Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at intelligent and rational individuals, whose comments are very welcome.

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14 November 2010

Obama's Jobs Creation Mythology

Obama gave a speech upon wrapping up the G20 Summit Meeting in Seoul, South Korea on 12 November in which he said that 1 million jobs had been created in the U.S. in the last year.  Let us check this statement out.

The year for which jobs statistics are available as of now and as of his talk was November 2009 through October 2010.  In November 2009, 139,132,000 Americans had jobs.  In October 2010, the number of Americans with jobs was 139,749,000.  This is an increase of 617,000 jobs.  These numbers are for the actual numbers of Americans working and are not seasonally adjusted.  This deep into a recession, the seasonally adjusted numbers may not be very meaningful.  They are also subject to some judgment, which makes them wobbly figures, as evidenced by their frequent adjustment in subsequent months after they are announced even though the unadjusted number remains rock steady.

Now, perhaps Obama was rounding off the number of jobs created to the nearest million.  Reasonable rounding practice would say that was fine if the number being rounded was quite a few million, but at 617,000, the reasonable rounding would have been to the nearest 100,000 or to 600,000 in this case.  On the other hand, we never know if he is only counting new jobs and not subtracting the jobs lost in that time-frame.  Or maybe he is still trying to convince us that his stimulus programs created many more jobs than they destroyed.  We cannot know what he had in mind.  But, we know that most people who heard him talk think he was saying that 1 million more people are working now as compared to a year ago.  That is not the case.

Worse yet, the American population is growing and we have an increase in the number of people of working age and therefore need more jobs now than we did one year ago.  To maintain a constant percentage of the population in jobs, the economy has to create many new jobs each year.  Since looking at the unemployment rate when long into a recession commonly tells us little about how many jobs are desired, I largely ignore the so-called unemployment number.  On examining the history of employment numbers, I found that few Americans were unemployed in the late 1990s and that in January 2000, at the start of the decade, the unemployment rate was 4.04% and 67.49% of the working age, non-institutionalized, population was employed or actively looking for work.  If the economy were robust and able to generate jobs that people would want as much as they did then, we should figure that 67.49% of the working age population would still want jobs today.  This allows us to calculate the number of jobs needed to satisfy those who would work if the jobs were available and reasonably enticing.

The Great Socialist Recession began in December 2007 in the United States.  It started earlier in most other areas of the world, having been kicked off by a spike in oil prices, which soon caused a financial crisis since much of the world was working on easy credit.  Our jobs problem in this decade did not start in December 2007, however.  In January 2000, we needed another 5,689,000 jobs to put everyone looking for work in a job.  That number corresponded to a 4.04% unemployment rate with some fraction of the unemployed being unemployable due to minimum wage laws and some fraction due to people changing jobs by choice.  By December 2007, the number of missing jobs had already grown to 11,023,000 jobs due to a growing population and a higher unemployment rate of 4.80%.  It also appears that the desirability of jobs had fallen somewhat by then.  I believe this was caused by the huge growth of local, state, and federal governments throughout the decade.  By December 2007, these excessive governments were already draining the private sector of much of its wealth and had dragged down its job creation powers.  The growth of government mandate expenses on businesses had grown even faster than had the governments themselves.

By December 2008, the U.S. economy was missing 15,287,000 jobs.  By December 2009, it was missing a gigantic 22,108,000 jobs.  Let us examine the number of missing jobs by month from November 2009 to the latest statistics of October 2010.

Please note that bottom of each bar for the missing jobs starts at 20 million jobs, so we can observe the variation in the number of missing jobs more readily.  Also, in November 2009, the number of missing jobs was 20,646,000 jobs and in October 2010 the number of missing jobs had increased by 589,000 jobs to a total of 21,235,000 jobs.  So, contrary to Obama's claim of creating 1 million jobs and the implication that most people would draw from that of progress in supplying the demand for jobs, we find that the problem of missing jobs has actually become worse.  617,000 more people are working but just to remain in the bad situation we had already been in during November 2009, we needed to have created 1,206,000 jobs rather than about half that number which were created.  Things are still getting worse.

Examining the graph, we see that the job situation worsened in December 2009 and again in January 2010.  It then slowly improved through July 2010.  But it got worse again in August, September, and October 2010.  Obama has nothing to crow about.  But, that does not stop him from trying to convince us that he does.

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