Economy, Recession, Unemployment

The Nation’s Economy, This Side of the Recession - NYTimes.com: "In the five years since the United States began its slow climb out of the deepest recession since the 1930s, the job market has undergone a substantial makeover. The middle class has lost ground as the greatest gains have occurred at the top and bottom of the pay scale, leaving even many working Americans living in poverty. The housing industry, once the primary engine of growth and a fountain of jobs, has shrunk, while health care, technology and energy have led the recovery...."

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Unemployment Still Terrible, How to Fix

The unemployment rate does not count workers who have given up and are not actively seeking work. A better measure is the labor participation rate -- and it still looks very bad:

U.S. Labor Participation Rate (source: BLS, US Dept of Labor, 4/5/14)

The Unemployment Puzzle: Where Have All the Workers Gone? - WSJ.com: "... Baby boomers can't be the whole story, though, since the participation rate has declined for younger workers too. This part of the drop is a function of various factors, including simple discouragement, poor work incentives created by public policies, inadequate schooling and training, and a greater propensity to seek disability insurance. Globalization and technological change have also reduced employment and wage growth for low-skilled workers—which raises questions about whether current policy is focused enough on helping workers to achieve the skills necessary to work productively and earn decent incomes...."

You want to increase employment? Increase self-employment. How?

1. Repeal the self-employment tax or at least reduce it to the same rate paid by regular employed workers (payroll tax): 7.65%.

2. Comprehensive income tax reform: a flat tax of 17.35% on all income, of whatever kind, from whatever source -- corporations, individuals, capital gains, etc., wages, dividends, interest, pensions, etc. -- with the first $30,000 in income exempt from income tax. No personal deductions -- tell Congress to quit playing games with the tax code. The present tax code, thanks to Congress, is FUBAR.

3. Comprehensive entitlements reforms: get the US off welfare -- including corporations, farmers, et al, and stop incentivizing government dependency -- if you do not know what I am talking about, go here.

4.  Remove all caps on the payroll tax in order to pay for our out-of-control health, disability, social security, and public pension welfare state. Everyone should pay the same rate: 7.65% for employee, 7.65% for employer on ALL compensation (including, e.g., CEO stock options etc.).

5. Abolish all public pensions for those not within 15 years of retirement -- the private sector has, for the most part, already abandoned pensions. Include everyone on Social Security. In addition, allow all individuals to self-fund, if they so choose, up to 15% of their annual income into a tax sheltered retirement account (exempt from creditors), administered by a US government regulated financial institution and guaranteed by the US government (this would replace 401Ks, IRAs, etc.). For police, military, and others qualifying for early retirement (before eligible for social security retirement), each responsible governmental entity would have to fund severance pay, in the interim, for those so qualifying, until they became eligible for social security.

6. Pass real health care reform: the Affordable Care Act [sic] is FUBAR. Remove all employer provided health insurance. Merge Medicare and Medicaid and provide 3 coverage levels: 1) comprehensive coverage for children and youth until age 18; 2) basic/catastrophic coverage for those between the ages of 18 and 65;  3) Comprehensive coverage for those 65 and older. Individuals could supplement government-provided health coverages with their own private health insurance. All health providers would have to publish their fee schedules--full transparency. Take employers and the states out of the health insurance scheme--they cannot afford it.

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Unemployment and the Economy, Where Are We REALLY?

Short answer: anemic

The population rose by over 2 million, but the labor force fell by over 200,000. People dropping out of the work force accounts for much of the declining unemployment rate. (source infra)

Mish's Global Economic Trend Analysis: Nonfarm Payrolls +175,000, Household Survey +42,000; Unemployment Rate 6.7%: "Beneath the surface, things look worse again. The household survey shows a gain of employment of only 42,000 while unemployment rose by 223,000." (read more at the link above)

What a stinking recovery!

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Bernanke's Failures, Unemployment, The Value of Money (US)

Or is the Fed destroying the value of the US dollar in trying to "boost employment"?

Money — the crisis Washington’s ignoring | New York Post: "And the average sale price of a new home rose 4.2 percent, but the value fell a staggering 54 percent to 257 ounces of gold. Absent a dramatic turn of events, Bernanke will leave his successor with a dollar that is less valuable by far than any dollar ever left by any Fed chairman. In percentage terms, the plunge in the dollar’s value on Bernanke’s watch is the second most dramatic in history. The cover for him to do this is a 1978 law called Humphrey-Hawkins, which gives the Fed the job not only of watching prices but of boosting employment. How has that worked out? The Fed has been ballooning its balance sheet by billions — “not literally” printing money, Bernanke quipped before Congress; it’s now done electronically — and the unemployment rate is still stuck above 7 percent."

