Time for Our Next Dose of Economic Castor Oil
The Federal government released economic data for September late last week. So, happy days are here again, right? The US economy is going great guns, yes?
Two words: um, no. As has been the case for the last 7 years, the economy . . . remains in the freaking toilet.
There was one change, though. The US labor participation rate did not remain at 62.6% last month. Rather, it declined further: to 62.4%. Once again, that’s the lowest the US labor participation rate has been since October 1977 – or early in the Carter Administration. It also marks the 18th consecutive month that the labor participation rate has been at Carter-esque sub-63% levels.
This means only 62.4% of the US civilian labor force is actually working or actively looking for work. As noted above, it’s also a 38-year low – which now has been the case for four straight months (July, August, and September’s labor participation rate of 62.6% were all previously tied for the lowest since October 1977).
As noted above, the US labor participation rate has also been at or below 63% for a full two years 18 months now. We never saw that during Carter’s catastrophic economic mismanagement.
And on top of that, job creation was far less than expected. Meanwhile, the US “official unemployment rate” remained at 5.1%.
That last is not good news. The “official unemployment rate” remaining steady at 5.1% is not, as some might claim, in and of itself an indicator of economic progress. By itself, the “official unemployment rate” is absolutely worthless as a measure of the economy’s actual performance; it tells you virtually nothing about the underlying economic reality.
That’s because the “official unemployment rate” – U3 – is calculated using only those who are “actively looking for work” but who are unable to find employment. “Actively looking for work” is defined as looking for work within the last 4 weeks. However, if someone has gotten completely discouraged and has quit even trying to find work, they’re not counted at all for U3 purposes. The labor participation rate, in contrast, accounts for them.
So, when the “official unemployment rate” stays steady at the same time job creation is too weak to keep up with new entrants, that means more people left the workforce than entered. With a growing population, that implies a rather sick economy.
Those who quit looking for work still exist, of course. And at some point in the future, they’ll almost certainly start looking for work again.
U3 is such a p!ss-poor measure of actual economic performance that it’s even possible for the “official” unemployment rate to decline at the same time the economy is actually losing jobs. I’ve provided a short, simplified example showing how this can occur in this past article.
That’s essentially what’s been happening over the past several years. The US labor participation rate has gone down by 3.3% since January 2009. Since there are roughly 251 million individuals in the US civilian labor force today, that means a huge number of Americans who should be out looking for a job have become so discouraged they simply aren’t even bothering to try. However, if and when conditions actually show some real improvement many of them will start looking again – and the unemployment rate will jump. That is when you’ll know a recovery has really started.
One last bit of “good news”: remember those “excellent” job creation numbers for August and September we heard so much about? That were higher than projected? For some reason, they were revised downward last month – substantially. Due to either error or design, the original numbers apparently were not even close to being correct. And it gets even “better”: those revisions now seem to indicate a possible 3-month downward trend in monthly job creation by the economy. If that’s really the case, that’s NOT good news.
Recovery? The correct response to anyone who talks about any “current economic recovery” is exactly the same as it’s been for the past 7 years: “What freaking economic recovery? So far, there hasn’t been an economic recovery.
All we’ve seen is economic stagnation, along with people becoming discouraged to the point of giving up on even looking. And on top of that, wages have been generally declining in real terms the whole time – and in current-dollar terms last month as well, though only slightly.
It’s been almost 6 years and 9 months, Mr. President. Are we ever going to see any real economic progress under your group of feckless fools and clueless tools Administration?
Eh, don’t bother to answer. I think we already know the score.
Category: "The Floggings Will Continue Until Morale Improves", "Your Tax Dollars At Work", Barack Obama/Joe Biden, Economy
Just watch, if we elect a Republican President, the liberal snooze media will suddenly start gushing about how bad things are and the real unemployment rate will be revealed. I remember the Jimmeh Kahtuh years, and the liberal media wasn’t nearly as biased as it is today, remember the “Misery Index”?
True…true…..and true.
We can only pray that we’ve not reached the point of no return.
Yes, but if this (lack of) administration leaves a massive financial and labor mess behind, guess who gets hit with fixing it?
