The Obama Jobs "Recovery"

Let us update the extent of the Obama jobs "recovery."  The most important datum informing us of the health of the economy to provide Americans a means to earn a living is the employment to population ratio.  When many people work, the economy is more likely to hum along fine and operate to raise our standard of living.  When fewer people work, there are more demands for high government extractions of wealth from the productive private sector, the standard of living stagnates or worse, and the people become more dependent upon the Big Government parasite.  So here is the non-seasonally adjusted data on the employment to population percentage according to the Bureau of Labor Statistics:

The fraction of the American non-institutionalized population over 16 which is employed has risen somewhat through April 2014 from a downward drop in the latter half of 2013.  However, this all-critical employment to population ratio is still well below the already very low ratio when he first took the oath of office of the presidency in January 2009.  More critically for Americans, the usual pattern of a recovery from recession within a couple of years to return to a similar employment to population ratio as that prior to the recession is in no way evident.  It is far more accurate to call this employment stagnation in the depths of a never-ending depression than to call this a recovery.

Yet many are shouting harrahs because the so-called unemployment rate dropped in April, even as 800,000 people left the workforce.  Many Americans are in the depth of despair at finding a decent job.  The reports are that most of the jobs that were created in April were relatively low-paying and unskilled jobs.  This is hardly surprising to me given the assertively anti-private sector policies of the Obama Oligarchy Gang of his dictatorial, individual rights trampling, Constitution ignoring, anti-energy, anti-business, micromanaging, lawless, and self-ownership denying regime.  In such a chaotic environment, the private sector does not invest in new business ventures and does not hire.  Obama's claims that money spent by government, which it removes from the private sector, is an investment has been tested many times throughout history.  That experiment always fails to back the statist theory and has failed once again under the Obama Regime.

This remains the never-ending Great Socialist Recession.  Although, given its duration and the degree of human misery it has caused, it is becoming more and more nearly correct to upgrade this condition to the Great Socialist Depression of the 21st Century.  The low employment, the huge transfer of wealth from the private to the government sector, the lawlessness of the government, and the rate of implementation of new socialist programs is very akin to the Great Depression of the 20th Century.  This is what you get when you put government in the hands of the Progressive Elitists.  For all their pretense to know better than most Americans how their lives should by micro-managed by this Progressive Elitist clique, they always manage to mess our society up royally.

We Americans do much better when we insist on controlling our own lives and living them in accordance with our self-chosen values.  Our standard of living is highly dependent upon our rejection of the Progressive Elitist claim that we did not make that.  It is each of us as an individual who must make our own lives and must honor and protect the right of every other individual to do the same.  We must fight off the usurpation of power over our lives by a power-lusting Progressive Elitist cabal.  That cabal refuses to recognize our highly individualistic natures, rich in complexity and highly differentiated.  It refuses to recognize our self-ownership as ObamaCare especially makes clear.  It refuses to recognize our ability to use reason to improve our own lives while exercising our individual rights to life, liberty, property, and the pursuit of our own happiness.  As the Declaration of Independence asserts the protection of such broad individual rights as the sole legitimate justification for a highly limited government and thereby defines the American Principle, the Progressive Elitist movement is profoundly anti-American.

What is Bad About a So-Called Government Shut-Down?

A so-called government shut-down is not really a shut-down of all government activities.  The defense of the country will continue to be provided.  Even Social Security checks and payments for Medicare will continue.  Yes, the employees of some meddling government regulatory agencies will be marked as non-essential and will be sent home.  That is the very least most of them are.  It is not at all essential that government interfere with the sovereign rights of the individual to life, liberty, and the pursuit of happiness, which is the mission of the government regulatory agencies.

Aside from defense, even the few powers the Constitution grants the federal government, are not very essential over short periods of time.  The power to establish post offices and post roads can surely go without exercise for a few months with no great consequences.  The power to establish a uniform rule of nationalization is already established in law, albeit not very good law.  Uniform laws on bankruptcy have also been established.  The regulation of commerce with foreign nations needs only to glide along established paths for a few months.  Protection against counterfeiting requires but a small group of specialists and it is clear that counterfeiters cannot even begin to compete with the Federal Reserve in watering down the value of the US currency in any case.  The Patent Office is also a small operation by the standards of the federal government.  Even the management of the federal courts is a very small fraction of the manpower used by the federal government.  The next Census is not to be held until 2020.  So, basically there is very little of the present mammoth government that is needed to perform its constitutionally granted functions, aside from the military.

And still the Social Security and Medicare checks will be also be issued, despite these activities clearly being beyond the constitutional grant of powers.  But, the EPA, NLRB, FEC, FAA, NOAA, NASA, NIH, FDA, the Agricultural Dept., the Energy Dept., the Education Dept., the Housing and Urban Affairs Dept., the Labor and Commerce Depts., SEC, HHS, and other agencies whose primary purpose is to control our lives and infringe upon our individual rights will have to designate many employees as non-essential and furlough them.  That is a very good thing.

