long-term unemployment:
[T]he odds of finding a job steadily decreased the longer someone was out of work. Some 30% of Americans who had been out of work for less than five weeks found new jobs last year.
Those odds deteriorated for the long-term unemployed. Of those who had been unemployed for more than six months, slightly more than 10% found new jobs. Nearly 19% dropped out of the workforce.
The problem endures this year: As of May, 6.2 million had been out of work for more than six months and more than 4 million haven’t work in more than a year.
And the outlook, at least at the moment, doesn’t look like it will change anytime soon.
This is Obama’s political Achilles heel. This is what gets incumbent presidents an early retirement. I’m not hoping that this persists through the 2012 election, I’m suggesting that there is nothing to indicate it won’t.
That is Obama’s challenge. And it is also the GOP’s attack line. This is Obama’s record – something he has to run on for the very first time. Time to begin pointing it out now.
The folks at e21 remind us of something that should be at the forefront of every person’s memory as they consider what this administration has and hasn’t accomplished in its promise to “stimulate” the economy and create jobs. I call it the “big promise”. I don’t call it a “lie” since I use the traditional definition of a lie (a known falsehood) vs. the more modern one in use today by activists on both sides (being wrong about something). But that’s fodder for a future post.
In this one I want to issue a reminder of what was promised and what has been delivered. Promise:
Back in January 2009, Christina Romer and Jared Bernstein produced a report estimating future unemployment rates with and without a stimulus plan. Their estimates, which were widely circulated, projected that unemployment would approach 9% without a stimulus, but would never exceed 8% with the plan.
They got their “stimulus” – $800 plus billion in mostly borrowed money with which they were to stem the tide of unemployment then rising and keep it under 8% as promised.
The result wasn’t even close. In fact, other than two months of this year, the unemployment rate has stayed above 9%. By this time, according to the administrations plan, we were told we’d be at about 6.5%.
So it is clear that the “plan” was a total and unmitigated but costly failure.
What’s their explanation for such a huge miscalculation?
Romer and Bernstein defend their estimates with the argument that the economic situation turned out worse than they had anticipated; and so the economy would have done even worse without a stimulus.
Is that so? Then, as e21 says, they owe us a much deeper explanation of why that was so and why they considered their solution at the time to be the proper thing to do. Because it is seeming more and more like a very expensive boondoggle at the moment:
The recession “officially” ended two years ago, yet the first quarter of 2011 only saw 1.8% growth. The Administration and Congress should have a more robust discussion about their self-proclaimed “2010 Recovery Summer” – if for no other reason than to better inform the public about the recovery challenges the U.S. still faces in 2011.
For example, there is new research that suggests that the stimulus may actually have resulted in a net loss of jobs. Regardless of the exact number of jobs lost or created, however, the fact that some economists are even arguing that it had a negative impact tells you that the stimulus may very well have been a wash overall.
Larry Lindsey offered his own review of the stimulus this week, arguing that it failed what’s colloquially known as the Sharp Pencil Test. As he explains, “if you sit down and do a back of the envelope calculation of the [stimulus] program’s costs and benefits, there is no way to conjure up numbers that allow it to make sense.”
Lindsey went on to offer this analysis:
[E]ven if you buy the White House’s argument that the $800 billion package created 3 million jobs, that works out to $266,000 per job. Taxing or borrowing $266,000 from the private sector to create a single job is simply not a cost effective way of putting America back to work. The long-term debt burden of that $266,000 swamps any benefit that the single job created might provide.
The 3 million claim is dubious at best with no mention of the type, quality or sector these jobs were supposed “saved or created” (the stimulus propped up a lot of state budgets which helped delay layoffs to government workers). And as Lindsey points out, the cost of what can only be a temporary “save” are way out of whack with the benefit. Instead, it appears the stimulus was a giant waste of money that did little if anything to create jobs in the private sector and mostly benefited government at a huge cost per job.
I’m not sure how anyone could economically justify such an outcome. But I sure would like to hear them try. I think they owe us some answers on this. And I’d like to see the GOP begin asking those questions. This is one part of the Obama record they need to pound on – starting now.
Once again, the headline unemployment number for February, which droped from 9.0% to 8.9%, hides much weakness in employment, despite the 193k new payroll jobs. Indeed, the BLS’ own U-3 unemployment rate, which is calculated in a similar fashion to mine, increased from 9.8% to 10.4%.
For my methodology, the numbers look like this:
Civilian noninstitutional population: 238,851,000
Historical participation rate: 66.2%
Proper labor force size: 157,641,660
Actually employed: 138,093,000
Actual unemployment rate: 12.4%
At the end of the day, we need another 8 million new jobs to bring us back to full employment.
Today’s unemployment situation data is…wierd. Most noticeable is that the Civilian Non-Institutional Population declined by 185k people, from 238,889k to 238,704k. Did a lot of people die last month? (Update: Ah. It was an annual population adjustment by the BLS. Carry on.) At the same time, we continue the trend of large increases in the population that dropped out of the labor force, with 319k dropping out last month. Since January, 2010, 2,039k people have left the labor force. On the plus side, 117k more people say they are employed this month than last month.
