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.

"No matter how vast your knowledge or how modest, it is your own mind that has to acquire it." Ayn Rand

"Observe that the 'haves' are those who have freedom, and that it is freedom that the 'have-nots' have not." Ayn Rand

"The virtue involved in helping those one loves is not 'selflessness' or 'sacrifice', but integrity." Ayn Rand

07 January 2012

Unemployment, the Lie by Misdirection

With the publication of the Bureau of Labor Statistics unemployment numbers for December 2011, we have generally been told that there is good news for employment.  We have been told that unemployment is down to 8.5% based on seasonally adjusted numbers.  This is a very big lie by misdirection, though it may be fully consistent with the usual practice by which unemployment is defined.  As I have said many times, during a long recession or depression, the usual practice produces a meaningless number.  Let us search for some real meaning in the job statistics of the BLS.

Because of the tendency for people to give up on searching for jobs when they have been long unemployed and unable to find employment, the number of people listed as unemployed and in the job market tends to drop or at least not to keep up with the growth of the population.  As a result, the usual unemployment number becomes meaningless.  One has to start looking at the actual numbers of people employed and the percent of the working age population that has a job.  This is where the real story is.  To do this, we must look at the numbers given in the following table:

Note that this table does not use the seasonally adjusted numbers which I suspect may not be realistically adjusted using normal seasonal swings when one is in a long-term recession.  In this table, we can follow the actual numbers of civilian work age people, the actual employed, the percentage of people employed, and we can calculate the number of people who would want jobs if good jobs were as plentiful as they were in January 2000 and for several years prior to that.  Note that in December 2005, 142.779 million Americans were employed, but in December 2011, only 140.681 million Americans were employed.  The number of employed Americans in that 6 years dropped by 2.098 million even as the working age population grew by 13.159 million.  The Obama economy of December 2011 is indeed in a very sorry state.  But this does not keep Obama from crowing at the top of his lung power that the economy is healing due to his policies.

The number of people unemployed is only 12.692 million now and it was 15.137 million in July 2010.  That looks like good news!  Ahhh......, but how disappointing it is to see that there were only 0.547 million fewer people employed in July 2010 than in December 2011.  In that year and a half of "recovery" from the recession, the working age population grew by 2.694 million while the number employed grew by only 0.547 million.  The percent of the working age people employed fell from 58.91% to 58.47%.

What happened to the number of missing jobs?  Not much.  In fact the number increased from the November 2011 report.  To be sure, month to month variations are not very meaningful, so we should look at longer trends.  Note that in seasonally adjusted numbers, the Obama administration is claiming that the number of jobs increased by 200,000!  The actual numbers of employed show no such increase.  In December 2011 the number of missing jobs was 21.689 million.  This is 378,000 fewer missing jobs than in December 2010.  At this rate of recovery, we can have as few missing jobs as in December 2007 in 28.2 years.  Yes, that is years, not months!  Obama should crow really loud about that.  With this Obama rate of recovery from the recession we can achieve the January 2000 number of missing jobs in 42.3 years!

Since May of 2011, the number of missing jobs is almost flat.  There is no sign of improvement.  Indeed, there is very little change over the last two years of supposed recovery.  This is totally unlike any recovery from a recession since WWII.

The wonder is that we have an economy which is stagnated in job growth.  Given the impending ObamaCare and Dodd-Frank regulatory controls onslaughts, the totally union-boss controlled NLRB thanks to unconstitutional despot appointments, the soaring costs of gasoline with central planning help, the soaring cost of electricity, the government refusal to allow oil and gas drilling, the upcoming cost increases for vehicles forced to go 54.5 mpg, the increased costs for food and drugs thanks to heavy-handed Obama regulations and added taxes, the money extracted from the private sector to be wasted on green energy developments, the increased state taxes in many states, the failure of the federal government to reduce our highest in the developed world corporate income tax and very high capital gains tax, and a never-ending threat by the President and Senate leadership to punitively tax the most productive members of society, it is a wonder that the private sector is keeping pace with the population growth at all in its job creation rate.  One can only imagine what the private sector could do if the governments, federal, state, and local, were to get off the backs of businessmen.


Barb-Central Texas said...

I agree with your assessment of the unemployment figures. But here's some good news: despite the fact that federal and state governments are doing much to hurt small businesses, at least some of the people who used to work as employees are now working as independent contractors, or starting their own small businesses. I am a lawyer and CPA working almost exculsively with closely held businesses and self employed individuals. I'm not 100% sure about this (would love to have more data) but I suspect that the small business sector is propping up the U.S. economy as a whole and that without small business, the whole structure would be likely to fail.

Charles R. Anderson, Ph.D. said...

Thank you for your comment Barb.

As I understand it, the number of new start-up businesses is down nationally in this recession compared to the numbers over the years prior to it. Start-ups can be very sensitive to local factors such as the regulatory and tax environment. Texas is one of the easier states to start a business, so I suspect that many more people out of a job will start a business legally in Texas than in many other states. Attitudes towards businessmen are better in Texas than in many Democrat Socialist states as well. I expect that part of what you are seeing is a phenomena of a relatively business-friendly environment.

The recession having dragged on so long, the resources of many small businesses have been depleted. Many have failed and been casualties of this unsustainable government romance with socialism. The FDIC has forced many banks and lending institutions to cut back on their loans to small businesses, calling them too risky. Start-up capital raised with collateral based on one's home value is harder to come by. Companies that would have bigger businesses for clients are suffering from the fact that the bigger businesses are sitting on hordes of cash, estimated to be worth $2.1 trillion. Government small business statistics are grim.

But, many Americans will not sit at home unemployed and twiddling their thumbs. I am sure many are operating businesses under the radar of governments. There are many people who are working at least part time without business licenses and who are not paying taxes, I am sure. This will be especially true in the Democrat Socialist states. It is a form of poetic justice!

Generally, I think small businesses are hurting, but I do think they are struggling on and fighting mightily to do their best under the worst of circumstances. If they give up the fight, then we will quickly settle into a Great Depression. We have to hope for a change in business climate, at least at the federal level, soon enough that small businesses can win their heroic battles often enough before they are all out of capital and every entrepreneur is totally exhausted and discouraged.