Perhaps, these furloughs will even set aside many of the people writing regulations to implement such awful laws as ObamaCare and the Dodd-Frank cover-up of the government culpability for the financial melt-down of the Great Socialist Recession.  Perhaps Obama will not have enough aides to do the paperwork to give his supporters special subsidies and exclusions from laws such as ObamaCare.  Now that would be a most excellent consequence of a government slow-down.

In fact, let us make the government slow-down a permanent thing!  It will do much to return our government to its legitimate function of protecting our sovereign individual rights.  It will do much to decrease its many tyrannical activities.  If the slow-down lasts long enough, any of the slowed activities with any justification will be taken up by the private sector and performed much better than our incompetent government does them.

Soaking Smaller Businesses under Mandated Workers Compensation Insurance

My small laboratory operation with three employees, counting myself, is forced to pay $69 a year for Terrorism Insurance to The Hartford as part of our mandated Workers Compensation and Employers Liability Insurance.  This is a ridiculous charge for insurance for a small company located in Columbia, Maryland.  We are hardly a target for terrorists.

What is more important yet, my actual payroll was multiplied by a factor of 1.74 to arrive at the payroll basis they use for charging for all aspects of the workers compensation insurance.  It turns out that the state of Maryland requires insurers offering workers compensation insurance to treat all officers of the company as having a minimum salary even if they actually have a smaller salary.  This is a clearly discriminatory act against very small companies and is of the nature of piling onto them when times are hard.  What I would give to be able to pay myself and my partner what the state claims we must have for our insurance premium basis!

Of course, I would not be surprised if the state of Maryland does not have this discriminatory requirement in part at the insistence of the insurers.  It is a curious thing that the upper salary used for the insurance basis is also set by the state of Maryland.  An executive making more than $197,600 is only counted as $197,600 to calculate the premium.  Chalk up another advantage for larger companies to make it a bit harder for smaller companies to compete.

This piling on process is similar to the state raising the rate for unemployment insurance on a company that has kept all of its employees while other companies are letting theirs go.  When unemployment claims go up, our rate goes up to cover the state's increased costs.  No one ever worries about our increased costs in hard times.  This never-ending Great Socialist Recession sure is a one-of-a-kind such hard time.

Governments cause horrible, long-lasting recessions and then they increase taxes on those companies trying to survive the chaos and destruction caused by governments.  Of course, if you are a big company or you have pull with government, then you can gather up subsidies,
be the beneficiary of mandates, and earn exemptions.

Small Employment Improvement, But Lost Recession Jobs Still Not Replaced

The missing job situation in this recession and generally as a result of government malfeasance since 1990 is shown in the plot below:

The number of missing jobs is falling, though it does this every year at the this time in these non-seasonally adjusted numbers derived from the household survey data of the Bureau of Labor Statistics.  If we compare the number of missing jobs relative to January 2000, for the last several July months, we find that the number is slightly lower at 20.747 million now than it was in July 2012 and July 2011, but it is slightly higher than in July 2010.  This leaves us far short of replacing the jobs lost in the never-ending Great Socialist Recession, so long owned and perpetuated by Obama.  Job growth is taking care of population growth, but it is not replacing the recession lost jobs.  This is truly a stagnant economy with no increase in our standard of living in sight.

Let us examine more of the employment numbers:

The number of employed people has increased recently and the number of missing jobs has improved as the percentage of employed work age people increased to 59.05%.  This is higher than the percent of employed people which was stuck in the 58 - 59% range for so long in this recession.  The real unemployment rate long stuck in the 13%-plus range is now down to 12.5%.

While many of the new jobs most recently may have been part-time jobs as reported, the average work week is still 34.4 hours, compared to 34.6 hours a week in July 2006 and July 2007.  This is only a 0.6% reduction in work hours compared to the two years prior to the recession. The effect of ObamaCare in converting full time jobs into part time jobs is large on current hiring, but it will have to go on for some time before the average work week is substantially shortened.  I expect that the effect will continue to convert full-time work into part-time work and will in time have a big impact on the average work week.

Given the number of jobs added from June to July in the seasonally unadjusted household survey, it will take 5.4 years to employ the same fraction of the population that was employed in December 2007 if the population increases at 1% a year.  This is a very optimistic projection based on a particularly large monthly increase of employed people of 272,000 and given that the economy is slowing once again.  Even with this unrealistic and optimistic projection, this Great Socialist Recession unemployment crisis will have lasted 11 years from its start in December 2007.  It will outlast Obama.

6 Aug 2013 Addition:

Since the Great Socialist Recession began in December 2007, the number of Americans 16 and older has increased by 13.889 million according to the BLS household survey data.  Yet, 1.988 million fewer Americans are employed now than in December 2007.  Obama's recovery claims are a complete distortion of reality. Yes, jobs are being added, but the rate of jobs added is lower than it was from 1993 to 2000, despite the opportunity to recover from a deep recession and the normal opportunities to employ a growing population of working age people.  Obama's socialist policies are doing exactly what such policies always do -- they are putting people out of work and lowering their standard of living.

