Free Markets, Free People

unemployment

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The bad, the worse and the ugly

A couple of economic notes and an environmental question.

On the econ side, unemployment.  The Mercatus Center explains our current unemployment situation and why the “official number” is a feel-good fantasy:

Alt-unempl-resize-websiteIn case you missed it, the real unemployment rate is in the 11% range.  Also note that before the recession, we were at around 9%.  We’re certainly doing better but why they continue to publish misleading numbers on the unemployment front is a mystery … oh, politics.  Never mind.

It’s better to be lied to and feel good about it than to know the truth.

Also, as a followup, the $15 minimum wage in SF and Seattle continues to take victims.  While neither has fully implemented the wage at present, its enough to push business owners into making decisions which are unlikely the intended consequence of the wage raise. We told you about Borderland Books in SF.   Here’s an example from Seattle:

Cascade Designs, an outdoor recreational gear manufacturing company based in Seattle, announced it is moving 100 jobs (20% of the workforce) later this year to a new plant it is leasing near Reno, Nevada. The company has offered some employees positions in Reno, but others must reapply.

Founder John Burroughs and Vice Chair David Burroughs blamed Seattle’s new $15 minimum wage, indicating it “nudged them into action.” According to the owners, Seattle’s new minimum wage would “eventually add up to a few million dollars a year.”

Once established in Reno, you may see further moves.  And:

The San Francisco Eater, a local publication following the city’s restaurant scene, predicts that the impact of the $15 minimum will likely lead many restaurants to close their doors this year. Abbot’s Cellar and Luna Park, popular locally owned restaurants, already made the decision to shut down. The owners both blamed the $15 minimum wage.

What’s $15 times zero?

Finally on the enviro front, where’s the outrage?  From CATO:

Nicaragua’s plan to build an Interoceanic Canal that would rival the Panama Canal could be a major environmental disaster if it goes forward. That’s the assessment of Axel Meyer and Jorge Huete-Pérez, two scientists familiar with the project, in a recent article in Nature. Disturbingly, the authors point out,

“No economic or environmental feasibility studies have yet been revealed to the public. Nicaragua has not solicited its own environmental impact assessment and will rely instead on a study commissioned by the HKND [The Hong Kong-based company that has the concession to build the canal]. The company has no obligation to reveal the results to the Nicaraguan public.”

In recent weeks we have seen similar opinions aired in the Washington Post, Wired, The Economist, and other media. In their article, Meyer and Huete-Pérez explain how the $50-billion project (more than four times Nicaragua’s GDP), would require “The excavation of hundreds of kilometres from coast to coast, traversing Lake Nicaragua, the largest drinking-water reservoir in the region, [and] will destroy around 400,000 hectares of rainforests and wetlands.” So far, the Nicaraguan government has remained mum about the environmental impact of the project. Daniel Ortega, the country’s president, only said last year that “some trees have to be removed.”

Some trees?!  Where are the enviros whackos on this?

Crickets:

Interestingly, despite this potential massive threat to one of the most pristine environmental reservoirs in the Americas, none of the leading international environmental organizations, such as Greenpeace, Friends of the Earth or the Sierra Club, has issued a single statement about the Nicaragua Canal.

We know for a fact that this is not out of lack of interest in Central America. After all, some of these organizations were pretty vocal in their opposition to CAFTA. Why isn’t the Nicaragua Canal proposal commanding the attention of these international environmental groups?

Why?  Because as Insty points out, “commies get a pass” on this sort of thing.

~McQ

When your government lies to you

Jim Clifton, Chairman and CEO of Gallup lays out one of the biggest lies our government is party to each month.

The unemployment rate.

Right now the lie claims that only 5.6% of those who want to work aren’t working.  That’s simply not true.

But it is a lie that banks on you not looking into how the government computes this number.  It banks on you using a different definition – i.e. one that defines unemployment as I have above – the unemployed are those who want work but can’t find work.

However, the government uses an entirely different set of criteria to come up with their number and ignore a  huge portion of the public which is out of work.

