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.