Still, that 9% unemployment rate is an artifact of 504k people disappearing from the population, not the creation of new jobs, something the anemic 36k new payroll jobs number makes clear. Also, the adjusted U6 unemployment rate surged From 16.6% to 17.3%. In fact, U-3, U-4, U-5, and U-6 all rose sharply. U-3 (Total unemployed, as a percent of the civilian labor force) rose from 9.1% in December to 9.8% last month. So, we got that goin’ for us.
Getting to the numbers, for a more accurate view of unemployment:
Civilian non-institutional adult population: 238,704
Historical labor force participation rate: 66.2%
Proper labor force size: 158,022
Actually Employed: 139,323
Unemployment Rate: 11.8%
UPDATE: Well, this is embarrassing. I’ve made a calculation error in the Excel spreadsheet, which provided an incorrect unemployment rate, above. I reversed the division between the labor force and the number of employed persons. I noticed that while writing the post above, on how I calculate the number. I’ve corrected the Excel spreadsheet, to prevent the error from recurring in the future.
The employment numbers from this morning are no cause for any sighs of relief, yet. The number of persons employed increased faster than the increase in population–which seems to be unusually small compared to recent months.
In any event, according to my calculation method, this is where we stand (all numbers in thousands):
Civilian Non-Institutional Adult Population: 238,889
Average Labor Force Participation Rate: 66.2%
Proper Labor Force Size: 158,145
Actually employed: 139,206
UNEMPLOYMENT RATE: 13.6%
The labor force participation rate continues to decline, coming in at 64.3% this month, a 30-year low. The actual size of the labor force was 153,690. Using the historical average participation rate of 66.2%, that means the current labor force is running with about 4.45 million fewer workers than it should.
This month’s non-farm payroll increase of 103k new jobs is really just a drop in the bucket. We would need 11 million jobs created to get the unemployment rate back to 5%. Even if there were no increase in population at all, we would need to create 300k new jobs per month for 37 months to get those 11 million jobs back. The only possible bright spot is that, this year, the first of the baby boomers hit 65 and begin retiring. So maybe the actual labor force participation rate is due to naturally drop, as is the size of the labor force.
All we have to do, then, is figure out how to pay social security to more retirees with a shrinking labor force. That should be fun.
Once again this month, the employment report, weak as it is, hides even worse weakness in the labor market. Despite the banner headline of 39,000 new jobs, the number of Americans actually employed declined from 139.061 million to 138.888 million, a decline in employment of 173,000. And, of course, 39,000 new jobs isn’t really helpful anyway, when you consider that last month, the labor force increased by 122,000. We need to be creating 122k+ jobs a month just to keep even with population growth.
The real unemployment rate continues to rise, according to my personally devised measure of employment (Population numbers are in thousands):
Civilian Non-Institutional Adult Population: 238,715
Average Labor Force Participation Rate: 66.2%
Proper Labor Force Size: 158,029
Actually employed: 138,888
UNEMPLOYMENT RATE: 13.8%
Compare and contrast that with April of this year:
Civilian Non-Institutional Adult Population: 237,329
Average Labor Force Participation Rate: 66.2%
Proper Labor Force Size: 157,112
Actually employed: 139,455
UNEMPLOYMENT RATE: 12.7%
Since April, the number of Americans actually employed has declined from 139.455 million to 138.888 million, a drop of 567,000 employed.
Of course that’s the "official" number – as we’ve been pointing out for some time, the real number is well into double digits. But it again points out that markets are not at all happy with the business environment and consumers simply aren’t consuming at a level to push hiring even if it was settled.
In a significant setback to the recovery and market expectations, the United States economy added just 39,000 jobs in November, and the unemployment rate rose to 9.8 percent, the Department of Labor reported Friday. November’s numbers were far below the consensus forecast of close to 150,000 jobs added and an unemployment rate of 9.6 percent.
The increases tallied are mostly seasonal temporary work, meaning private companies aren’t creating many jobs at all (again, the economy has to generate around 125,000 new jobs a month just to stay even):
Private companies, which have been hiring since the beginning of the year, added 50,000 jobs in November. Most of those increases came from temporary help, where 40,000 jobs were added, and in health care, with an additional 19,000 jobs.
Retail jobs declined by 28,000 in November, while manufacturing, which had showed some strength earlier in the year, lost 13,000 jobs.
Government jobs dropped by 11,000 in the month.
Outlook? Bleak. Meanwhile the tax fight continues in the Congress. If you’re wondering why the business climate remains so unsettled, it is thinking like this which is typical of the majority party there:
Yeah, that’s right – this yahoo is claiming that small businessmen don’t ever make any decisions based on tax considerations. So they won’t mind a tax hike in the least.