Clifton points out:

If you, a family member or anyone is unemployed and has subsequently given up on finding a job — if you are so hopelessly out of work that you’ve stopped looking over the past four weeks — the Department of Labor doesn’t count you as unemployed. That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news — currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed.

Yet politicians and the media keep pushing that number out there without any caveat or qualifier.  They too expect you to use your definition of unemployment while they knowingly push this lie.

And, it’s even worse than that.  Here’s another way they pad that official number:

There’s another reason why the official rate is misleading. Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 — maybe someone pays you to mow their lawn — you’re not officially counted as unemployed in the much-reported 5.6%. Few Americans know this.

Of course “few Americans know this”.  It’s because our government goes out of its way to avoid telling us this. The official unemployment numbers is a fantasy number with very little basis in reality.  It is aimed at serving the political resumes of our government masters.  It is designed to pretend there has been progress in the employment field.  There hasn’t.  Period.

Yet another figure of importance that doesn’t get much press: those working part time but wanting full-time work. If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find — in other words, you are severely underemployed — the government doesn’t count you in the 5.6%. Few Americans know this.

None of this gets much press.   The politicians and bureaucrats glibly push this lie and the media dutifully publish it with little or no research into its efficacy.  We have the lowest labor participation rate in about 40 years meaning huge numbers of Americans remain unemployed or grossly underemployed while our political betters celebrate false employment numbers and claim things are “getting better”.  It is all about the next election instead of service to this country for them.

Clifton concludes:

I hear all the time that “unemployment is greatly reduced, but the people aren’t feeling it.” When the media, talking heads, the White House and Wall Street start reporting the truth — the percent of Americans in good jobs; jobs that are full time and real — then we will quit wondering why Americans aren’t “feeling” something that doesn’t remotely reflect the reality in their lives. And we will also quit wondering what hollowed out the middle class.

The middle class is the real victim of these horrid economic conditions.  Pretending that “all is well” on the employment front lets politicians off the hook when it comes to addressing the problems the middle class in this country are facing – like UNEMPLOYMENT!  They simply point to the lie and claim that “historically” that rate signifies “full employment” and they’re the heroes that brought it down.

When your government purposely lies to you, any trust you may have in it vanishes.  And it portends even worse problems.  If it will lie about the unemployment rate, what else will it lie about?  And what steps will it take to maintain those lies and protect those who tell them?

What was supposed to be a servant to the people is evolving quite rapidly into the people’s master.  Government wasn’t envisioned like this at all at our founding.  In fact, what we have today is anathema to what our founders envisioned.  A huge, bloated, powerful, coercive and dishonest government which seems to think it has the right to intrude at all levels of our life.   The particular lie Clifton exposes is only one of many it has pushed over the years.  And unless something is done and done quickly it will only get worse.

Maybe it is time for a convention of the states.

~McQ

Observations: The QandO Podcast for 24 Nov 13

This week, Bruce McQuain makes his triumphant–albeit mean-spirited and cruel–return, to talk with Michael and Dale about Iran, The Census Bureau. and the Senate’s filibuster rules.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here.

Observations: The QandO Podcast for 10 Nov 13

This week, Bruce, Michael and Dale discuss Obamacare and the end of antibiotics.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here.

Stagnant wages, among other things, a result of the economic doldrums

That’s certainly one of the factors keeping GDP growth low.

Four years into the economic recovery, U.S. workers’ pay still isn’t even keeping up with inflation. The average hourly pay for a nongovernment, non-supervisory worker, adjusted for price increases, declined to $8.77 last month from $8.85 at the end of the recession in June 2009, Labor Department data show.

Stagnant wages erode the spending power of consumers. That means it is harder for them to make purchases ranging from refrigerators to restaurant meals that account for most of the nation’s economic growth.

Not only that, but unemployment remains historically high years after the “recovery”. The question, however, is why wages are remaining stagnant. The WSJ cites three factors:

Economic growth remains sluggish, advancing at a seasonally adjusted annual pace of less than 2% for three straight quarters—below the prerecession average of 3.5%. That effectively has put a lid on inflation, which has been near or below the 2% level the Federal Reserve considers healthy for the economy. With demand for labor low, prices not rising fast and 11.5 million unemployed searching for work, employers aren’t under pressure to raise wages to retain or attract workers.

