Posted by Michael A. Kamperman on September 4, 2009
The August 2009 unemployment rate climbed to 9.7% and the economy officially lost another 216,000 jobs. President Obama’s Administration said today that the President doesn’t consider the country to be out of recession and on the road to recovery until jobs are being created, not just saved. President Obama is correct to measure our economic performance primarily based on the unemployment rate. It is certainly the metric the American people will be using at the polls in 2010 and 2012. This is very refreshing news and offers a glimmer of hope that the President will start to take the economic crisis seriously. The Whitehouse said technical measures like a positive GDP report would not mean the economy has recovered if it is not accompanied by job growth. Meanwhile, many in the media are portraying the August unemployment report as a sign of an improving jobs picture, just because we lost fewer jobs than we lost last month. Others in the media are talking about a jobless recovery. The unemployment rate is the best measure of overall economic performance that we have. It is an oxymoron to talk about a jobless recovery.
The actual unemployment report did not contain any good news. Hours worked stayed at 33.1 hours, which means employers have not yet started bringing their part-time workers back to full-time status and are not increasing over-time. We will not see job growth until we start to see full utilization of companies existing workers. Shockingly, despite the stimulus plan being in full swing in the month of August, government jobs fell by 18,000. This is primarily attributed to layoffs of postal workers and cut backs by state and local governments. Finally, the most distressing news was that the U-6 unemployment rate has now risen to 16.8%. In the early 1980’s when the official U-3 unemployment rate hit 10.8%, an even broader measure of unemployment than U-6 topped out at 15%. The U-6 measurement is telling us we have the worst jobs picture since the 1930’s.
President Obama can at least be thankful that he will not have pictures of economically desperate people in long lines at soup kitchens. This is because our modern method of feeding hungry people is food stamps. The number of Americans receiving food stamps is now a record 35 million, up from 26.5 million in 2007. Recognition of the scope of a problem is the first step in solving it. I detected today the President’s Administration is realizing the jobs picture is much worse than they expected and the stimulus plan is simply not going to create any jobs. It was only in April that his economic team ran stress tests on the nation’s largest banks using a worst case scenario for the 2009 unemployment rate of an average of 8.9%. We are well past the worst case expectations. The President needs to tell his economic team he wants a new plan, because the current one clearly isn’t working.
Posted by Michael A. Kamperman on September 1, 2009
The official U-6 unemployment rate is 16.2%. The official U-3 unemployment rate is 9.4%. After the last unemployment report I pointed out that the Bureau of Labor Statistics made an adjustment and removed approximately 1 million people from the labor force. Had this not occurred the official U-3 unemployment rate would be 10%, and not 9.4%. It turns out the statisticians have been systematically tossing Americans out of the official labor force for the last year. The civilian non-institutional population (not-in-prison) population has risen from 233,864,000 in July of 2008 to 235,870,000 in July of 2009. Yet the BLS statisticians claim those seeking employment has fallen from 156,300,000 to 154,504,000. Basically, the population of those over the age of 16 and not in prison has risen by 2 million people and magically those seeking employment has fallen by almost 2 million. The participation rate in the labor force is now calculated to be only 59.4%, down from 62.9% at the start of 2008. Are we to believe that the significant losses in the stock and bond markets over the last 18 months have caused 2 million extra people to retire due to increases in wealth? Anecdotally we know that many people that retired in the last few years have re-entered the workforce due to wealth destruction. Without this sleight of hand the official U-3 unemployment rate would be 11%, not 9.4%. Are the American people aware of this? Are members of Congress aware of this? Is President Obama aware of this? Shouldn’t this be the lead story on the ABC, CBS, CNN, FOX, and NBC nightly news shows?
If American people realized the official unemployment rate should be quoted as a minimum of 11%, then they would be demanding action. The kind of action we are not getting out of Washington. The unemployment crisis is particularly acute amongst people in their 20’s, many with college educations. This is why over 1 in 8 mortgages in America are 30 days or more past due. This is why the stress test designed to keep the ZOMBIE BANKS alive is a joke. This is why tax revenues at the federal, state, and local levels are collapsing.
Washington needs a wake-up call. Hello Washington, is anyone up their listening? It seems Washingtonians are more interested in esoteric theories like fiscal discipline, balancing the federal budget, moral hazard, no more bail-outs, healthcare reform, global warming, and positioning for the 2010 elections than they are about sitting down and solving the greatest economic crisis since the Great Depression. Where are our statesmen? Where are our leaders that care more about our people than they do about their own party and their own chances for re-election? We need massive quantitative easing. We need a “bad bank” to absorb the toxic assets and end the ZOMBIE status of most of our largest lenders. We need to open up credit for homes and autos to people with credit scores lower than arbitrary lines like 700. We need to give significant federal aid to our states. And we need a serious stimulus program for our people, such as lowering the age of eligibility for Social Security and Medicare. We need economic shock and awe Washington….WAKE-UP!
Posted by Michael A. Kamperman on August 7, 2009
Was I surprised the reported unemployment rate fell from 9.5% to 9.4%? Yes I was. I expected the unemployment rate to rise. Especially since the Labor Department reported the U.S. lost another 247,000 jobs in the month of July. But I was also surprised last month that the unemployment rate rose by only .1% from 9.4% in May to 9.5% in June. In June, the Labor Department reduced the number of people wanting jobs from 155,081,000 to 154,926,000. Based on estimates for population growth we need to add about 125,000 jobs every month for the job market to absorb new entrants seeking work. By decreasing the active participation in the labor force by 280,000 in June, the reported rate of unemployment rose to only 9.5% instead of 9.7%. For the month of July, the Labor Department once again reduced the number of people wanting a job in America. This time the number dropped from 154,926,000 to 154,504,000. If the Labor Department kept the numbers of those seeking work in May constant with July and added the normal 250,000 new entrants into the ranks of those seeking employment, then the unemployment rate reported this morning would have been 10% and not 9.4%. In the last two months the Labor Department has added almost 1 million people to the ranks of those not in the Labor Force. This is the reason the official unemployment rate is the same in July as it was in May and not 10%. Just as with the GDP report, signs of economic weakness are being reported as signs of economic strength. In the U.S. 577,000 fewer people are earning a paycheck than were just two months ago, and we had more young people enter the workforce than older people retire, and yet our official unemployment rate is unchanged and the pundits declare the economic recovery is on.
Intuitively and intellectually it doesn’t make much economic sense that more people are leaving the workforce than entering it. If you are a stay at home parent and your spouse loses their job, then that means in many cases two people are looking for employment in your home rather than one. If you are a stay at home spouse and your working spouse lost a good paying job and has had to accept a job at much lower wages, then that means in many cases two people are looking for employment from your home rather than one. If you are a young adult going to school and Mom and Dad have to pull your financial support, then that means in many cases you are looking for work. It only makes sense that we have more people seeking employment when many households have declining, rather than rising, incomes.
While we may be entering a sustained period of economic growth, the data and the reaction by the White House and the Media means the economy will have to recover on its own without any further near term significant assistance from Washington. This is not a comfort to me when the “improvement” comes from a combination of claiming a 20% decline in exports over the last three quarters actually added to economic growth, and the way we are improving our unemployment rate is by no longer counting fellow citizens desperate for work. Perhaps the strategy of talking ourselves into recovery will work. However, woe is us if the recovery spin is wrong and we wasted an opportunity to head economic calamity off at the pass at Thermopylae.
