Is Unemployment Really Declining?

Right From the Start

The United States Department of Labor reported that approximately 243,000 jobs were created during January of 2012 and that the unemployment rate had dropped to 8.3 percent. Any increase in employment is good, but we need to be careful about how joyfully we celebrate. First, we need to put the job creation into context; and second, we need to understand that the unemployment number is practically irrelevant except for the political class that touts its increases and decreases as if they actually had meaning.

The latest recession began in 2008, the final year of President George W. Bush’s second term. Three million, six hundred thousand jobs were lost in that calendar year and marked the end of nearly four and one-half years of job growth which added almost 7.8 million jobs. In 2009, the first year of President Barack Obama’s presidency, another 5.06 million jobs were lost. In 2010 we added back about 1.03 million jobs and in 2011 another 1.8 million were added.

Based on those figures, one might conclude that of the 8.7 million jobs lost, we have recovered 2.8 million jobs. But that would assume the workforce numbers are static. Based on population growth figures, it is estimated that approximately 200,000 new people join the available workforce each month. That’s an additional 2.4 million people seeking jobs who are not included in the job statistics mentioned above. And then you need to add to that figure the number of people that were already unemployed immediately preceding the beginning of the recession in 2008 – approximately 6.9 million. In reality, at the conclusion of Mr. Bush’s term, there were approximately 12.9 people for whom work was not available. That is a staggering figure but it only gets worse.

By the end of Mr. Obama’s first year, another 5.06 million jobs were lost and an additional 2.4 million people were available to enter the workforce. Thus at the conclusion of Mr. Obama’s first year, there were approximately 20.4 million for whom work was not available. In 2010, the economy began to add back jobs – approximately 1.07 million jobs. However, yet another 2.4 million people were available to enter the workforce, which meant that there were approximately 21.73 million people for whom work was not available. The third year of Mr. Obama’s term, 2011, saw the economy add back another 1.7 million jobs; but yet another 2.4 million new people were available to enter the workforce. So at the conclusion of Mr. Obama’s third year, there are approximately 22.4 million people for whom work is not available.

While the economy continues its anemic recovery we are losing ground in the jobs market. More pointedly, the economic recovery has been so weak that we have not produced sufficient jobs to keep pace with the growth in workforce availability let alone recover one single job that has been lost since the beginning of the recession in 2008.

And that is precisely why the unemployment rate is irrelevant. The unemployment rate is not a measure of the number of people for whom work is not available. It is simply a measure of the number of people receiving government assistance in the form of unemployment payments. It does not include those who have received the maximum amount of benefit payments. And it doesn’t include those who have entered workforce availability but have never held a job.

If you were to believe the unemployment numbers published by the Bureau of Labor Statistics you would conclude that at the end of 2011 there were approximately 13.5 million people unemployed when, in fact, there are approximately 22.4 million people for whom work is not available. That is 22.4 million and growing monthly, annually.

As further illustration, at the point that the economy began to add jobs in April of 2010, the number of unemployed, according the Bureau of Labor Statistics, was 14.6 million. By the end of the year, that number stood at 14.8 million – 200,000 more – even though 674,000 jobs had been added to the economy. In 2011 the number of unemployed, according to the Bureau of Labor Statistics, fell from 14.9 million to 13.7 million – an improvement of 1.2 million, even though 1.7 million jobs were actually added to the economy. In both cases people simply dropped off the unemployment rolls – stopped receiving benefits – without actually finding a job.

The same is true on a more micro level for Oregon. From January of 2011 to December of 2011, the number of unemployed, according to the Oregon Department of Employment, fell from 207,624 to 177,918 – an improvement of 29,706. At the same time, the number of people employed in Oregon rose from 1,993,068 to 1,994,663 – an improvement of only 1,595. Oregon’s unemployment rate improved from 10.4% to 8.9% not because there was robust job growth but because 28,000 people stopped receiving benefits. They either reached their maximum benefit payment, just gave up or left the state. And that number does not include the number of people who entered workforce availability in 2011 and for whom no jobs were available. That number is about 30,000 based upon the fact that Oregon represents about 1.25 percent of the total population of the United States and 1.25 percent of the total number of persons (2.4 million) entering workforce availability in the nation.

The point is that while Mr. Obama – and even Gov. Kitzhaber – brag about the falling unemployment numbers, those numbers have little relationship to the actual employment picture. The unemployment numbers represent a political point and a government dependency and are far from any real focus on the 22.4 million people for whom no job is available – 22.4 million and growing monthly and annually.

Now is not the time for the politicians, including Mr. Obama, to take a victory lap. Now is the time to double down by examining carefully the impediments to job growth – no more phony stimulus, no more crony capitalism, no more pie-in-the-sky green energy – just a real focus on removing the impediments to job growth.