Obama Year 5 Economic Recovery Collapse

The 22 July 2013 Wall St. Journal headlined "Growth Outlook Stuck in Neutral."  It reports how slightly rosier economic predictions earlier in the year are proving to be too optimistic.  It notes that the expected Second Quarter growth has been downgraded to a mere 1.5%, down from an expectation one month earlier that it would grow at an annualized rate of 1.9%.  Recall, as I often point out, that since population growth is about 1% a year, real per capita GDP growth is about 1% less than the real GDP growth.  Consequently, the Second Quarter growth projection is actually only 0.5% in terms of an improved standard of living and in terms of serving employers to think about hiring.  Of course employers are mostly converting people to part time jobs thanks to ObamaCare, so most new hires are a downgrade from a full-time job somewhere to a part time job somewhere else.  This in turn has caused a sudden decrease in retail spending to only 0.4% in June, which is really -0.6% when corrected for population growth.  Worries are rising that the second half of 2013 will not live up to earlier expectations also.

Once again, the expectations of the Obama administration, or at least its and its media running dogs public announcements, have proven wrong on predictions of an improving economy.  In fact, Obama is wrong for the fifth time out of five such claims.  The man and his supporters are remarkably consistent in being wrong.  This, of course, comes from being remarkably wrongheaded in their aims and in their understanding of the economy.  Strangely enough, it proves impractical to thwart the economic rights of individual entrepreneurs.  Who could ever have imagined that!

The recoveries of 2009, 2010, 2011, 2012, and now of 2013 have all collapsed.  But Americans, just keep going on about your business and keep that faith in Hope and Change, and love that Obama smile.  Keep moving on.  There is nothing to see here.

Obama's Job Destruction Plan Illustrated

We have long been seeing updates of the graph that Obama and his henchmen used to illustrate the effect of their jobs creation plan with comparison to the jobs recovery with no such plan.  The effect of his distributing huge sums of printed and borrowed money among his campaign contributors and such of his constituents as he expected had purchasable votes is clearly shown in this most recent update of that graph.  The actual unemployment (actually understated) through the recession is shown with the red dots and this far exceeds the anticipated unemployment rate if Obama did nothing.

Surely we should assume that the difference between the original projected unemployment rate and the actual unemployment rate is the result of Obama's policies.  In other words, instead of improving the jobs situation, those policies clearly worsened it during this Great Socialist Recession.  They worsened it far worse than this plot implies too, since the actual unemployment rate is really much higher than the stated rate as I have many times pointed out.  This is due to the many people who have given up hope of finding employment and stopped looking for it.  It is also due to the many people who have become comfortable on food stamps, extended unemployment benefits, and on Social Security disability payments under Obama's inducements to do so.

Obama Kills Jobs and Resuscitates the Great Socialist Recession

Let us start off with a chart showing the number of jobs missing from our economy since January 2000 in thousands of jobs.  The number of missing jobs in January 2000 was equal to the number of unemployed people then who were looking for jobs or in some cases were simply taking some time off between jobs.  Jobs were plentiful then and had been for several years, so unemployment was only 4.0%.  Because of the boom and bust nature of the economy since then due to the Federal Reserve setting very low interest rates, the deficits run by our governments, increasing regulations and taxes, added energy costs due to drilling prohibitions, recent added uncertainty caused by ObamaCare and Dodd-Frank financial reform, and considerable class warfare and anti-business rhetoric, the number of missing jobs has increased greatly in the course of the last 11 years.

The number of missing jobs is calculated assuming that the same percentage of Americans would work today as did in January 2000 if good jobs were available.  The high tech bubble that burst in 2001 and 2002 had already created a situation with about 5 million more missing jobs than we had had at the beginning of the century.  In December 2007, the United States had not yet been much affected by the recession due to a sharp increase in the price of oil that was already hurting most other countries of the world.  But in 2008, companies began laying off employees and stopped hiring new employees.  This never-ending Great Socialist Recession was underway.

Since Obama occupied the White House, there has been no substantial or sustained return to normalcy.  The number of missing jobs for the last four months has been almost constant.  There was actually a small increase in the number of missing jobs in August, though the statistics are not really good enough to consider that a real effect.  What is real is that over the long term now, there has been no improvement.  This is not surprising since almost every action the Federal Government and the Federal Reserve have taken was effective in killing jobs, not in creating them.  Jobs are conserved in big businesses and many, many jobs are created by small businesses when the government does little to hurt their businesses.  The Federal Government and many state governments have worked very hard to create very tough business conditions and much uncertainty when American business already faced a world largely in recession and stiff competition from abroad.

Obama's socialist viewpoint, his servitude to labor unions, and his academic economic advisers with their belief in Keynesian economic theory, led him and the Democrats down a very wrongheaded path.  America is in misery because of this wrongheaded understanding of the economy and business by our ever more controlling central planners in Washington.  The private sector and Capitalist free market can do much better.

