Saturday, October 4, 2014

Bamboozling Us about Jobs

The Obama administration released a jobs report last week that touted the fact that 248,000 jobs had been created in the past month and that unemployment has dropped to 5.9%, its lowest level since 2008. This sounds good and has been been presented to the public that way, but for a different take on these numbers check out the analysis by Wayne Allyn Root who declares that the numbers are pure fantasy.

First, he points out, the reason unemployment dropped to 5.9% is that 315,000 more Americans dropped out of the Labor Force last month.

To understand why this is significant, suppose imagine a population in which there are 100 people with jobs or looking for jobs. Of those one hundred, 90 are working and 10 are unemployed but still seeking work. The unemployment rate would then be 10%. Now there are two ways to lower that rate. The desirable way is to increase the number of workers by having some of the unemployed find jobs. If, say, five out-of-work people obtain work the number of unemployed would be cut in half and now only five percent of the labor force is unemployed.

But evidently this isn't what's happening. What's happening is that every month more people drop out of the labor force. In other words, if the ten unemployed in our imaginary labor force all gave up looking for jobs and left the labor force, then unemployment would drop to zero since there'd now be ninety people left in the labor force and ninety people working. It's full employment but it's hardly a sign of a healthy economy.

Thus, the 5.9% unemployment figure from last month means nothing when so many people are dropping out of the labor force. It doesn't tell us anything about how many more people are working than were working a year ago. In fact, the Labor Force Participation Rate is lower now than it's been in 36 years. Ninety two million Americans of working age are not currently working. Where have these people gone?

Some have gone on disability, some have retired, some are on some form of welfare, but with fewer people working and more people living off what those who are working pay in taxes, we're finding ourselves in an unsustainable position.

But what about those 248,000 new employees the administration is so proud of? Again, the figure is deceptive. A full 230,000 of the new jobs went to those in the 55 to 69 year-old age group. In other words, most new jobs went to retirees who need to continue working at other jobs to pay their supplemental insurance premiums, to pay the taxes and mortgages on their homes, and to help support their kids and grandkids who can't find work and can't afford to live in the Obama economy.

In fact, in the prime working age group of 24 to 54 years old, 10,000 jobs were actually lost last month.

This brings Root to the worst part of all of this. Most of the 248,000 new jobs are either part-time or low wage. That's why older Americans are taking them. Eighty percent of new jobs were in what he calls the lowest quality categories.

No wonder so many people favor raising the minimum wage even though doing so would actually reduce overall incomes. Minimum wage jobs are all that are available to a lot of people today.

The next time you hear an administration spokesperson boast that unemployment is down, be very skeptical until you find out how many people have dropped out of the work force and what kind of jobs new hires are getting. The administration doesn't publicize those statistics, and the media mentions them only sotto voce, but without knowing those numbers the unemployment rate is meaningless.