For my part, on a national level, I am less concerned about further tax cuts than I am about tax stability and predictability. I am much more concerned with the additional burdens imposed by Obamacare and the new and increasing regulations imposed by Mr. Obama’s administration. I am more concerned with an energy policy that denies access to North American energy while wasting billions on a failed “green energy” policy. I am more concerned with the growth in the national debt and the waste of billions of dollars on crony capitalism and green energy adding to a staggering national debt which, should interest rates rise even one percent, will likely sink our economy for another decade.

On a state level, because of the relatively small Oregon economy, the tax and fee increases in Measure 66 and 67 have had a much greater impact and need to be repealed. And the growing influence of Oregon’s public employees unions, with their $130 million political war chest available each biennium, needs to be addressed.

But what is good for the economy seldom is reflected in what is good for politics. As America moves closer and closer to a European style welfare state, we are moving closer to the point where a voting majority is dependent on the state for their income. The irresistible lure of something for nothing spelled the decline of Europe. And with Mr. Obama serving as the nation’s Pied Piper, that allure may well prove fatal for America.

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Posted by at 05:00 | Posted in Economy, President Obama, Uncategorized, Unemployment | 21 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Bob Clark

    We do have very subpar economic growth but growth nonetheless, and it’s difficult almost always to defeat an incumbent.  FDR was able to win two re-elections even with much more dire economic performance, but the voting public must have thought a sideways economy is better than Hoover’s crashing economy.

    Longterm, Mr. Huss is right.  Paying folks to rest on their laurels as presently is the road to national financial ruin, as well as national security weakness.  Being GOP to me means keeping the nation and states on sound financial footing through adherence through the free enterprise model and resetting government spending levels back to pre-crisis levels. Sometime down the road after this November’s general election, the GOP maybe should think about trading some give back on the Bush Era income tax rate cuts for a lower corporate tax rate (say 35% down to 25%).  This might help pickup private sector economic performance by making the U.S a more preferred business location vis-a-vis rest of the world.

    P.S I think the unemployment rate isn’t just about the unemployed losing their unemployment benefits, as it is based on a household survey question(s) I believe in which the respondent is asked whether he or she is looking for work and/or currently employed.  Further tid bit: I hear about one quarter of the drop in the labor participation rate is based on the unemployed taking early retirement.

  • valley person

    According to the Bureau of labor statistics, nearly 8 million net jobs were lost from December 2007, the onset of the recession, to July 2009, about the time when Obama’s stimulus and other policies began to kick in. From July 2009 to the end of 09 we lost another 600,000 jobs net. We then began to gain net jobs and have been doing so ever since.

    Attributing jobs lost the first 6 months of the Obama Administration is pure sophistry. He needed some time to pass some bills, which by the way got zero support from Republicans in any case.

    It is now Obama’s economy, and it is recovering pretty well. I know that freaks Larry out, but get used to it. 

    • JoelinPDX

      Yeah, don’t you know you are going to get ignorant crap from people like VP. Go back and read Larry’s article and then read it again and keep reading it until you get it, instead of the BS we’re being fed by Obozo’s number crunchers.

      • valley person

         So you are saying Larry’s number crunching is more reliable than the BLS?

  • JoelinPDX

    Larry, an excellent primer on what is really going on with the employment numbers. This clearly explains why the jobs added number can go up but there is no concomitant change in the unemployment figure. It also makes clear that the true unemployment rate continues to increase despite what we are being told but the Bureau of Labor Statistics.

    Nice job. Now if you could just find a way to make the likes of Valley Person, 3H and David Apell understand and acknowledge the truth.

    • David Appell

      Not true — the U6 unemployment rate has declined from a high of 17.2% (Oct and Dec 2009) to 15.1% last month.

  • Verycold

    Valley person,

    As Jack Nicholson said,  “you can’t handle the truth”.  That is how Greece became bankrupt Greece, by depending on government and refusing to face the cold hard truth.

    • valley person

       Mr or Ms Very cold….Greece became “bankrupt” because it issued bonds to pay for services, and has to pay those bonds back in a currency it does not control. They got themselves in a bad way, but it has nothing to do with the US, and certainly has nothing to do with the discussion here over unemployment.

  • Rupert in Springfield

    What it comes down to is we have a growth rate that would be barely acceptable were it occurring between recessions. Coming out of a recession, where GDP growth is generally much higher, our current growth rate is awful.

    No one would claim Obama caused the recession, just as only die hards would claim Bush caused the recession. It is a world wide situation and the blame is hardly singular.