Everything in the Democrat Economic Central Planning Arsenal is a Dud

The government told us the GDP growth rate in the first quarter was 1.8%, which is not a healthy growth rate at any time and is especially weak if an economy is recovering from a recession.  In May, the government increased that reported first quarter growth rate to 1.9%.  This was still not good, but it seemed to leave the door open to optimism that while recovery was slower than in other recessions, it would occur.  Then, the bottom fell out.  The first quarter GDP growth was revised downward to 0.4% and the second quarter GDP growth was said to be an anemic 1.3%, which has just been revised down to 1.0%.

Jobs growth is not keeping up with the growth in population.  The annual Consumer Price Index (CPI) stands at 3.6% and is running much higher in the last half year.  The average American worker workweek decreased by 0.1 hours and earnings fell by $0.03, which is no way to keep up with the inflation.  Labor productivity has very unusually been falling lately as well.  These factors bode ill for further hiring.

The rest of the world economy is not in good shape either, so there is no chance that exports will do much to change the bleak picture of the American economy.  The Purchasing Managers' Index (PMI), a measure of business purchasing activity, fell to a two-year low in August to 49.0.  Numbers below 50.0 mean contraction of business activity is going on.  Among the European countries with reduced activity are Great Britain, France, Spain, Italy, Ireland, and Greece.  The positive PMI's of Germany, Sweden, and Switzerland dropped.  The PMI of Japan is at a 3-month low and Taiwan's PMI is very negative at 45.2, its lowest value since January 2009.  Canada's GDP contracted, largely due to a 2.1% drop in exports.  The leading retailer in Australia expects falling sales.  China has a PMI on the edge of contraction and its exports to the U.S. have fallen.  The world economy is staggering.

In the U.S., the favorite Democrat central planning tools of stimulus spending and quantitative easing, or creating money from thin air, have not worked.  What a surprise!  Despite the GDP growth of the first half of the year being only 0.7%, the White House is telling us that GDP growth for the year will be 1.7%.  Wow, what a howler that is!  This means they are predicting growth in the second half of this year at an annual rate of 2.7%.  I suppose they think that growth will occur because businessmen and consumers are trusting that Obama's speech on his economic recovery plans this week will solve all of our problems!  For that to be so, all Americans would have to regress to the point that they believed that he could stop the oceans from rising and cure all of the diseases of the world, as many did when they first voted for him.  I think many even of those favorable voters have learned something since!  Even if that were the case, that growth which has not been evident through August, would have to occur entirely in the last 4 months of the year.

Let us examine a few issues with the stimulus approach loved by socialists.  The CBO, not really a very reliable source, recently released a report saying that the $787 billion American Reinvestment and Recovery Act has really cost us a $825 billion increase in debt.  They claim that they cannot figure out how many jobs were created by it, but it was somewhere between 1.4 million and an unbelievably generous 4 million.  I do not think they seriously try to estimate the number of jobs lost due to the bill.  So let us divide $825 billion by 1.4 million jobs and we find each job cost $589,300.  While some investment is needed to create meaningful jobs, that is enough money to pay someone the median income of $46,300 for 12.7 years!  I could readily provide several scientists with jobs with that amount of money, but the federal government is always incompetent and inefficient!  While I do not believe there is even a 1% chance that the stimulus bill created 4 million jobs, even if it did, each job would have cost $206,250 which would have allowed me to provide at least 1.5 long-term new jobs in my laboratory instead of a mythical job.

The CBO report claims that printing up $0.825 trillion in a $15 trillion economy added between 0.8% and 2.5% to the GDP in real, inflation-adjusted growth.  Printing this amount of money diluted the value of all money by at least 5.5% since 0.825/15 = 0.055.  One could argue that the dilution of money value is proportional to the smaller value of money in circulation, making the dilution much greater than this.  The act of printing that money did nothing to add to productivity so its effects upon production are transitory.  Worse yet, that monetary dilution devalued all property, including the already depressed housing market, and all commodities, such as oil, cotton, corn, wood, and metals.  Despite these huge negative effects, the CBO tells us that the expenditure increased the GDP by something in the range from 0.8% to a totally unbelievable 2.5%.  Well, this is another instance of the very bad track record of the CBO showing its lack of understanding of economics or its adherence to rules which do not correspond to reality.

The CBO then goes on to say that direct government purchases of goods and services have a multiplier effect of 1.0 to 2.5 for every dollar spent!  Well that is very interesting.  If that were so then the stimulus bill expenditure of $825 billion would have increased the GDP by between 5.5% and 13.75%!  Clearly, direct expenditures by government have no advantageous multiplier effect.  In fact, we can calculate the effect from their own numbers for the GDP growth they claim for the stimulus bill.  0.8/5.5 = 0.145 for the lower bound multiplier and the upper bound multiplier would be 2.5/5.5 = 0.45.  These calculated multipliers ranging from 0.14 to a clearly too high 0.45 are way below 1.0, which is more like what one expects from an incompetent and inefficient government with no real interest in human productivity.