As usual, the culprit is legislation passed by Congress and signed by the President -- the dual mandate required by legislation known as Humphrey-Hawkins. At some point we really need a moratorium on any new legislation. Congress and the Executive Branch (that's you Obama) should be repealing legislation, amending legislation by rewriting it to be more streamlined, simple, and easy to execute and follow, and stop excluding government (including Congress) from ANY legislation!

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Employment--what's the problem

Poor President Obama--every day he looks weaker and ineffectual. You want to "create" jobs? More government is NOT the answer, in fact, it is a big part of the problem--

"As a Realtor, I speak with many business owners every day. Most are not hiring, waiting to see how the new healthcare law will affect their bottom lines. Growing government is not the answer. In Miami-Dade, we saw a population increase of about 10% between the year 2000 and 2010, yet our local taxes increased by almost 70%, which resulted in bloated payrolls, without any discernible betterment of services. Business people need a reliable framework to grow their businesses, uncertainty over more onerous government regulation and taxes have stifle and will continue stifle job growth, not only in Florida but elsewhere."--reader's comment in the Miami Herald

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Orwellian Washington Speak - the "Good" Job Numbers

For a long time I have warned that the headline unemployment rate is not trustworthy but a distortion. Yes I know the Obama administration and its mainstream media shills are more than happy to keep peddling this ignorance, but if you want the true picture, start drilling down--here's a start:

Mish's Global Economic Trend Analysis: Jobs +236,000, Unemployment Rate 7.7%, Part-Time Employment +446,000: "The official unemployment rate is 7.7%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6. U-6 is much higher at 14.3%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years. . . . One can look at the data two ways.

1. The economy is getting better and more jobs are available
2. People are working more jobs because their hours were cut and they need a second job

Evidence suggests more of the latter than the former. . . . The reported 236,000 surge in the establishment survey is not real. It will be revised away. This is why: In the household survey one is either working or not, thus multiple jobs do not distort the reported unemployment rate (although there are many other distortions such as the participation rate and declining labor force). The establishment survey, however, is distorted by people working multiple jobs. A surge in multiple-job workers would artificially hike the baseline number. I expect revisions later, probably huge downward revisions." Read more at http://globaleconomicanalysis.blogspot.com/2013/03/spoiling-great-employment-news.html#jHhhwXKfyLffSmSY.99

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The Obama Legacy so far, is a Nightmare

Here's a snapshot of the Obama record thus far--

In The Last 5 Years --

• The Civilian Institutional Population Rose 9.9 Million
• The Labor Force Rose Only .9 Million (yes, less than 1 million)
• Those Not in the Labor Force Rose 9.8 Million
• Employment Fell by 2.3 Million
• Full-Time Employment Fell by 5.3 Million
• Part-Time Employment Rose by .9 Million 
• Unemployment Rose by 4.5 Million
• Food Stamp Usage Rose by 20.3 Million

Source: Mish's Global Economic Trend Analysis: Demographic Nightmare; Recession Through Recovery in Pictures 

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Pronouncements, Predictions, and Projections

From Krugman comes this bite-size insight into what the future holds (as far as jobs) and it's not very positive--

"Along with its new policy pronouncement, the Fed released its economic projections (pdf). What struck me is that the Fed expects the unemployment rate to be well above its long-run level even in the fourth quarter of 2015, which is as far as its projections go.This means that the Fed is projecting elevated unemployment nine full years after the Great Recession started. And, of course, the Fed has been consistently over-optimistic."

Welcome to the New Normal!

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Declining Jobless rate due to shrinking labor force not good news

The spinners in the media have been rejoicing over a declining unemployment rate (even the small decline reported over the last few months). Unfortunately, a decreasing unemployment rate is not necessarily good news. After all, if everyone dropped out of the work force, the unemployment rate would be zero (-0-)! A decreasing unemployment rate is not good news when it reflects a shrinking labor force--

Jobless rate 7.7%; 146,000 new jobs: "The government revised down job gains for September and October by a total 49,000. September's additions were revised from 148,000 to 132,000 and October's, from 171,000 to 138,000. . . . Meanwhile, the continuing sharp drop in the unemployment rate -- from 8.3% to 7.7% since July -- is surprising and at least partly reflects retiring Baby Boomers, says Chief U.S. Economist Jim O'Sullivan of High Frequency Economics. "What's happening here is the demographics have changed," he says. He says monthly job gains of about 75,000 are likely enough to keep the jobless rate from rising, down from 100,000 to 150,000. A shrinking labor force, however, does not bode well for economic growth because retirees have less spending power."

