The Recovery that Isn't

| September 7, 2012 | Reply

The White House has good news for us today. The economy is getting better, thanks to Barack Obama’s brilliant policies and, if we give him another four years, he’ll do even better!

While there is more work that remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression. It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007…

Today’s report from the Bureau of Labor Statistics (BLS) shows that private sector establishments added 103,000 jobs last month, and overall non-farm payroll employment rose by 96,000. The economy has now added private sector jobs for 30 straight months, for a total of 4.6 million jobs during that period.

The household survey showed that the unemployment rate declined from 8.3 percent to 8.1 percent in August.

I am just a blogger, not a highly-credentialed and well-paid economics adviser, but I know that the word “recovery” means that whatever malady you have is getting better, yes? One could assume that this jobs report would be better than the last one, or at least that this year would be better than the year before.

That’s not happening. Jim Pethokoukis skimmed some of the numbers the White House didn’t mention and they don’t show an economy in recovery at all. In fact, they show an economy that’s wobbling like a tired duck flying behind a 767.

Since the start of the year, job growth has averaged 139,000 per month vs. an average monthly gain of 153,000 in 2011.

In other words, we created 14,000 fewer jobs per month this year than we did last year.

- While the unemployment rate dropped to 8.1% from 8.3% in July, it was due to a big drop in the labor force participation rate (the share of Americans with a job or looking for one). If fewer Americans hadn’t given up looking for work, the unemployment rate would have risen.

– Reuters notes that the participation rate is now at its lowest level since September 1981.

– If the labor force participation rate was the same as when Obama took office in January 2009, the unemployment rate would be 11.2%.

– If the participation rate had just stayed the same as last month, the unemployment rate would be 8.4%.

I want to stop here for a moment. The Civilian Labor Participation Rate measures the percentage of people in the job market out of the total of all the people who could be in the market. So if you’re able-bodied, of working age, and a civilian and you’ve given up looking for work, you’re out of the market. We want a bigger number here — as close to 100 percent as we can get. Right now, the participation rate is 63.5 percent. The rate has dropped like a rock since Barack Obama was inaugurated, even though the recession he likes to blame for all his woes ended in 2009.

To put this drop into perspective, the last time the participation rate was this low, Ronald Reagan has just taken office, the Space Shuttle Columbia made its first-ever launch, and the BBC gave the first public demonstration of the compact disc. it was a BeeGees album.

Jimmy Carter didn’t do this badly.

So what happened last month is 96,000 people who wanted work found work while 368,000 people who wanted work gave up hope and stopped looking. The labor pool today is a little smaller while the participation rate dropped by a proportionally larger amount. That makes the unemployment number look not quite as bad even though it really means our economy is weaker than it was the month before. Make sense?

Did I mention weaker than the month before?

The Labor Department also said that 41,000 fewer jobs were created in June and July than previously reported. The change in total nonfarm payroll employment for June was revised from 64,000 to 45,000, and the change for July was revised from 163,000 to 141,000.

To simplify, we actually created fewer jobs in June and July than we thought we did, which makes our August number even worse because it will likely be revised downward, too. But here is the worst number of all.

Each month, The Hamilton Project examines the “jobs gap” — the number of jobs that the U.S. economy needs to create in order to return to pre-recession employment levels while also absorbing the people who enter the labor force each month. If we added 96,000 jobs every month, we would not close the jobs gap until after 2025…

Thirteen years. That’s how long it will take us to get back to where we were before the recession if we follow the genius plans Barack Obama and Congressional Democrats have put into motion over the past four years. And make no mistake, his plans for the next four years are conceptually the same as the ones we’ve seen since 2009: raise taxes on everyone but especially “the rich”, make government bigger, and “invest” in infrastructure that grows the bank accounts of union bosses and campaign contributors (Happy Birthday Solyndra Bankruptcy!). There is no world in which any of those policies will let our business owners hire more people, give more raises, build more buildings, or buy more equipment. So here we are.

The White House did hedge its bets though. We shouldn’t focus on one month’s numbers, because the economy is volatile and blah blah blah context blah blah stuff we don’t know but they do because they’re smart…

As the Administration stresses every month, the monthly employment and unemployment figures can be volatile, and employment estimates can be subject to substantial revision. Therefore, it is important not to read too much into any one monthly report and it is informative to consider each report in the context of other data that are becoming available.

And that’s impressive. Truly. Economies are complex. They have tens of millions of moving parts. It is difficult for anyone to get a truly solid reading on our economic situation from a single month’s unemployment report. No one is smart enough to mange such an immense and complex machine because…wait. Did I just sound like Hayek there? Hmm!

Well, anyhow, the White House’s team of economic super geniuses would have impressed me more with that caveat if they hadn’t made the same excuse every month for the past 30. If you’re keeping score, Barack Obama has been President for 44 months, which gives him a very impressive Excuse Average of .818. That’s All-Star level right there.

If only he were that good at economics.



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Category: The Economy and Your Money

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