Don’t Pop the Unemployment Champagne Cork Just Yet
Posted by Michael A. Kamperman on April 3, 2010
It is great news that more Americans found a job in March than lost one. That is the end of the great news. That is unless of course your a quantity-over-quality kind of guy or gal. Of the 162,000 jobs created in March, over half were temporary jobs split between the private sector and U.S. Census Bureau. The ADP report showed a loss of 24,000 private sector jobs, while the Labor Department reported a gain of 123,000 private sector jobs. Last year the Labor Department was consistenelty more optimistic than ADP. Then a couple of months ago the Labor Department revised down the number of jobs for 2009 by almost one million workers. More disturbingly average earnings declined by .1%. When coupled with the recent .1% decline in the Core CPI rate the risks of entering a deflationary spiral are rising. What has come to be known as the underemployment rate or real unemployment rate (U-6) rose to 16.9%, even though the official unemployment rate (U-3) held steady at 9.7%. The recent Gallup poll reported the underemployment rate rose to 20.3% in March, up from 19.9% in January. The difference between Gallup and the U-6 rate is probably related to questions surrounding how often you looked for work in the last 12 months and seasonal adjustments. Gallup is not anxious to find technical loopholes to exclude people from the labor force. Additionally, the number of people out of work 6 months or longer rose again and now stands at over 6 1/2 million. But the number that jumped out at me is the number of people who were forced to work part-time for economic reasons rose by 263,000 in the household survey. When the last 5 months are taken together as a whole it appears the labor force has stabilized. However, the wage declines are an indication that the quality of jobs are going down as much as it is an indication of deflation.
What appears to be happening is that as people’s unemployment benefits run out they settle for any job. It makes no sense to take a job for less than half the pay of your old job while you are collecting unemployment benefits. It makes a lot of sense to take whatever you can get when the checks stop coming in the mail and you need to find a way to put food on the table. The problem is it is not enough for our society to simply have people working. We need to have them working in good paying value added jobs. We are a society deeply in debt. As such we need rising incomes to service the debts. If incomes are declining it is much more difficult to pay our debts. If incomes are declining it is much more difficult for tax revenues to stabilize. And finally, if incomes are declining it is much more difficult to grow our economy. For despite the .1% drop in average earnings we have a long way to fall if our wages are to reach par with China where the average worker in Shanghai makes $5,000 per year. Most of these workers have no benefits, such as pensions or health care. The Chinese society also doesn’t have the percentage debts to service that the American society does.
Rather than high-fiving at the Whitehouse while strategizing with Census hiring how to have the lowest top-line unemployment number possible for the November 2010 election, the Whitehouse should take a serious look at this supposed economic miracle. President Obama should ask is the March Unemployment Report the best we can do after-all? After we spent a bunch of our $787 billion economic stimulus money? After the Federal Reserve printed over $1.5 trillion? What will happen now that the printing has ended? What will happen now that taxes will rise due to the health care bill, due to the states need for revenue, and due to the pending expiration of the so called Bush tax cuts in 2011? What will happen in 2011 when the states don’t have stimulus dollars to plug some of the shortfalls in their budgets? Where do we go from here? The President’s strategy of having the U.S. double exports within 5 years is a joke when one considers we are competing against global workers who make $5,000 per year without benefits and that have free and open access to our markets while we don’t have free and open access to theirs. The next big joke is the oppositions plan that the way to improve the economy is to reduce the federal deficit primarily through spending cuts. Why don’t we ask Latvia, Ireland and Greece how that’s working out. Our country needs to have a real long look in the economic mirror and quit spinning every economic statistic in a way to make it benefit either the Republican Party or the Democratic Party. Otherwise, like Japan we are staring at two lost decades, not one.