How in the world does anyone take someone like that seriously? However, understanding that his thinking is most likely not uncommon there, it isn’t at all hard to imagine why Congress seems clueless as to how to stimulate the economy, is it?
I‘m always cynically amused by lead sentences like this from the supposedly unbiased media.
Unemployment is set to remain higher for longer than previously thought, according to new projections from the Federal Reserve that would mean more than 10 million Americans remain jobless through the 2012 elections – even as a separate report shows corporate profits reaching their highest levels ever.
Of course one has zippity do dah to do with the other. The reason corporate profits are reaching their highest levels ever is because corporations that have survived the recession have done so paring down to a "lean and mean" status by dropping headcount, closing unneeded facilities and cutting spending. Those workers that are still employed are what are necessary to carry the corporation forward in the financial situation and business climate we find ourselves in now. As the economy slowly picks up steam and additional headcount can be justified by additional business, it will be added. But, as we all know, employment is a lagging indicator – i.e. profits and such are going to go up before headcount goes up.
But there’s going to have to be a definite, traceable, unmistakable upward trend with a demonstrable increase in business before corporations add headcount again in the present business climate. And given what this administration and the 111th Congress have done – make war on American business – few are inclined to do that.
So? So it stands to reason that employment is down and will probably stay down until corporations and businesses see a much friendlier and stable business climate than they’re seeing now.
We haven’t been writing about the hostile climate here for our health or amusement. But as can be witnessed here, the subtle yet telling attempt to shift the blame is found in the first sentence. If only greedy corporations would simply start hiring instead of amassing profit, why everything would be peachy keen and our man in the White House wouldn’t be looking at the probability of high unemployment in 2012.
So prepare yourself to see these sorts of exercises in blame shifting at regular intervals over the next couple of years.
Even as conditions are likely to remain miserable for job seekers for years to come, an extraordinary bounce-back is underway in the nation’s corporate sector, with profits rebounding 28 percent over the past year to an all-time high in the third quarter.
Without this narrative, which the entire left and a good portion of the middle will swallow whole, the administration and Democrats haven’t an identified enemy with which to wage political war – and that, of course, is part of our problem now.
This is one of those cases where the headline numbers and claims of new jobs are so totally out of step with reality, that it’s hard to believe how badly the banner numbers reverse the actual employment situation. In fact, I’d argue that this month highlights perfectly why the Bureau of Labor Statistics needs to thoroughly revise the way the Employment Situation is reported.
To understand why, let’s look at the “A” Tables of the Employment Situation report. Take a careful look at the “Employed” line in the table. Last month, there were (in thousands) 139,391 persons employed. This month, there were (in thousands) 139,061 employed. So, non-farm payrolls may have increased by 151,000 jobs, but there are 330,000 fewer employed Americans than there were last month.
The total civilian, non-institutional adult population, in thousands, was 238,530 this month. With the historical long-term trend rate of labor force participation of 66.2%, that means the actual size of the labor force should be 157,907. With only 139,061 persons actually employed, the real unemployment rate is actually 13.6%, up from 13.2% last month, and from 12.8% in May.
The current labor force participation rate of 64.5 is the lowest since November of 1984.
Essentially, the employment situation worsened last month, rather than getting better. The only reason it looks better is because so many people are just dropping out of the labor force. When they do so, they magically disappear from the official banner statistics.
What is actually happening is that job growth is not keeping up with population growth, so every month, real employment is declining. It’s nice to see that employers have added 151,000 payroll jobs, but that simply isn’t a rate that keeps pace with job force growth. To give you an idea of how this is working, since Oct 09, the civilian non-institutional adult population has increased by 1,980 thousand people, while at the same time, the number of employed has risen by 819 thousand. That means that there is a deficit of 1,161 thousand jobs that has built up over the last year.
The banner statistics of payroll jobs and unemployment rate are increasingly out of step with the true employment situation.
According to Gallup’s private read on unemployment, we currently stand with an unemployment rate of 10.1%. Gallup says:
Unemployment, as measured by Gallup without seasonal adjustment, increased to 10.1% in September — up sharply from 9.3% in August and 8.9% in July. Much of this increase came during the second half of the month — the unemployment rate was 9.4% in mid-September — and therefore is unlikely to be picked up in the government’s unemployment report on Friday.
The government’s final unemployment report before the midterm elections is based on job market conditions around mid-September. Gallup’s modeling of the unemployment rate is consistent with Tuesday’s ADP report of a decline of 39,000 private-sector jobs, and indicates that the government’s national unemployment rate in September will be in the 9.6% to 9.8% range. This is based on Gallup’s mid-September measurements and the continuing decline Gallup is seeing in the U.S. workforce during 2010.
So, when looking at the numbers we have from ADP, showing a 39,000 job loss for the month, plus the sharp spike upward in the last half of September, tomorrow’s unemployment figures from the BLS will miss most of the job losses, and will show a national unemployment rate that is smaller than it truly is.