And guess who will refuse to accept responsibility for it?
Precisely how is this different from any time since, oh, the FDR Administration?
A component of government spending is included to calculate GDP. What happens if a govt. spends trillions of borrowed money? Positive GDP that would have otherwise been negative. It’s possible, and in my opinion it’s also plausible.
Also, as I’m sure you already know, a component of looking for work is motive. That motive has been diluted by transfer paymentservices I would think.
In any regard, none of it matters. The djia was up Friday and I read Bezos makes a billion a month. Soon he will purchase the right politician that will allow him to deliver via drone and we’ll all live happily ever after.
Plausible? Hell, that’s what the Federal government has been doing virtually nonstop since at least 1970 – if not way before then. It’s just business as usual in the USA.
Yeah Hondo, I phrased it that way because I was working from memory and posting from my phone… too lazy to look up the details. But now I am at my desk.
To further shore up my assertion above: As far as I know, “recession” is defined solely by GDP.
AS TO the component of GDP that is purely government spending:
So, were it not for the government spending metric asstons of money (hello waste, hello fraud, hello abuse…. come on down!) via the use of borrowed money, one could reasonably assert that the GDP might have been negative these past years and that there was no real “recovery” at all. Since debt and interest does not count positive or negative in the calculation of the GDP, there is no downside to doing what I have described. Need the GDP to grow in order to secure an election? Need the GDP to show growth so your administration can look effective? Spend spend spend! And you won’t read a word about it in the mainstream media.
So Hondo, the point of my followup is not to argue with you (we seem to be in agreement)… just to flesh out my earlier assertions that I was too lazy to do at the time. Using, you know, lawyer tricks.
Seemed to me you were just being polite. When it comes to this issue, I quit being polite a few years ago. That’s why I rephrased your statement in plain language.
Yes, we’re in complete agreement. More people need to hear that plain truth: Federal deficit spending has been masking underlying significant economic issues for decades. Specifically, it’s created an income-transfer state in which the productive get screwed – and there are few consequences for being a non-producer. Hell, when you could nearly two freaking years of various types unemployment compensation (and no, IT’S NOT FREAKING UNEMPLOYMENT “INSURANCE” – it’s a tax-funded benefit), free Medical care on demand (Medicaid) if you have no $$$, and someone else buying your groceries (SNAP) and subsidizing your housing – sometimes you wonder if it even pays to actually work.
These kind of policies are bankrupting the nation – and the “wonderful Current Administration” is freaking grossly accelerating the process by adding more and more and more, and making it “easier” to get free stuff. And they don’t seem to realize that – or, if they do, they don’t give a sh!t.
I agree. They don’t give a shi! because they are only concerned with the front loading of the GDP while they are in office. Ultimately GDP to Debt ratio defines the end game and someone will have to instruct us to “go Greek”. Interest payments are a harsh mistress.
Meanwhile, if we had taken our lumps, told a few criminal wall street types “You gambled, you lost, fuck you”, not confiscated wealth via taxation and debt (implicit taxation), not accelerated spending, etc. we might already be over it and on the path to real sustainable growth.
One interesting thing… all of the bailout plans (Greece et al) depend on GDP growth in order to succeed. There’s an easy way to grow GDP as demonstrated above. Could get ugly.
Transfer payments…. my phone included the word “services” for some unknown reason. SWEADEN!
Yellen has waffled again on whether or not she’ll raise interest rates. First, she said ‘not’. Then she said ‘will’. Last week, she changed her direction again and said ‘not’.
I’m just guessing, but considering how she’s waffling, she is not making the ‘will/won’t’ decisions on her own.
While she changes her mind with the way the wind blows, when and IF she does raise the interest rate from 0.0% to 0.5%, a recession will follow and whoever is next elected will get blamed for it.
Whatever happens, it is going to be interesting.
Hondo, do self-employed people count in any of those numbers? There are a lot of people who are running small businesses out of their homes and have been for some time.
There’s one other factor: the ACA (aka howbadismycare) is one item that is keeping people working who would otherwise have retired by now. This is the age 55-65 group. What has happened in the past is that people in that age bracket retired at will, but lack of or cost of health insurance is keeping them working until they decide to stop.
