Sunday, June 9, 2013

Jobs Situation Stinks ... Yet Unemployment Rate Headed Down Over Next Several Years ... What's the Deal? ... This Time Really Is Different ... It's Bad and Getting Worse

Jobs in the U.S. are scarce. So are compensation increases for those who do have jobs. The supply and demand factor is working.

Government growth and intrusion has made the U.S. a poor place to secure good jobs. Lest you doubt what I say, we created 175,000 jobs last month. "Normal" monthly jobs added used to be considered well in excess of 200,000, especially in a "recovering" economy. In the future, perhaps less than 100,000 added monthly jobs or so will be enough to reduce the unemployment rate as fewer people join or remain in the work force.

Our work force is shrinking, and job opportunities within that smaller work force are shrinking as well.

Government grows and the role of the private sector shrinks. Redistribution begets a stalled economy and jobs market, and solid economic growth stops. It's happening right before our eyes.

And also consider this. The U.S. has fewer jobs now than it did in 2007. We're doing worse than countries such as Canada, Britain, Germany, Australia and even Sweden in creating new jobs for our citizens.

Fewer people working may result in a lower unemployment rate as fewer people stay in or enter the work force of the future. That means that our economic problems will grow as the unemployment rate comes down.

In other words, regardless of whether the official unemployment rate moves up or down, the economic situation in our country will in all likelihood continue to deteriorate as long as government grows at the expense of the private sector.

Increasing taxes to fuel government expenditures (or borrowing or printing money) for the purpose of redistribution works as an economic growth killer over time. It's that simple.

How Many Jobs to Bring Down Unemployment? has the "math" story on the developing irrelevance of the unemplyment rate as published:

"The recent pace of U.S. job growth tends to be described as “tepid,” “lackluster” or “disappointing.” But according to two economists from the Federal Reserve Bank of Chicago, it’s plenty good enough to bring down the unemployment rate.
In a new paper , Chicago Fed economists Dan Aaronson and Scott Brave try to estimate how many jobs the economy needs to add each month to keep the unemployment rate steady, after taking into account population growth and other factors.

Their answer: 80,000 jobs. That’s far below the 150,000 to 200,000 jobs required in the 1980s and 1990s, and significantly below the 100,000 to 150,000 figure often cited by economists today. Messrs. Aaronson and Brave argue those higher figures fail to take into account underlying changes to the U.S. labor force, notably slowing population growth and a long-term decline in the share of the population that’s working. . . .

They estimate that by 2016, it will take just 35,000 new jobs per month to keep the unemployment rate steady. That’s based on some admittedly uncertain assumptions about immigration, labor-force participation and other trends; the authors estimate the true figure could be anywhere from zero to 120,000 jobs, with somewhere between 20,000 and 50,000 jobs per month as the most likely range.

Of course, with joblessness at 7.5%, no one wants the unemployment rate to stay steady. Messrs. Aaronson and Brave estimate the economy had about 6 million fewer jobs in 2012 than it should have based on long-term trends. Even if job growth accelerates somewhat in coming months, to 195,000 jobs per month, it will take four years to plug that gap, the authors estimate.

The new paper, then, doesn’t mean that recent job growth has been sufficient given the high rate of joblessness. But the authors’ conclusion is significant for two reasons. First, it has potential implications for Fed policy: It suggests that even if job growth stays at its recent level -— or even if it slowed somewhat — the unemployment rate will continue to fall. That could lead the Fed to tighten monetary policy earlier than some experts now project.

Second, once the unemployment rate does return to the 5% to 6% that economists consider normal, the Chicago economists would expect hiring to settle in at around 35,000 jobs per month. That’s well below the trend of the 1980s and 1990s, and suggests that overall economic growth will be lower as well.

“When economic activity finally stabilizes at its trend, our estimates suggest that employment growth, and consequently growth in the number of total hours worked, will be slower than in the past,” the authors write. “This has ramifications for the potential speed at which the economy can grow in the future.”"


And how has the U.S. fared compared to international "competition" in creating jobs the past few years? Pretty bad, actually.

Many Rival Nations Surge Past the U.S. in Adding New Jobs has the disappointing but accurate story:

"The American economy may be the world’s biggest, but when it comes to job creation since the recession hit at the end of 2007, it is far from a leader.
Indeed, contrary to the widespread view that the United States is an island of relative prosperity in a global sea of economic torpor, employment in several other nations has bounced back more quickly, according to a new analysis by the Bureau of Labor Statistics.


The government reported Friday that the nation added 175,000 jobs in May, continuing a 32-month run of job gains. The unemployment rate moved up slightly to 7.6 percent, from 7.5 percent in April.       

But overall employment in the United States remained 2.1 percent below where it was at the end of 2007, according to the statistics bureau. By comparison, over the same period, between December 2007 and March 2013, the number of jobs was up 8.1 percent in Australia; Germany, the biggest economy in the troubled euro zone, has managed a 5.8 percent gain in employment.       
“The United States is way below where it should be,” said Lawrence F. Katz, a professor of economics at Harvard. “We had a massive downturn and a tepid recovery.”. . . 
While several European countries have fared worse, Canada, Sweden and even Britain, which is trapped in yet another recession, have enjoyed healthier job gains than the United States. In fact, of the nine countries surveyed by the Bureau of Labor Statistics, only perennially-troubled Italy and Japan performed worse....      
The fitful recovery that began in 2009 is also different from the trend that prevailed after the deep recession of the early 1980s, said Laurence M. Ball, a professor of economics at Johns Hopkins University in Baltimore. While economic growth has struggled to top 2 percent in recent years, annual gains in output briefly topped 7 percent when the economy bounced off the bottom three decades ago.       
Mr. Ball noted that the weak trajectory of the labor market in the United States mirrored the pattern for overall economic output. While the Australian economy was 13 percent larger in terms of output than it was in 2007, and Canada had expanded by 6 percent, the American economy had grown by only 3 percent over the same period.       
The overall employment picture in the United States remained better than many other Western countries, despite the slow pace of job creation since the recession. For example, unemployment in Spain was 27.2 percent, Italy had a jobless rate of 12 percent, and the unemployment rate in France was 10.8 percent. . . . 
Still, at 7.6 percent in May, unemployment in the United States is half a percentage point higher than in neighboring Canada. The United States population is nearly 10 times that of Canada, yet the Canadian economy added 95,000 jobs in May compared with 175,000 in the United States.
Another sign of distress is the persistence of long-term unemployment four years into the recovery. While the number of workers who have been out of a job for less than five weeks is almost unchanged from 2007 levels, there are roughly 4.4 million Americans who have been unemployed for more than six months, a 257 percent increase since 2007."
Summing Up
The U.S. jobs situation stinks. So do the prospects for strong U. S. economic growth without a change in policy which turns over the reins to the private sector and away from the government knows best bureaucracy.

The only problem with doing that is that the gang in government has control of the reins.
And of course, the pols won't do what's necessary for solid economic growth. That's not how they function.
So get ready for years of weak growth, high unemployment and an increasingly burdensome debt structure. Lots of hand wringing, theatrics and finger pointing, too.
But don't expect much real action on what's needed to get us out of this mess. We'll needed a better informed, focused and involved citizenry before that happens.
That's my take.
Thanks. Bob.

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