Yer Latest “Good Economic News”
Well, the economic news for August is now out. Short version: the economy is still in the freaking toilet.
For the third consecutive month, the US labor participation rate remained at 62.6%. That means only 62.6% (the actual number, to 6 figures, calculates to 62.5518%) of the US civilian labor force is actually working or actively looking for work.
This is a 38-year low – for the third straight month. Prior to the last 3 months, the last time the US labor participation rate was this low or lower was October 1977. Then, it was 62.4%.
Yes, that does indeed read October 1977 – as in “during the worst of the Carter years”.
It’s true that the “official unemployment rate” fell slightly last month, from 5.2% to 5.1%. But that measure is absolutely worthless, because it tells you nothing about the underlying economic reality. Here’s why.
U3 – the “official unemployment rate” – is calculated using only those who are “actively looking for work” but who are unable to find work. “Actively looking for work” is defined as looking for work within the last 4 weeks. However, if someone has gotten completely discouraged and is no longer even looking for work, they’re not counted. But they still exist. And at some point in the future, they’ll be looking for work again.
U3 is such a p!ss-poor measure that it’s even possible for this to cause the “official” unemployment rate to drop while you’re losing jobs overall. I’ve provided a short example at the end to show how this can occur.
That appears to be precisely what’s been going on for the past several years. The US labor participation rate has gone down by 3.1% since January 2009. That means a huge number of Americans simply aren’t even bothering to look for work that should be looking. If the labor participation rate were the same today as it was in January 2009, an additional 7.78 million Americans would be in the labor force.
Today’s US civilian labor force totals over 251 million. Just for “fun”, let’s calculate what the “official” unemployment rate would be today if we had January 2009’s labor participation rate.
In January 2009, the US labor participation rate was 65.7%. If that were the case today, the US civilian labor force would be approximately 164,970,000. (Since the US labor participation rate today is only 62.6%, the civilian labor force today is only about 157,065,000.)
However, today only about 149,055,000 Americans have jobs. That means if we had a labor participation rate equal to that of January 2009, we’d have about 15,915,000 unemployed people who were actively looking for work today.
Doing the math gives an unemployment rate of 9.64+% if we had the January 2009 labor participation rate of 65.7%. Since “official” unemployment in January 2009 was 7.8%, we’d need at least 4.5 million more jobs than exist today to get back to January 2009 economic conditions – and nearly 8 million more to achieve a 5.1% unemployment rate at January 2009’s labor participation rate.
Oh, and we’re all also taking it in the proverbial shorts regarding purchasing power, too. Per that wonderful bastion of conservatism called the New York Times, real wages (e.g., adjusted for inflation) have dropped since January 2009 in all earnings quintiles – with the lowest-earning quintile seeing the largest real decline.
Recovery? What freaking recovery? So far, there hasn’t been one. All we’ve seen is stagnation, along with people becoming discouraged to the point of giving up. Actual economic recovery? Um. no.
It’s been more than 6 and a half years since January 2009. Are we ever going to see any real economic progress?
. . .
Example Showing Loss of Jobs AND a Decline in “Official” Unemployment
This simple example assumes no retirements and no new entrants into the job market during the two months in question. In real world calculations, they’re considered – those are handled by adding new entrants and subtracting retirements, but the example is simpler and easier to follow if we omit those. FWIW: since the population is growing, there are typically more new entrants than retirements each month. In the real world, new job creation must exceed the difference between new entrants and retirements or the unemployment rate will go up.
First month
These are the numbers at the beginning of the first month.
Number unemployed and looking for work: 100,000
Number with jobs: 900,000
Labor Force: 100,000 + 900,000 = 1,000,000
Unemployment rate: 100,000 / (100,000 + 900,000) = 10.0%
Second month
At the beginning of the second month, 25,000 jobs are cut. However, 50,000 of the previous month’s “officially” unemployed people got fed up and quit looking for work 5 weeks ago – so they’re no longer counted. The 25,000 who lost their jobs immediately start looking for new work.
Number unemployed and looking for work: 100,000 (previous month) – 50,000 (quit looking) + 25,000 (lost jobs, started looking) = 75,000
Number with jobs: 875,000
Labor force: 75,000 + 875,000 = 950,000 (those who quit looking are no longer counted)
Unemployment rate: 75,000 / ( 75,000 + 875,000) = 7.89%
So, there was a net loss of 25,000 jobs in that month, but because enough people got fed up and quit looking for work the “official” unemployment rate dropped by 2.1+%. Truly a great measure of economic conditions, eh?
Category: "The Floggings Will Continue Until Morale Improves", "Your Tax Dollars At Work", Barack Obama/Joe Biden, Economy
Why work or look for work when one can get free phones, SNAP, and virtually unlimited unemployment bennies?
Socialism – it’s such a wonderful thing…
Those free phones still crack me up. What was the justification of funding those programs? So they could look for and be contacted by potential employers?
…and Parole Officers, drug contacts…
figures don’t lie, but liars figure, and Gubberment liars are the worst of all.
Thank you Lyndon Johnson (you ass hole) for The Great Society and all the liberal administrations who have built upon it since.
When the incentives not to work are as good or better as the incentives to get off one’s ass and look for work, then this situation will only become worse.
They want to cut veteran’s benefits and health care. They want to cut Social Security benefits. But no one, no one on the liberal side ever and few on the conservative side ever mentions cutting any welfare benefits in their myriad forms. Never!
Until we as a nation turn this upside down on the “hands always out for more” populace, this will not change. If it does change, it will take at least a generation to start to get the sit on their asses mind sets changed. This will only happen when the only benefits are minimal money and basic food costs. FAR less than is available now. No free phones, no free anything except the bare necessities to live. Some will be happy to stay where they are even then. But many will desire to have more and when the ONLY option for more is to work for it, I believe they just might. But this could also be wishful thinking on my part. Wishful about the needed changes and then wishful about the dead on their asses ever changing. There already are now and may be then, simply far more willing to just turn to crime to get what they want than work for it.
And at the same time we are cutting military personnel out for any and every excuse possible, adding more veterans and “jobless” to that pool. Why? So we can pay for social “happy” programs.
Just like the waters off Rio de Janeiro…looks good from a distance.
Don’t worry. Congress will just increase the number of H1B1 visas so scum companies like Disney can replace American workers for tax cuts.
and I wonder how long it’s going to take to repair this mess.