There are jobs available, but you do have to have the skills to fill those positions and I do not see much in the way of entry-level positions now. This is extremely reminiscent of Carter’s mess.
It’s my understanding that the BLS uses monthly survey data to acquire their numbers, and that those numbers are then used to project national totals. The survey sizes seem to be large enough to yield statistically valid results – e.g., it’s very unlikely they’re completely wrong, but may be off slightly due to sampling error.
I believe that those who indicate they own a business and work in same are indeed counted as “employed” on such surveys.
The definition of who counts as “employed” is elastic as hell, too. If someone works as little as a couple of paid hours a week on a regularly-scheduled basis – they’re “employed”. Ditto if they perform unpaid work in a family business. As noted above, I’m pretty sure home-based business owners also count.
The U3 statistic is trash. It excludes those who are discouraged, or who are simply too damn lazy to get up off their butts and look for a job, and haven’t actually looked for work for 4 weeks or more. It also includes involuntary part-time workers (e.g., someone whose hours have been cut to part-time from full time, or who can only find a part-time job) as well as some unpaid workers (family businesses). (Not positive, but I believe it also excludes full-time high-school and college students; I’d have to check to be sure.)
In short, U3 is designed to make things look rosy and nice. U6, while better (it accounts for underemployment), shares some of its flaws.
You want to look at how the economy is really doing since about 1990, look at the civilian labor participation rate. If it’s above about 65%, the economy is doing OK; above 66%, good to very good. If it’s below 64%, it’s hurting.
And if it’s below 63%, we’re economically sucking hind tit.
Worse, what has gone away are medical retirement plans which enabled long-term employees to bridge their medical coverage between their retirement and age 65 when Medicare kicks in.
Time was in a lot of larger companies, you retired (typically rule of 85 or 90) and had your pension/401(k) taken care of for life. That went away and they only covered healthcare until Medicare kicks in.
Now what we’re seeing is that companies say, “Have a nice life” and you’re on your own getting health insurance prior to age 65. Consequently, people who might have been able to retire at age 55-60 (or at worst 62) are now staying until 65-70.
I heard something this morning that barely 4 in 10 under 25 are working. Yeah, that’s gonna work out real well.
It’s worse than that, SEA. Back in July – the peak month for youth employment and participation – the labor participation rate for ages 16-24 was only 60.0%. The percentage who actually had a job was 52.7%. That’s essentially the same as in 2014.
http://www.bls.gov/news.release/youth.nr0.htm
Here’s the stat that really grabbed me:
The summer youth labor
force participation rate peaked at 77.5 percent in July 1989.
Understandable. At that point in time, many still went directly to work after graduating from high school. Nowadays, that’s not as common as it was then.
Kids were also typically finished with college at 22 or so if they went directly to college after high school. Many of them had found employment by July. Now, it’s much more common for kids to attend college on the “5 year plan” – or even the “6 year plan”. Many don’t work over the summer.
Plus, the economy wasn’t doing badly in the late 1980s. Today, it’s been in the toilet for about 7 years.
All that doesn’t make the change desirable, but does at least partially explain the change.
Great job opportunities at GOARMY.COM
?
And the best part is that it will be adjusted downward next month.
Maybe I should get a job at All-Points Logistics….
You know, that brings up an interesting point. Is someone working honestly at a company they know to be “dirty” morally culpable, even though they themselves do not participate in any malfeasance?
I am sure they are.
I bet they are several good people there that need a job/paycheck to take care of their families.
Cash can buy loyalty, but not respect.
And I can only imagine Phildo has put a blanket of silence on across the board communication only interspersed with disinformation (outside of his felonious senior staff).
I believe I stated the question badly.
A better formulation would be, “Does the mere act of voluntarily working for a company one knows is acting unethically imply that the person doing so is in part morally culpable for that company’s unethical actions, even if they themselves take no direct part in those unethical actions?”
Tough question being that ethics are sometimes on a shifting scale.
I do not know if I am qualified to respond as my interpretation could be different from the next guys.
