The Magical Shrinking Unemployment Rate
Robert Oak on October 3, 2014 The September current population survey unemployment report dropped to 5.9% and all sing hallelujah the job crisis is over. The unemployment rate hasn't been this low since July 2008. The unemployment rate dropped two tenths of a percentage point in a month, but why it dropped is more interesting. The main reason is the decline in those participating in the jobs market. The labor participation rate is the lowest rate in 36 years, not seen snce February 1978. The ranks of the employed has increased 2.3 million in the last year while those not in the labor force has swelled by almost 2 million.
This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS. This survey tells us about people employed, not employed, looking for work and not counted at all. The household survey has large swings on a monthly basis as well as a large margin of error. Yet, it is our only real insight into what the overall population is doing for work, or not.
The ranks of the employed increased by 232 thousand this month which is a great showing. From a year ago, the employed has increased by 2.33 million and now tallies 146,600,000 as shown in the below graph. These figures are good signs people really are getting jobs.....
The most frightening statistic of the household survey is the labor participation rate. The labor participation rate is at 62.7%, a record low, and is shown in the below graph.
These are not all baby boomers and people entering into retirement. Below is a graph of the labor participation rate for those between the ages of 25 to 54. These are the prime working years, so once cannot blame retirement and college on the declining participation rate. As we can see, this 80.7% rate has dropped and is at lows not seen since the 1980's recession.
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This month's household survey, makes it seems like the job market is perfectly fine. Yet if we look at labor participation rates, that is the reason the unemployment rate has dropped so much. It is also true the job market has improved and more people are finding work.
NOTE: See also NJFAC report: Is the Decline in the Labor Force Participation Rate During This Recession Permanent?United States Lost Output Clock
$5,994,539,791,160 [as of Oct11, 2014]
Blue line = Potential GDP (if capital and labor are fully employed with adequate demand)
Red line = Actual GDP
GDP = Government Spending + Private Spending + Exports - Imports
GDP & Labor Employment => Positive Correlation (Okun's Law)
The Problem We have a modern epidemic of unemployed and underemployed workers in the United States.
Since the 2008 financial crisis, the labor market has reached a tipping point, and the middle class has received its final blow.
Every time there's a business with machines or facilities idle due to low sales, or a worker unable to find a way to contribute, it's money being lost and wasted in our economy.
This untapped production from unemployed workers and unused facilities will never come back.
You can't go into a time machine and fix the misery caused over the years by unaddressed economic strife.
You can't put together families torn apart by broken careers and home foreclosures.
The pain can't be undone.
The Reason
If you are unemployed, seeking work and unable to find adequate fulfillment, or you're a business owner with sluggish sales and idle capital, it is not your fault.
Deregulatory policies and dismantling of public isntitutions under Ronald Reagan and Bill Clinton paved the way for a series of financial crises.
Bankers got drunk off cheap money from Fed chair Alan Greenspan, until they couldn't handle the debt load and risk and collapsed.
And once it popped, they used tax payer money to bail out the large financial institutions, with trillions in guarantees, loans, and equity purchases.
All this in the backdrop of decades of working Americans being shafted by free trade agreements and destruction of collective bargaining.
The result was a credit market and economy in shambles, and a government unwilling to plug the aggregate demand hole adequately with New Deal style public expenditures.
The Solution But we can reverse the bad policy which led to the crisis and do something about the unnecessary future pain. We need a large, $1.1 Trillion government stimulus jobs-directed spending program NOW.
For a detailed 20-page run-down of the nature of our current woes and the fix, click here.
This missed production/income, if spread evenly across all working Americans, amounts to lost accumulation of wealth per working American of: $38,550 --National Jobs for All Coalition
http://www.njfac.org/
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