Alan Reynolds, an unusually insightful economist, has written an excellent article entitled The Fed vs. the Recovery, which first appeared in the Wall Street Journal on 26 August 2011.  It is on the CATO Institute website here.  He says:

In demand-side theorizing, monetary stimulus means the Fed buys more bonds. The Treasury has certainly been selling a lot of bonds, and the Fed has been buying (monetizing) a huge share of those bonds. That helped push the broad M2 money supply up at a 6.8% rate over the past six months. Yet the only thing we have to show for all that stimulus over the past year has been rapid inflation of producer prices and a simultaneous slowdown in the growth of the private economy. Consumer price inflation also accelerated to 5.2% in the first quarter and 4.1% in the second, from just 1.4% in the third quarter of 2010.

He notes that industrial supplies and materials account for 34.5% of our imported goods so far this year and capital equipment and parts add another 23% of imports.  Because of the second quantitative easing (QE2) which began in November 2010 and ended in June of 2011, the value of the dollar fell about 15% relative to the Euro.  The Economist's commodity-price index went up 50.9% in a year in dollars, but 22.8% in Euros.  Our import prices rose by a 15.1% annual rate and our export prices rose by an annual 11.4% over the last three quarters under QE2.  These effects reduced the growth of real GDP.

Alan Reynolds notes that

The net effect was to reduce the profitability of manufacturing and distributing products in the United States, and therefore to shift such activities (and jobs) to other countries which were less handicapped by the dollar's weakness.

Fortunately for the S&P 500 companies, 46% for their sales came from other countries!  As a result, their operating earnings per share rose from $20.40 a year earlier to $24.86 by June 2011.  Thanks to our government's policy of printing money, this did most Americans little good.

One of the commodities whose price was driven up by QE2 with important and devastating consequences was that of oil.  As I have pointed out many times (thanks to reading Alan Reynolds), every postwar recession except that of 1960 has been triggered by a sudden increase in the price of oil. From August 2007 to July 2008 we had such an oil price spike as the value of the dollar fell and oil prices doubled.  We had another large oil price increase due to the dollar losing value from late August 2010 when Bernanke announced QE2 until the end of April 2011.  The price of oil increased from $72.91 to $112.30, an increase of 54%.  Just the price of oil increasing suddenly has a very negative impact on our economy.  This is aggravated by our refusal to allow reasonable increases in domestic production, which makes us more vulnerable to fluctuations in the value of the dollar relative to other currencies.

Both the Stimulus and the Quantitative Easing efforts have depressed the growth of the GDP and resulted in giving companies every incentive to hire aboard and every disincentive for hiring at home.  Meanwhile, the regulatory, tax, anti-business, promotion of labor cost increases, and anti-energy policies and rhetoric of the Obama cabal has been added to the wrongheaded policies of the Federal Reserve to put us into a never-ending recession.

Actions Speak Louder than Words: Obama Hates Small Business

For each of the last five months, the National Federation of Independent Businesses (NFIB) has found that the business optimism of small business owners has fallen.  With First Quarter 2011 GDP growth dropped to 0.4% and Second Quarter GDP growth presently said to be 1.3%, some earlier optimism that this never-ending Great Socialist Recession was showing some signs of recovery has vanished.  Indeed, it is not even clear that if price inflation were taken into account properly that the so-called growth of the first two quarters of this year was not really a contraction of the economy.  We may very well actually have had the second dip of this recession already.  The Manufacturing Index has also been very disappointing.  Real estate values show no sign of recovery and consumer spending is still limping along.

Every time Obama and the Democrats push to provide extended unemployment benefits to the unemployed, the states have to continue using much higher than normal unemployment tax rates on the employees of businesses.  My company's rate in 2010 and 2011 is 7.33 times higher than it was 2008, despite our never having let an employee go who was eligible to collect unemployment insurance benefits.  This is not an incentive to small businesses to hire more employees and makes it harder to keep the employees they have.  Being forced to let a good employee go is definitely an optimism killer when you are running a small business.

Small businesses are also hit by the increased costs and bureaucracy they will have to expect with ObamaCare.  The Dodd-Frank financial industry reform bill has especially cut them off from the big lenders with assets in excess of $100 billion.  The increased regulatory burdens imposed by Obama's EPA, FDA, FTC, DOD, FDIC, Consumer Protection Agency, the NLRB, and the restrictions on oil and gas drilling have been hardest on small businesses who cannot afford legions of lawyers to deal with the government bureaucracy.  When the FDA or DOD require a business to become ISO-certified as proof of quality controls, that cost is proportionally much greater on a small business than on a larger business.  This is a very real discrimination against small businesses and often has only cosmetic effects on real quality controls since the business owner and upper management in a small firm are much more likely to be on top of quality issues than the corresponding management is in a big business.  New FDA oversight of small food retailers and producers is another major cost escalator for many small businesses.  Since few people were dying of food poisoning, there is no significant benefit to this new Obama cost.