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Obama's Unemployment Problem

Of all the headwinds the Obama administration is facing in this election, this is probably the toughest: Unemployment has only fallen because fewer Americans are looking for work, not because more Americans are finding jobs. --

Source: Heritage Foundation calculations from U.S. Dept of Labor

Not Looking for Work: Why Labor Force Participation Has Fallen During the Recession: "Lower Participation = Lower Unemployment Rate. As high as the unemployment numbers are, they still overstate the economy’s performance. Since the recession began, the labor force participation rate—the proportion of adults either working or trying to find work—has fallen by approximately 2 percentage points. The government counts only people actively looking for jobs as unemployed. The drop in labor force participation accounts for the entire net drop in the unemployment rate over the past three years."

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Where Are The Jobs?

Where are the jobs? Forget about the "unemployment rate" and instead look at the employment-population ratio--

Paul Krugman in the New York Times explains:
" . . . the unemployment rate is a problematic measure, because it can fall not because more people are working but simply because fewer people are looking for work. . . An alternative is therefore to count employment rather than unemployment; one simple measure is the employment-population ratio, which suggests no improvement for years:

Info source: St. Louis Fed and Paul Krugman/NYTimes.com

In other words, there has been no improvement in actual "employment" since we hit bottom in 2009!

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The economy? Slippin' and Slidin'

The U.S. economy? Slippin' and slidin'--it's all in the jobs report (both excerpts below are from Ezra Klein of the Washington Post):

Early Friday morning (before jobs report released):
Previewing the June jobs report: 100,000 jobs? 125,000?: "The big news today will be the jobs report, which comes out at 8:30am. Economists surveyed by Bloomberg News expect to learn that the economy added 100,000 jobs in June — well above the 69,000 it added in May, but well below the 259,000 it added in February. Goldman Sachs, which is expecting to see that we added 125,000 jobs in June, points out that this will be the first jobs report in awhile that “should be relatively free of the distortions that have plagued analysis of the underlying employment trend recently. In particular, the ‘payback’ for the unusually mild winter is now almost certainly behind us.” That is to say, the June jobs report might be a clearer look at the underlying trends in the economy than either the quick, weather-aided growth we saw early in the year or the sharp deceleration we saw in May. Hopefully, it won’t be too depressing."

Later Friday--after the jobs report released:
The June jobs report in one word: ‘unchanged’: "In this economy, little or no change isn’t good enough. We added 80,000 jobs in June. That’s not enough to keep up with population growth. So, in the context of our growing workforce, the labor market lost ground last month."

So forget all the "spin"--bottom line: the job situation got worse last month. The economy? Just slippin' and slidin'.

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The Devil Wears Obama?

Romney uses Vogue editor’s campaign ad to portray Obama as out of touch - TheHill.com: "Mitt Romney’s campaign is capitalizing on May’s dismal jobs report by portraying President Obama as out of touch on the economy and focused more on his own job than finding work for America’s unemployed. Romney and Republicans underlined their message on Monday by seizing on an Obama campaign video featuring Anna Wintour, the well-heeled editor of Vogue and inspiration for “The Devil Wears Prada.”"

"Don't be late?" Some would say of the Obama administration on the economy: "Too little, too late."

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"More Government" is NOT the "Answer"

You think "more government" will solve the U.S. unemployment problem? Look at France--

Why France Has So Many 49-Employee Companies - Businessweek: ". . . Once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons. French businesspeople often skirt these restraints by creating new companies rather than expanding existing ones. “I can’t tell you how many times when I was Minister I’d meet an entrepreneur who would tell me about his companies,” Thierry Breton, chief executive officer of consulting firm Atos and Minister of Finance from 2005 to 2007, said at a Paris conference on April 4. “I’d ask, ‘Why companies?’ He’d say, ‘Oh, I have several so that I can keep [the workforce] under 50.’ We have to review our labor code. . . . Companies say the biggest obstacle to hiring is the 102-year-old Code du Travail, a 3,200-page rule book that dictates everything from job classifications to the ability to fire workers. Many of these rules kick in after a company’s French payroll creeps beyond 49. . . . There are now 2.9 million people out of work in France, almost 10 percent of the workforce and the most in 12 years. . . . "

