Friday, March 8, 2013

Employment Is Improving, But There's a Long Way to Go

The highly watched official unemployment rate for February was reported this morning as 7.7%, representing a marked improvement from the 7.9% a month ago.

On the other hand, the broader U-6 rate stayed very high at 14.3%. So we're improving but there's a long way to go to approach anything resembling full employment, which must be our goal.

JOBS are our biggest shortfall today, and more jobs will make lots of things that are now seemingly impossible become reality once again. As jobs grow, our nation's fiscal deficits and debts will shrink, and more Americans will enjoy the confidence that results from being able to take care of themselves and their families.

More jobs = more smiles = more prosperity = a higher standard of living = greater self reliance = greater national security = a better society full of opportunities for future Americans.

So how big is the ongoing American jobs problem? Pretty big. Very big, in fact.

Why the unemployment rate is so misleading is subtitled ''Real jobless rate is about 2 percentage points higher:'

"There’s a lot of money riding on the accuracy and credibility of U.S. economic data. A lot of that faith is misplaced, but it’s not because the government is actively fudging the numbers or lying to us. Unlike a lot of people in Washington, the statisticians who crunch the numbers are a professional bunch who want to get things right. . . .

Of course statistics, by their very nature, can never be perfect or pure, no matter how well-meaning their creators. . . .

In recent years, the unemployment rate has become one of the most politicized economic numbers. Which means it’s also become one of the most misunderstood numbers. . . .

In theory, the jobless rate should be noncontroversial. It’s simply the percentage of people who want a job who can’t find one. However, it’s more complicated in practice. What does it mean to look for work? How hard do you have to try? How often do you have to try? What does it mean to have a job? Does it have to be a full-time job to count? What if it’s irregular work? . . .

. . . the official unemployment rate (known as the U-3 rate) was 7.7% in February; there were 12 million people who said they had looked for a job without success, compared with 155.5 million in the labor force.

But there were also 6.8 million people who said they wanted a job but weren’t even looking, perhaps because they were discouraged. . . .

In addition, 8 million people said bad economic and business conditions limited them to part-time hours even though they preferred to work full-time.

If you count those discouraged workers and involuntary part-timers as unemployed, the unemployment rate jumps to 14.3%. The government reports this number as the U-6 rate.

Some people call the U-6 rate the “real” unemployment rate, but that doesn’t make sense: It includes millions of people who do have a job, even if it’s not the one they want.

What’s the ‘real’ unemployment rate?

Some analysts have begun paying attention to a different measure of labor-market slack: the labor participation rate. This is simply the percentage of adults, age 16 and up, who are in the labor force (either working or actively looking), excluding those in institutions such as the military, prisons or hospitals.

The idea for using the participation rate is that so many discouraged workers have stopped looking for a job that the official U-3 unemployment rate has become irrelevant.

For instance, the U-3 rate fell to 7.7% in February, in part because the labor force shrank by 130,000. The drop in the unemployment rate to a four-year low wasn’t necessarily great news.

About 40% of unemployed people have been out of work longer than six months, far more than at any time since the Great Depression.

It stands to reason that many people who’ve been unemployed that long without finding a new job would simply give up, drop out of the labor force and no longer be counted as officially unemployed.

But we can’t pretend they don’t exist.

The participation rate is currently 63.5%, down from 66.2% at the beginning of the recession, matching a 31-year low. If the participation rate were still at 66.2%, the unemployment rate would be 12.1%.

So is that the “real” unemployment rate? Not really. There’s no reason to think that a 66.2% participation rate is the correct level. More than 3 million people turn 65 each year. The number of retired people is soaring. Yet these people are still counted as part of the adult population.

Because the population is aging, the participation rate is falling rapidly. The Congressional Budget Office predicts that it will fall to 63% by 2021, even with the economy at full employment.

These people haven’t dropped out of the labor force; they’ve retired.

If we really want to understand the health of the labor market, it’d be best to focus on employment and unemployment of the working-age population, 25 to 65, and leave millions of teenagers and octogenarians out of the equation. . . .

In 2012, the participation rate for the working-age population was 77.5%, down about three percentage points from the peak of 80.2% in 1997.

It means that the vast majority of working-age adults, men and women, are working or looking for work. But it also means that many millions have given up hope of finding a job. Some of them will never work again.

If the participation rate were where it was in 2007, about 3 million more working-age adults would be in the labor force, and the unemployment rate for that group would be about 9%, instead of 6.8%.

That means that the “real” unemployment rate is about two percentage points higher than the official rate. If we understood that, we might be trying to do more to create jobs.

Long-term unemployment is our country’s biggest problem, and if we don’t do something quick, it’ll cause permanent damage to our economy, and ruin the lives of millions of people."

Summing Up

No matter how we add it up, unemployment is too high.  Especially long-term and youth unemployment.

And the implementation of ObamaCare combined with the push to raise the minimum wage will only make the job hunt harder for oldsters, middle age and youngsters alike.

Our government absolutely needs to focus on JOB #1, which must be growing the private sector employment levels. It can best do that by getting out of the private sector's way and by finally taking the necessary steps to reform the tax code instead of raising taxes further. And lest we forget, it can also perform a great service if it stops stifling private sector investment and related efforts directed toward our once-in-a-lifetime current opportunity to achieve North American energy independence.

Today's unemployment numbers were surprisingly good. That said, the condition of private sector employment in America today is unsurprisingly bad.

A little less uncertainly, a little less government and a whole lot more private sector investment would immediately begin to work wonders for our economy and society.

We the People deserve at least that, but our kids and grandkids deserve a whole lot more.

That's my take.

Thanks. Bob.

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