Falling demand has been the biggest problem for small businesses which are less likely to participate heavily in the export markets as the large multinational companies do.  There are better opportunities for profits and sales abroad in many areas than here in the U.S., thanks to the Obama administration economy-wrecking policies.  Small business owners are also very worried about the uncertainties caused by excessive government spending and the rapid increase in the national debt.  The more spending government does, the more it interferes with business activity.  Since 2001, the GDP has grown by 46%, but the national debt has grown by 146%!  The Federal Reserve bought about three-quarters of U.S. Treasury Bonds in 2009 and 2010, thereby increasing its balance sheet from $896 billion in August 2007 at the start of the housing bubble collapse to $2.9 trillion now.  This is clearly not sustainable, yet there is no end in sight to this method of "covering" the absurd spending of the government.  The excessive spending and debt both cause pressure of increased taxes or inflation in the near future.  Business taxes are already much too high.

While only about 8% of small businesses name access to credit as their primary problem in NFIB surveys, it is clear that the credit needs of many small businesses are not being met.  Interest rates were increased on many lines of credit, business loans, and business credit cards.  40% of small businesses attempting to borrow in 2009 were able to meet their credit needs, 10% had most of their needs met, 21% had some, and 23% had none of their credit needs met.  With the gathering worries of satisfying the Dodd-Frank finance reform bill, this situation is becoming worse as this recession drags on and on and on.  Small businesses commonly do not have the resources to last through multiple years of recession.  Banks are especially refusing to lend money to fill in cash flow problems.

Small business owners generally own real estate.  In the NFIB 2009 study, 95% had real estate.  The fact that most real estate has lost considerable value has deprived many small business owners of the collateral they would commonly use to secure credit.  13% of small business owners had at least one property worth less than what they owed on it.  The loss of property values has left many small businesses much more vulnerable.

Into this sorry picture of woes for small businesses, the Obama administration FDIC has been squeezing banks to loan less money to small businesses, which it regards as less credit worthy as a group.  On that they may be right, but as is the rule with government, the assessment is a one-size-fits-all assessment.  Main Street Bank of Kingwood, Texas specializes in small business loans.  Main Street Bank has a $175 million loan portfolio and 90% of it goes to small businesses.  Most of these businesses have annual revenue less than $1 million.  The average loan size is $100,000.  Main Street had a profit of $1 million in the Second Quarter and wrote off 1.25% of its loans as bad.  The failure rate of loans in the FDIC insured banks in the First Quarter was 1.82%.  The FDIC has not released the bad loan rate for the Second Quarter yet.  Government is slow.

Despite the success of Main Street Bank in its small business loan strategy, the FDIC slapped it in July 2010 with an order to increase its capital and reduce the proportion of its small business loans from 90% to 25%.  The bank was also ordered to hire another bank executive.  It had to sell a business and shrink its loan portfolio to meet the increased capitalization requirement.  This increase in capitalization was a large one, from 9.5% in June 2010 to 17.3% in June 2011.  As a result of this FDIC interference in their business, Main Street Bank is working hard to turn in its bank charter.  A new company is being set up, Ascentium Capital, which will have backing from a private group of investors and will no longer take customer deposits.  This business will not be regulated and will be able to continue to specialize in small business loans.  They plan to increase the loan portfolio to $500 million.

The reduction from 90% of Main Street Bank loans to 25% for small businesses, removed $114 million of small business credit from the market.  Now imagine this kind of thing happening all over the country as the FDIC goes from bank to bank and prescribes lowered small business loan exposure.  The impact on small business credit will be huge.  This is very important, because a large fraction of American workers are employed by small firms and much innovation occurs in these companies.  A lack of access to credit during an extended recession makes these myriad small businesses more likely to fail.  The Obama administration policy is clearly to subsidize and bailout big businesses, but to slash and plunder small businesses.

Interestingly enough, the Small Business Administration has been repeatedly cited for guaranteeing lenders loans at 85% of the loan for which the lenders are considered to be at high risk in 80% of SBA 7(a) loans.  Their loan failures run many times higher than those of Main Street Bank!  While their loans go to only 0.2% of small businesses, they have an outlandish failure rate of 19.4%.  Perhaps the Obama crew should be more concerned with controlling this loan failure rate than that of a private bank which knows its business very well.

That tendency to plunder small business could not be made more clear than by Obama's constant effort to raise taxes on those earning more than something between $200,000 and $250,000 a year.  His efforts to widen the death tax is another indicator of his evil intentions with respect to small businesses.  It is politically much easier to plunder small businesses than it is to tackle big businesses with their many savvy lawyers and lobbyists.  It is also easier to over-regulate small businesses.  Socialists do not like business owners and managers.  They are equated with labor exploiters, no matter how many goods and services they produce for free consumers and no matter how many jobs they may provide.  Obama and his crew of insiders are nothing if they are not true socialists.  Small businesses are made to pay a heavy price as a result of their present power.