Emphasis mine. The Fed is happy with the inflation rate. And the administration, despite numerous claims to be focused like a laser beam on “j-0-b-s” has done little if anything to address unemployment or economic growth. Finally, given the uncertainty that regulation and new laws (such as ObamaCare) bring to the table, employers are even less likely to hire until the regulatory and legal dust settles and they have a much better idea of how both effect their business and industry.  It’s not about “pressure”.  It’s about a lack of incentive.

Secondly:

Businesses are changing how they manage payrolls. Economists at the Federal Reserve Bank of San Francisco in a recent paper said that, in the past, companies cut wages when the economy struggled and raised them amid expansions. But in the past three recessions since 1986—and especially the 2007-2009 downturn—companies minimized wage cuts and instead let workers go to keep remaining workers happy. As a result, to compensate for the wage cuts that never were made, businesses now may be capping wage growth. “As the economy recovers, pent-up wage cuts will probably continue to slow wage growth long after the unemployment rate has returned to more normal levels,” the researchers said.

Another point to make, again considering the unemployment rate, is that those working are glad to still have a job. And with the economy still struggling it is unlikely that many feel the time right to push for higher wages. In fact, it is a “buyers market” right now when it comes to labor. And it will remain one until we get into much higher growth percentages and the demand for labor begins to outstrip the supply. We’re not even close to that at this point.

Finally:

Globalization continues to pressure wages. Thanks to new technologies, Americans are increasingly competing with workers world-wide. “We are on a long-term adjustment, as China, in particular, but all developing countries, get their wages closer to ours,” said Richard Freeman, an economist at Harvard University. According to Boston Consulting Group, there will be only a roughly 10% cost difference between the U.S. and China in making products such as machinery, furniture and plastics by 2015.

Technology is also replacing workers in many industries. Automation is especially tough on low skilled workers. But again, given laws like ObamaCare, the incentive at work is to have fewer employees, not more. Businesses will automate where it makes sense and helps make a profit. It is also a means of closing that wage gap mentioned above, so it isn’t a trend that is likely to end anytime soon.

All of those factors and what I’ve mentioned in addition to them combine to make unemployment and wage growth both remain static. There simply aren’t any incentives at the moment to hire more people. Certainly not in GDP growth. Certainly not with the plethora of new regulations and laws.

In fact, as is mentioned in the article, at the moment there are only two paths to higher wages:

The only path to wage gains is through a stronger economy or an increase in demand for specialized skills.

The economy is moribund and has been for quite some time with GDP growth under 2% for the last three quarters.

That narrows the path to wage gains to a single one – developing specialized skills. It isn’t a path open to everyone, unfortunately, for a number of reasons.

So how could government help change all of that? Quite simply by getting out of the way – something it seems completely unable to comprehend or do.

And because of that, it continues to contribute negatively to the economic situation we endure.

~McQ

Don’t drink “the employment picture is much better” Kool-aid

Why?  Because it isn’t really better.  Oh, it may be marginally better than it was a year ago but that’s not saying much at all.  In terms of real progress?  Yeah, not so much.  The National Journal says:

The U.S. jobs picture is bleaker than the most recent jobs reports may make you think. The economy added 175,000 jobs last month, but at the rate things are going, it would take almost a decade to get back to prerecession employment levels. A Job Openings and Labor Turnover Survey report released Tuesday by the Bureau of Labor Statistics digs in on the bad news: The number of job openings in the U.S. actually fell by 118,000 in April to 3.8 million.

How bad can 3.8 million job openings be? The Economic Policy Institute looks at the number and sees that “the main problem in the labor market is a broad-based lack of demand for workers—and not, as is often claimed, available workers lacking the skills needed for the sectors with job openings.”

Here’s a chart they put together to visually make the point:

An economy on the mend is generating jobs at such a pace that it is competing for workers.  As is obvious, that’s not the case in this economy, nor has it been the case for quite some time.