I know that if upper management were acting unethically or illegally, I’d be doing two things as quietly as possible:
1–Looking for another job.
2–Getting as much verifiable proof of said malfeasance to drop a major turd in their proverbial punchbowl.
Think the Star Wars Death Star; Are the ordinary troops manning the Death Star as worthy of death as was the Emperor?
Military personnel generally don’t have the option to quit their job without risking jail or death, so I don’t really think that’s a good comparison. That’s particularly true if they were draftees vice volunteers (which seems likely in a society such as the Star Wars “Empire”).
It’s an interesting question to me. At what point does an individual’s work knowingly supporting a “dirty” organization make the individual themselves dirty, even if they do nothing unethical personally? One can argue they are “aiding and abetting” by knowingly supporting the organization.
But by the same token, at some point logic dictates that the connection must become too tenuous to be morally culpable. Virtually every company and organization does something that could be considered unethical from time to time – or buys from one who does. When does the connection become too tenuous? Is buying other than “fair trade” coffee morally wrong? If you buy a shirt at Wal-Mart, are you guilty of supporting “wage slavery” because of Wal-Mart’s “low wages”? How about if you buy that same shirt on sale at Nordstroms for the same price? Does that make the purchaser “more morally upstanding” – or just not very smart?
Just a few thoughts regarding a hard philosophical question. Not sure this one really has a good answer.
But the Federal and State governments grew, and added 127,000 jobs just this year, that’s a good thing right? I mean, those folks are employed after all, and even though private sector is apparently shrinking, Big Brother will be there to pick up many of the pieces. Well as long as we have other peoples money to spend. So rejoice, and sing the OPM Song (it is to the tune of the 3 Stooges).
DJIA up 300 today. Please pass the gravy.
A good chunk of that because some investor bought $2.5B worth of GE stock.
Out of curiosity…how Jimmy C’s LPR stats stack up to his predecessors.
https://upload.wikimedia.org/wikipedia/commons/7/74/US_Labor_Participation_Rate_1948-2011.svg
http://www.bls.gov/mlr/1999/12/art1full.pdf
That is true, but it’s only half the story. Nixon, Ford, Carter, and Reagan were all POTUS during a time of significant demographic and structural change for the US labor market. That change was due to greatly increased participation of women in the US labor force. Beginning in the early/mid 1960s, the US labor force began to change dramatically. The model of “male breadwinner/female homemaker” – overwhelmingly the case prior to the early 1960s, particularly among those who were married – began to change to a more mixed model. Bottom line: the fraction of women working outside the home began to rise dramatically, and continued to rise over the next 25 or so years. (I’m pretty sure it was offset somewhat by a slight decline in the male labor participation rate due to “stay at home dads” and other factors, but I’m not going to spend the time to research and verify that). That trend can be seen in the graph as a roughly linearly 26-year increase (or for more than one full generation) in the US labor participation rate – from approx 1964 to approx 1990. There is one notable exception during this period: from approx 1977 to approx 1984. There, the labor participation rate stagnated. That represents Carter’s economic idiocy and the 4 years afterwards it took to recover fully from same under Reagan. By 1990, a new equilibrium state appears to have been reached, with a “new normal” labor participation rate of around 66% having been established for a robust US economy. This represents the completion of the demographic change caused by the “women’s lib” movement in the US labor market. From 1990 to 2008, the US labor participation rate fluctuated in roughly the 66-67% range. I will give Slick Willy credit: he either had enough common sense (or was too preoccupied with beret-wearing interns) to eff things up as badly as Carter did. The same is in general true during both Bush administrations, in spite of the fact that each faced major economic disruptors (1990 oil cost spike, 9/11 attacks). However, in late 2008, the US… Read more »
And another thing. If you think we are fortunate to have Academia and independent think tanks watching with a jaundiced eye, you might want to think again.
Watch that documentary “Inside Job” in regards to the academics.
Read this in regards to Think Tanks
http://www.nytimes.com/2014/09/07/us/politics/foreign-powers-buy-influence-at-think-tanks.html?_r=0
Everything is for sale. Everything.