The Hidden Grimness of the State Unemployment Numbers

The government's Bureau of Labor Statistics (BLS) has released the state by state unemployment figures for May 2011 and compared them to May 2010.  In the 15 states they reported a significant change in jobs, they reported lower unemployment rates.  Changes in jobs in the other 35 states were not significant according to the BLS and will not be discussed here.  A critical review of the numbers shows this interpretation of the unemployment situation to be the work of flim-flam artists. 

Perhaps this should not surprise us in view of the control over the Dept. of Labor exercised by labor unions and the partisanship widely on the loose in the Obama administration.  The reality of the state by state review here is a grim one, but one with some useful information for job seekers.  Of course this analysis is also important for anyone deceived by the impression that the jobs situation is slowly improving.  It is actually getting worse.  At the national level I showed this to be the case here, noting that there are 693,000 more missing jobs in May 2011 than there were in May 2010.  There is no job creation adequate to keep up with the population growth of the nation.

The BLS reported that 665,400 more people were employed in May 2011 compared to May 2010 in these 15 states.  They reported that 87,300 more people were employed in California in May 2011 than in May 2010.  They used seasonally adjusted job numbers, but that should not matter given that they were comparing a May to a May.  I decided to check whether the same result would be found using the Work Force numbers and the Unemployed numbers which were not seasonally adjusted.  Since the Work Force is the sum of the Employed and the Unemployed (as recognized by the BLS), one can subtract the Unemployed from the Work Force and find the seasonally unadjusted Employed numbers for each state.  One wonders why the Employed numbers are not given directly if one expects transparency.  Transparency, much promised by Obama, is the last thing one gets from Obama and his followers.

So, what do we find for the jobs added in California over the last year?  We find that there are 40,100 fewer people employed, not 87,300 more people employed.  The state of Washington is another for which positive change in net jobs is reported as 19,600, but there was actually a loss of 32,100 jobs from May to May!  Overall, in the 15 states the BLS says added 665,400 jobs, only 333,100 were actually added.  This is almost exactly half the reported number of jobs added.  Of the 15 states reported to have lower unemployment, only 3 created as many jobs as the BLS said they did.  Examine the numbers in the table below:

The next to the last column provides the change in the Civilian Labor Force.  In any case in which the number is negative, people have either given up looking for employment or they have left the state, presumably for employment or in the hope of employment elsewhere.  In 9 of the 15 states in which Obama's BLS has claimed an improvement in the unemployment rate, this number is negative.  The only large positive number belongs to the state of Texas.  Nebraska's positive number is significant given the small population of the state.  But, note that California lost 149,500 people in its workforce, which means the situation in California is particularly grim.  The loss of 58,500 people in the workforce in Washington and of 76,600 in Michigan are also very grim signs.  Illinois, Pennsylvania, and Oklahoma also had large losses.  For the 15 states that supposedly had improvements in their unemployment rates, there was a net reduction in the civilian labor force of 247,000 people. 

Of course this could mean our population is shrinking, but that is most unlikely.  What it means in net is that people have given up on finding a job and the BLS no longer counts them in the workforce.  If they are no longer in the workforce, then they do not count in the calculation of the unemployment rate.  State by state, it could mean that people simply moved out of a state.  But if this list really has all of the states in it with statistically significant changes in jobs and they are all reported as positive changes, then it would be very odd of people to migrate to those states which are statistically known not to be creating jobs.  No, it is clear that the effect is that the unemployed have lost all Hope under the regime of this most hyped Hope President.

At this point, you might be thinking that the Obama administration just exaggerated the job additions by a factor of two, but there was still a bit of improvement in the job situation.  If so, you have missed a very important consideration.  From 2000 to 2010, our population grew at an average rate of 0.94% a year.  Assuming that each state on our list of 15 significant job growth states according to the BLS grew at the national average, each of those states would have to add 0.0094 times the number of employed people in May 2010 just to provide the jobs needed to keep up with the growing population.  I calculated that number in the last column.  California needed 150,196 added jobs to tread water, but it lost 40,100 jobs to fall behind by 190,296 jobs.  The state of Washington needed to add a net of 30,042, but it lost 32,100 to fall behind by a total of 62,142 jobs.  Failures such as these are why the jobs situation for the young is particularly awful.


Only 6 of the 15 states the BLS told us had an improving unemployment situation have created more jobs than they needed to to stay even with expected population growth.  They are, with the number of jobs they added above the number needed to accommodate average population growth:

Ohio, 21,807 jobs
Oregon, 16,076 jobs
Texas, 9,439 jobs
Nebraska, 4,480 jobs
North Dakota, 1,418 jobs
Wyoming, 38 jobs

It should be noted that Wisconsin almost met its goal to keep up with normal population growth.