In a word, the employment picture sucks.  Anyone pretending otherwise is doing exactly that – pretending.  And they can toss around all the numbers they like, the bar charts above tell the real picture – business is not hiring and the reasons are multiple, most having to do with government intrusion (see ObamaCare for one example).

~McQ

Observations: The QandO Podcast for 07 Apr 13

This week, Bruce, Michael and Dale discuss the events of the week.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here.

Jobless numbers “unexpectedly” rise to 4 month high

Because, you know, we’re in a (perpetual) recovery and stuff like this isn’t supposed to happen:

The number of Americans filing new claims for unemployment benefits hit a four-month high last week, the latest suggestion the labor market recovery lost some momentum in March.

Initial claims for state unemployment benefits increased 28,000 to a seasonally adjusted 385,000, the highest level since November, the Labor Department said on Thursday.

Economists, who had expected claims to drop to 350,000, said while part of the rise reflected difficulties adjusting the data during the Easter and spring breaks, there was no doubt the pace of job growth had eased.

“What we do know is that the growth momentum has slowed, employment has slowed. The question is how much?” said Millan Mulraine, a senior economist at TD Securities in New York.

How much?  Well let’s consider something shall we?  What has recently and finally gone into full effect to the point that employers can now finally make some plans with reference to it as to how many they plan to employ (or continue to employ)?

Oh, yeah, ObamaCare.  The taxes and penalties kick in this year and – not saying this is the only reason – companies and corporations are finally put in the position of executing their plan to avoid the prohibitive costs and penalties imposed.

That’s right – “avoid”. Again, as is usually the case, the left has ignored Human Nature 101 as they usually do. You have to remember, the purpose of their utopia is to change human nature once and for all from a self-interested and independent being to a hive worker enslaved to the state, er, an enlightened being who thinks of others first … yeah, that’s the ticket.

And when their utopian plans meet human nature, well they call the result “unintended consequences”. We who study human nature call them “entirely predictable outcomes”. They seem surprised by these “unexpected” developments. We simply shake our head at their studied stupidity.

The problem, of course, is they presently have the power of the state in their hands. What that means is they will continue to try to drive the square peg of their utopia into the round hole of human nature and use the power of government to do so.

What that means is at some point, when they’re finally out of power, we’re going to have to pick up their pieces of what they’ve destroyed and try to piece it together in some form or fashion, if that’s possible.

And all the while that’s being attempted, we’ll have to listen to them whining and complaining that what is being done isn’t “fair” or “equitable”.

Well, what you’re suffering now is a result of “fair and equitable” nonsense that ignored Human Nature 101. Maybe it’s time to figure that out if you’re on the left.

~McQ

Unemployment rate at 7.8%? If you believe that, you probably believe the presidential polls …

Here are a few fast facts (from BankruptingAmerica.org)  to put today’s absurd announcement into persepctive:

  • The real unemployment rate stayed at 14.7%. This includes the underemployed and those who have given up looking for work.
  • 23 million Americans are still looking for work. In January 2009, that figure was 22 million.
  • Of the 12.1 million Americans unemployed, more than one third (4.8 million) have been looking for work for over six months.
  • Two out of every five Americans looking for work have been out of work for more than six months.
  • 3.4 million Americans have been out of work for a year and are still looking for work.
  • 802,000 Americans have stopped looking for work
  • In January 2009, the average amount of time spent unemployed was 19.8 weeks. Today, the amount of time has doubled, rising to 39.8 weeks.
  • Manufacturing employment edged down in September by -16,000 jobs.

If you’re wondering why the drop, it simply means another massive group of Americans have come to the end of their extended unemployment benefits and are no longer counted.

In reality, the only numbers that count are listed above.  The labor participation rate essentially remains unchanged.  Those who are celebrating 7.8% are only fooling themselves.  Those who are unemployed certainly know who they are and when it comes time to enter the voting booth and pull the lever aren’t going to be thinking about this “improved number”.  They’re going to be dealing with the fact they don’t have a job.

Wonder who they’ll blame?

~McQ
Twitter: @McQandO
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