    What one can say is Obamas policies have not been helpful for growth. Even those who support his health care bill would admit that it retards growth as it is a huge market uncertainty. Sure, if you work for a subsidized industry there has been growth, but thats not a sustainable plan. We all remember Solyndra and the bevy of other Green Welfare flops that followed.

    Another drag on the economy is the deficit. Again economic growth is the key. Obama seems to have no comprehension of this as when it comes to the deficit his only solution seems to be raising taxes on the wealthy. That’s not a solution as there simply is not enough money there substantially reduce the deficit at any realistic tax increase. Some tax increase proposals could actually increase the deficit, such as raising capitol gains taxes. Mr. Obama had no understanding of this when it was repeatedly pointed out to him in the debates that raising cap gains results in lower revenue.

    What we need is a sustained growth policy. They key thing that Mr. Obama needs to understand, is that federal revenues are tied more closely to GDP growth than they are to tax increases.

    If he doesn’t get it, then maybe he should ask around. Growth got us a balanced budget under Clinton, not the tax increase he passed when coming into office. We know this because by 1994 (more than two years after the tax increase) Clinton was sending budgets to congress that had $300B deficit projections 10 years out.

    What turned it around? Growth, not tax increases. Obama would do well to reconsider the direction of his administration in that regard. Clinton did and the success of his presidency is generally credited almost entirely to that fact.

     

    • valley person

      ” Even those who support his health care bill would admit that it retards growth as it is a huge market uncertainty.”

      Error #1. We supporters don’t admit that. But do go on (and on).

      “Another drag on the economy is the deficit. ”

      Error #2. The current deficit is boosting GDP growth acording to the CBO and just about every economist. Read your Econ 101 textbook for an explanation.

      “That’s not a solution as there simply is not enough money there substantially reduce the deficit at any realistic tax increase. ”

      I’ll ignore the garbled syntax. Not renewing all the existing temporary tax cuts would close about 75% of the projected deficit 4 or 5 years out. A 75% reduction is substantial. That makes error #3.

      “Some tax increase proposals could actually increase the deficit, such as raising capitol gains taxes”

      This is very close to being Error #4. But you saved yourself by using the word “could” instead of “would.” “Could” gives you wiggle room. Read the summary in: https://www.cbo.gov/ftpdocs/84xx/doc8449/88-CBO-007.pdf

      “Growth got us a balanced budget under Clinton, not the tax increase he passed when coming into office.”

      Take this apple and this orange. Eat them both. Since you ate the apple first, I submit it was the orange that satisfied your appetite.

      Error #4 (or 5). It was BOTH Rupert. And a third element known as spending growth restraint. Revenues increased by about $100B a year after the tax increase, and spending increased by about $50B a year.

      “We know this because by 1994 (more than two years after the tax
      increase) Clinton was sending budgets to congress that had $300B deficit
      projections 10 years out. ”

      Error #5 (or 6). The tax increase passed in August 1993. 1994 began 4 months after it passed not 2 years.  And Fiscal year 94 began in October of 93, so it was a mere 2 months after the bill was signed. I have pointed this out to you 4 or 5 times I think, but you keep making the exact same mistake. You must love your floggings.

      You now have this remarkable opportunity to admit to 5 errors from a single post.

    • David Appell

      > Some tax increase proposals could actually > increase the deficit, such as raising capitol gains taxes.

      That is far from obvious. The capital gains tax rate was 28% under Reagan, and 29% in Clinton’s first term. Clinton, you’ll recall, balanced the budget and left a surplus.

      Warren Buffett has said the level of capital gains tax rates are not a consideration in his investing. But what does he know? 

    • David Appell

      Only die hards claim George W Hoover started the recession? Hardly. A great many people see Bush’s lax regulatory environment as a major factor in causing the recession. His regulators scoffed at the threat derivatives posed to the markets. (Watch Frontline’s “The Warming.”) Liabilities in the market reached $600 trillion.

      Yes, $600 trillion. And Bush’s people (Greenspan, Rubin, and company) saw nothing to worry about. 

      • David Appell

        That program was “The Warning.” (I’ve been working on something climate-related all day.) 

    • David Appell

      Clinton also reduced the deficit by reducing the size of government. Federal outlays were 22.3% of GDP in 1991, and were reduced to 18.2% by 2000. 

      By 2008 they were back up to 20.7%, and 25.0% in 2009. 

  • David Appell

    “Bush On Jobs: The Worst Track Record On Record”
    Wall Street Journal, Jan 9, 2009
    https://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/

  • 3H

    It would be nice to have sources. But I suppose that is asking too much.  When  Larry talks about 200,000 new people entering the workforce very month, has he also taken into account the number of people who voluntarily exit the workforce – people who retire?

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