First of all, noting that we were missing 21,484,000 jobs in May 2011, these six states creating more jobs than they need to keep up with population growth actually have very few jobs to meet the demand for jobs.  In addition, these states have their own unemployed.  But, if you are able to relocate to a state where the job situation is not hopeless, you may want to consider these states.  The North Dakota and Wyoming job markets are very small, so you should go to one of the top four states on the list baring unusual job preferences and skills.  Ohio and Oregon are somewhat surprising.  Everyone knows that Texas has been a job creator, but once you discount the false claim by the BLS that Texas created 205,400 jobs from May to May with the actual number of 114,300 jobs, the Texas phenomena is reduced to its being one of the few states to simply keep up with expected average population growth in job creation.

Now you can appreciate how truly ludicrous it is for Obama and his administration and his Democrat allies to make the claim that they are making progress on reducing the horrific unemployment.  It is their determined anti-business and anti-wealth-creation mindset that has kept us from recovering from this Great Socialist Recession and kept business from hiring.  Obama and those who share his socialist viewpoint have made a lifetime point of not understanding business and economics because they believe creating money is immoral.  But, earning money by offering others the values they want in the private sector is both moral and necessary.  The results of the Obama vendetta against people earning a livelihood have been brutal to the General Welfare in the extreme.  Not surprisingly, they do not want us to understand just how brutal they have been.

We must make every effort to remember these painful facts throughout this coming election cycle and work hard at explaining the reality to others.  If we are not successful, Obama and his Democrat allies will continue to wreck havoc on the People of the United States.

Continued High Unemployment -- A Manufactured Crisis to be Exploited

The on-going recession began in mid-2008 due to a housing bubble and financial instability brought on by the federal government's and Federal Reserve's easy money policies, which had been pricked by the needle of the 2007 sharp increase in energy prices.  Throughout the recession, which according to government numbers is falsely said to have ended in mid-2009, the government has continued to pursue the easy money policies that caused the recession.  What is more, it has selectively decided that some individuals and companies will not pay the price for bad decisions they may have made, albeit with much encouragement from the government.  This has heaped all of the costs of the recession on those who bore no or little responsibility for the recession or on a few responsible actors the government does not like for one reason or another.

To be more precise, the economy was rebounding from the recession in the latter part of 2009 and in early 2010.  But then ObamaCare and the Dodd-Frank financial "reform" bills were passed and the Democrats clearly wanted massive tax increases.  These actions and many strange and arbitrary regulations created an avalanche of business uncertainty to add to the lingering uncertainty of the earlier bailouts and company asset thefts by the government. The second dip of the recession started in the latter half of 2010.  Then, once again, perhaps due to the extension of many of the Bush tax cuts, the economy showed some signs of recovery in the first quarter of this year.  But, continuing government ineptitude mixed with deliberate destruction of the private sector, caused the second quarter of this year to slip back into recession mode again.  This fact was hidden by the unrealistic measures of price inflation, which ignored large fuel and food price increases and over-emphasized some improvements in technology values.  Apparent increases in GDP were likely just artifacts of the understated inflationary effect on goods and services of the huge stimulus spending and the two Quantitative Easings.

Each month, I calculate the real unemployment rate and the number of missing jobs in comparison to January 2000 when most anyone who wanted a good job could find one.  In the belief that were good jobs available, as large a fraction of the population would be wanting to work today, one can calculate the needed jobs and the missing jobs.  The latest numbers based on the Bureau of Labor Statistics unemployment report for May 2011 follow:

There actually was a nanoscale improvement in the number of missing jobs relative to April 2011.  The bad news is that the improvement in jobs creation ought to be much, much better at this time after the mid-2008 start of the recession if we were really seeing any improvement of the economy.  There were 693,000 more missing jobs in May 2011 than there were in May 2010!  A new crop of high school and college graduates is emerging and there are no jobs for them.  This is now a three-year old recession!  Recessions of the private sector never last this long.  Only government can make such an extended recession.  This is truly the Great Socialist Recession.

We are mired in the doldrums and there is no wind in sight.  The business community expects the Obama administration and the Democrats to continue making systematically awful choices with respect to the business of business and job creation.  It is true that Congress is doing less harm since the Republicans gained control of the House, but that has only invigorated the administration's determination to cause as much harm as possible through executive branch agencies.  Some of this is incompetence in business and economic matters, but some is very likely an effort to simply make many Americans dependent upon big government.  The plan is to make many individuals so destitute that they will think government is their only salvation.  It is to put many companies so at risk in the hands of regulators that they will bow and scrape before government to save their heads from the chopping block. 

What is better than a crisis of no growth, inflation, and joblessness for government to aggrandize its power?  This is well-understood by those many Democrat Socialists who hunger always to expand the scope and power of government, while making the private sector tremble in fear.  They well remember how the Great Depression grew government and gave the Democrats the initiative in politics for decades.  Some of the most influential Democrats are hoping the present crisis will give them the same power, if only they can make this recession into a long-lasting depression or at least something close to one.  These supreme power-lusting Democrat Socialist leaders are a minority of the party, but they are in control of the party policy.  The Great Socialist Recession is very unlikely to end until Obama is no longer occupying the White House and the Democrats no longer control the Senate.

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.