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Gallup: U.S. Unemployment Rate Up in April to 8.6%

Are things really getting better? Is the economy stalling? Just look at the data:

Gallup Seasonally Adjusted U.S. Unemployment Rate Up in April: " . . . applying the government's historical April adjustment to Gallup's unadjusted number yields a seasonally adjusted April estimate of 8.6%, up from 8.1% in March. . . . the rise in Gallup's seasonally adjusted unemployment rate suggests that the government will report an increase in its seasonally adjusted unemployment rate for April. Such an increase would contrast with the consensus forecast that the government's April unemployment rate will be unchanged at 8.2%. However, it does seem consistent with the increase in jobless claims in recent weeks and Wednesday's ADP report showing that the economy added only 119,000 new private-sector jobs last month -- not nearly enough to lower the unemployment rate, particularly when seasonal hiring should be increasing. . . ."

UPDATE (Friday, May 4, 2012): Reuters-- U.S. employers cut back on hiring in April and more people gave up the hunt for work, dimming hopes the economy was turning a corner just as President Barack Obama prepared to launch his re-election campaign. Employers added 115,000 workers last month after increasing payrolls 154,000 in March, the Labor Department said on Friday. Economists had expected to see the creation of 170,000 jobs. The unemployment rate ticked a tenth of a point lower to 8.1 percent, a three-year low, but only because people left the workforce. It was the third straight month in which hiring slowed, intensifying fears that the U.S. recovery is losing momentum and opening the door a bit wider for the Federal Reserve to ease monetary policy. "The bottom line is you don't have evidence that this economy has reached escape velocity," said Robert Tipp, an investment strategist at Prudential Fixed Income. . . . 

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More on the Obama "Fudge" Jobs Report

More on the Obama Administration's "Fudge" Jobs Report:
US jobless rate falls to lowest level for three years - Telegraph: " . . . there was, inevitably, plenty in the report that offered support for those taking a more cautious stance. The Bureau of Labor Statistics had its annual revision of the total size of the potential working population, which helped flatter Friday's numbers. Another less encouraging indicator was that average hourly earnings edged up only 0.2pc on the month, a pace that economists say is not strong enough to do much for consumer spending. . . "

Comment to the above article:
The only reason the official UE rate "fell" to 8.3% is because 1.2 million workers were removed by BLS from the availalble labor pool during the month. This is the largest single-month drop in history. The Labor Force Participation Rate is now at a 30-year low of 63.7%. That is ABYSMAL!

This was NOT a good report. Far from it. Other measures of unemployment suggest that the actual UE rate increased to 11.5% while measures used prior to 1995 suggest an actual UE rate greater than 22%. (See:http://www.shadowstats.com/alt... )

As one analyst put it, "In fact other than January 2009 there has never been a single month in my table, which dates back to 1999, that put up a worse combined number. This "performance" rates a literal "second from utter despair and disaster", and the employment rate shows it:... This is not a strong report folks, and in fact documents an actual and ongoing collapse in the US labor force, despite the crooning on the mainstream media disinformation channels!" See: http://market-ticker.org/akcs-...

Even the liberal economist Paul Krugman knows it's "fudge"- Better - NYTimes.com:  "The usual caveats apply: it could be a blip, it might be an artifact of seasonal adjustment, etc.. Also, the gap remains huge. Suppose that we need 100,000 jobs a month to keep up with population growth, and that we’re 10 million jobs in the hole — both conservative estimates. Then we need about 7 years of growth at this rate to restore full employment."

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The "Obama Fudge Jobs Report"

As a follow-up to my "Washington Fudge" post on the "January Jobs Report" (they're "fudging" the numbers):

Santelli on the "shrinkage"

Record 1.2 Million People Fall Out Of Labor Force In One Month, Labor Force Participation Rate Tumbles To Fresh 30 Year Low | ZeroHedge: "Submitted by Tyler Durden on 02/03/2012 08:51 -0500: A month ago, we joked when we said that for Obama to get the unemployment rate to negative by election time, all he has to do is to crush the labor force participation rate to about 55%. Looks like the good folks at the BLS heard us: it appears that the people not in the labor force exploded by an unprecedented record 1.2 million."

If you want the truth about the "Obama Fudge Jobs Report," look at the charts posted at Zero Hedge or here or read this.

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January jobs report--"Washington Fudge"

You think the January jobs report is good news? You better think again--they're "fudging" the numbers in Washington--no surprise since this is an election year.  My source? How about Floyd Norris in the New York Times--

Wow. But Is the Number Real? - NYTimes.com: "How many jobs did the American economy add in January?

