Monday, September 10, 2012

One More Look at the REALITY Revealed by the August Unemployment Numbers

Two weekend editorials about the significance of the August unemployment results are worth reviewing. Accordingly, we'll quote lengthy excerpts from each.

Those Jobs Numbers Are Even Worse Than They Look is a sobering look at the employment situation, asserting that the true unemployment rate is 19% and not 8.1%:

"Don't be fooled by the headline unemployment number of 8.1% announced on Friday. The reason the number dropped to 8.1% from 8.3% in July was not because more jobs were created, but because more people quit looking for work.

The number for August reflects only people who have actively applied for a job in the past four weeks, either by interview or by filling an application form. But when the average period of unemployment is nearly 40 weeks, it is unrealistic to expect everyone who needs a job to keep seeking work consistently for months on end. You don't have to be lazy to recoil from the heartbreaking futility of knocking, week after week, on closed doors.

How many people are out of work but not counted as unemployed because they hadn't sought work in the past four weeks? Eight million. . . .

The alarming numbers proliferate the deeper you look: 40.7% of the people counted as unemployed have been out of work for 27 weeks or more—that's 5.2 million "long-term" unemployed. Fewer Americans are at work today than in April 2000, even though the population since then has grown by 31 million.

We are still almost five million payrolls shy of where we were at the end of 2007, when the recession began. . . .

The key indicator of our employment health, in all the statistics, is what the government calls U-6. This is the number who have applied for work in the past six months and includes people who are involuntary part-time workers—government-speak for those individuals whose jobs have been cut back to two or three days a week.

They are working part-time only because they've been unable to find full-time work. This involuntary army of what's called "underutilized labor" has been hovering for months at about 15% of the workforce. Include the eight million who have simply given up looking, and the real unemployment rate is closer to 19%. . . .

And even many of those who have jobs are hurting, because annual wage increases have dropped to an average of 1.6%, the lowest in the past 30 years. Adjusting for inflation, wages are contracting.

The best single indicator of how confident workers are about their jobs is reflected in how they cling to them. The so-called quit rate has sagged to the lowest in years.

Older Americans can't afford to quit. Ironically, since the recession began, employment in the age group of 55 and older is up 3.9 million, even as total employment is down by five million. These citizens hope to retire with dignity, but they feel the need to bolster savings as a salve for the stomach-churning decline in their net worth, 75% of which has come from the fall in the value of their home equity.

The baby-boomer population postponing its exit from the workforce in a recession creates a huge bottleneck that blocks youth employment. Displaced young workers now face double-digit unemployment and more life at home with their parents.

Many young couples decide that they can't afford to start a family, and as a consequence the birthrate has just hit a 25-year low of 1.87%. Nor are young workers' prospects very good. Layoff announcements have risen from year-ago levels and hiring plans have dropped sharply. People are not going to swallow talk of recovery until hiring is occurring at a pace to bring at least 300,000 more hires per month than the economy has been averaging for the past two years.

Furthermore, the jobs that are available are mostly not good ones. More than 40% of the new private-sector jobs are in low-paying categories such as health care, leisure activities, bars and restaurants.

We are experiencing, in effect, a modern-day depression. Consider two indicators: First, food stamps: More than 45 million Americans are in the program! An almost incredible record. It's 15% of the population compared with the 7.9% participation from 1970-2000. Food-stamp enrollment has been rising at a rate of 400,000 per month over the past four years.

Second, Social Security disability—another record. More than 11 million Americans are collecting federal disability checks. . . .

These dependent millions are the invisible counterparts of the soup kitchens and bread lines of the 1930s, invisible because they get their checks in the mail. But it doesn't take away from the fact that millions of people who had good private-sector jobs now have to rely on welfare for life support.

This shameful situation, intolerable for a nation as wealthy as the United States, is not going to go away on Nov. 7. No matter who wins, the next president will betray the country if he doesn't swiftly fashion policies to address the specific needs of the unemployed, especially the long-term unemployed. . . .

It's zero hour. Policy makers need to understand that the most important family program, the most important social program and the most important economic program in America all go by the same name: jobs.

Ready for another one? The Jobs Deficit is subtitled 'Labor force participation goes backward to 1981:'

"August job gains were disappointing for the fifth straight month, up only 96,000 overall and 103,000 for the private economy. That's a downshift from a still-mediocre 153,000 per month in 2011 and a 140,000 average earlier this year. . . .

The telltale labor force participation rate fell again to 63.5%, which is the lowest share of Americans over age 16 in the workforce since September 1981. That's going way backward. . . .

The 1980s saw a jump in labor-force participation during the Reagan boom, which continued through the 1990s as a buoyant job market lured a surge of women, immigrants and young people. The rate dipped in the early part of the last decade but rose again during the Bush expansion and was 66.2% as recently as January 2008.

It fell again in the recession, but the most distressing news is that it has kept falling during the last three years of recovery. This is unprecedented, and the big question is why. The matter is a fruitful area for economic research, but one certain culprit has to be the multiple years of weak job growth.
Older workers in their 50s who lose their jobs in particular may be dropping out of the job market when previously they might have found other jobs before retirement. Second earners in a household may also decide the payoff isn't worth the effort. Then there are the long-term unemployed whose skills become less marketable over time. The average length out of the job market continues to be a stunning 39 weeks, compared to an average duration of between 15 and 20 weeks from 1984-2008.

Meanwhile the wage data released Friday contained more disappointment. Hourly earnings fell by one cent in August to $23.52 and over the past year wages are up 1.7%. That's less than the rate of inflation, meaning that higher gas and food prices, medical expenses and tuition costs are reducing the purchasing power even of those Americans who are fortunate enough to have a job.
Democrats also claimed in Charlotte that this was the best we could expect from any President given the hole he inherited that included 800,000 lost jobs a month. But this isn't what we were told in 2009. Mr. Obama promoted his $830 billion spending stimulus with the prediction that it would reduce the jobless rate to 5.6% with some five million more jobs than we have.

Judging by his convention speech, the President has nothing more in his policy arsenal beyond $100 billion more stimulus spending. The tax hike he wants to impose on businesses and investors planned for January is hardly inspiring employers to expand their operations and payrolls now. The Affordable Care Act is another dampener on hiring.

The single dominant theme in Charlotte this week was that President Obama and his party are the champions of the middle class. The August jobs numbers and the record of the last four years tell a different story. No Presidency has done worse by the middle class since Jimmy Carter's in the 1970s."

Summing Up

Although we've reported extensively on August's jobs numbers, it's still appropriate to look closely at the reality of long term employment conditions in the U.S.

With all the noise in the political campaigns about how good or bad things are or were, or are getting or aren't getting, I thought a few properly interpreted facts placed in perspective would help provide some clarity.

After all, economic growth and added jobs are, have been and will continue to be our largest economic issues for years to come, so we may as well know what's what, even though we may not enjoy knowing what we come to know.

All that said, knowing the reality is the best way to change that reality into a better reality for our nation's future health and well being.

And we definitely need to get from the current reality to a better one asap, if not sooner.

Thanks. Bob.

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