The Labor Department estimated on Friday that the economy gained 243,000 jobs.

The department also estimated that the economy lost 2,689,000 jobs in the month.

The difference in the two numbers is in seasonal adjustment. Employment always falls in January, as temporary Christmas jobs end. So the government applies seasonal adjustment factors in an effort to discern the real trend of the economy apart from seasonal fluctuations. The actual survey showed the big loss in jobs. The seasonal adjustments produced the reported gain of 243,000 jobs.

A reason to doubt the number is that there has been a tendency in this cycle for the seasonal factors to overstate moves, in both directions. Labor mobility is down, as fewer workers quit to seek better jobs and employers both hire and fire fewer people than they used to do. If the seasonal adjustment was too large, then the gain should be smaller."

In other words, the economy lost jobs last month. But the Obama administration creates a "positive report" by using unreliable "seasonal adjustment factors." Well, at least Floyd Norris in the New York Times isn't fooled. How about you?

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Obama’s Jobs Bill: Hire somebody who's not unemployed and you'll get sued!

The U.S. has a very serious unemployment problem (among other serious problems).  Federal Reserve Chairman Bernanke has called it a "national crisis"--

“We’ve had close to 10 percent unemployment now for a number of years and, of the people who are unemployed, about 45 percent have been unemployed for six months or more. This is unheard of.”  (emphasis added)

Hardly surprising then, that the Obama administration has proposed a "jobs bill." What is surprising is that Obama's bill  would make it likely than any employer who hired someone who was not unemployed, would be sued--Mr. Obama’s jobs bill would prohibit employers from discriminating against job applicants because they are unemployed. . . Unsuccessful job applicants could sue and recover damages for violations, just as when an employer discriminates on the basis of a person’s race, color, religion, sex or national origin.

http://www.nytimes.com/2011/09/27/us/politics/obama-proposes-adding-unemployed-to-protected-status.html

This proposed legislation would apply to any business having 15 or more employees. While everybody agrees we need to reduce unemployment, this proposal, if enacted, will have the opposite effect. Rather than risk getting sued, employers just won't hire--

. . . the proposed solution to this problem in President Obama’s jobs plan is a case of the cure being worse than the disease. It is not hard . . . to imagine that someone could think this proposal is a good idea, because most people have never run a business. . . Every out-of-work lawyer will find plenty of opportunities to extract money from small-business owners (the bigger companies have lots of lawyers to defend them): “Settle with my client, or we will sue you.” And it hardly matters if you are guilty or innocent. Either way, you have to waste time, energy and money defending yourself, which of course the contingency lawyer knows. Do you realize how expensive it can be for an employer to defend even a baseless claim? How do you prove your innocence? And the bottom line is this: Even if this goes through, it still won’t compel business owners to hire someone they don’t want to hire.

Who are the biggest losers in this scheme? Everyone. This is just one more reason for a business owner to avoid hiring anyone (there are other reasons, as well). . . . (Chicago business owner Jay Goltz in the New York Times-- http://boss.blogs.nytimes.com/2011/09/28/is-this-the-right-way-to-help-the-unemployed/ )

Is it asking too much to ask the President of the United States to consult with at least one small business owner before proposing "jobs" legislation?  With this provision included, this is a really, really bad "jobs plan."  President Obama obviously has no experience nor understanding of running a business and meeting a payroll--and he is obviously clueless about creating conditions that will encourage employers in the private sector to hire--in fact, in trying to "help," his administration is making things worse. Thomas Paine said, "Lead, follow, or get out of the way."  In this case, the Obama administration appears unable to lead, unwilling to follow, and therefore just needs to "get out of the way."

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If Washington was really serious about reducing unemployment

If Washington was really serious about reducing unemployment, it would start by:

1. Allowing foreign students graduating from U.S. universities with graduate degrees have permanent residency upon graduation--In the long term, the nation needs comprehensive immigration reform. In the short term, policymakers should focus on reforms that are directly related to increasing the "brain gain" for the nation—creating new jobs and producing economic benefits—to produce tangible and achievable improvements in our immigration system.
http://www.brookings.edu/papers/2011/01_immigration_west.aspx;

2. Reforming the tax code--want an example? How about changing the stupid tax policy causing U.S. companies to relocate offshore--When A U.S. Company Redomiciles To The Cayman Islands, What Lesson Should We Learn?

None of the above is hard to comprehend, so why does Washington continue to do NOTHING?
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