A few weeks ago, the Bureau of Labor Statistics released the new job numbers. They reported nonfarm payrolls rose 243,000 in January, a stronger showing than previous months. In response, President Obama stated, “The economy is growing stronger and the recovery is speeding up.” Sadly, such a statement defies economic reality. The economy isn’t “speeding up” when it grew at a pathetic pace of 1.7% in 2011. This is the slowest recovery to any recession since the Great Depression. It is true that the unemployment rate dropped from 8.5% to 8.3%. However, the unemployment rate doesn’t tell the whole story. Instead, it covers up the real devastation of the job market.
The simplest way to measure the number of unemployed Americans is to look at the unemployment rate (U-3). This is the rate all of the media reports use, performing a disservice to the American people since it fails to depict reality. The rate is simply the number of unemployed people divided by the total labor force. It doesn’t include those who are marginally attached to the workforce, underemployed (working part-time), or those who have become discouraged from looking for work. A more accurate measure of unemployment is the U-6 unemployment rate that includes all three. That rate currently stands at 15.1%, a number President Obama and his allies conveniently fail to ever mention.
According to the employment-to-population ratio, the last two years have been completely stagnant remaining at 58.5% since January 2010. The Washington Times reported, “A year ago, there were 99 million people either officially unemployed or otherwise not working, and the official unemployment rate was 9.1 percent. Now, unemployment reported by the government is down to 8.3 percent, but the number without jobs has topped 100 million.” The Congressional Budget Office projected “on February 16, the unemployment rate will remain above 8 percent until 2014.” The CBO report also states, “The rate of unemployment in the United States has exceeded 8 percent since February 2009, making the past three years the longest stretch of high unemployment in this country since the Great Depression.”
So why does the unemployment rate continue to drop while more people are actually jobless? Millions of Americans have left the labor force and can’t find work. Even though the total population rose 1.6 million last month, the Bureau of Labor Statistics reported a historical 1.2 million people dropped out of the labor force. A small part of this was because of the baby boom generation is about to retire. Nevertheless, the size of the labor force has hit a 30 year low of 63.7% down from 65.7% when Obama took office. Keep that in mind the next time Obama takes credit for a decrease in the unemployment rate.
James Pethokoukis analyzed Obama’s job record for the American Enterprise Institute Blog, and revealed some interesting statistics. When Obama took office, the labor force participation rate was 65.7%. If the labor force rate was the same today as it was when Obama took office, the unemployment rate would be at 11%. If we use January’s labor force participation rate at 64.2%, the unemployment rate would be at 8.9% today. These numbers may be applauded in Europe, but they are devastatingly high for America. The real problem is that 3.8 million Americans have left the labor force since Obama took office. With a government that provides basic necessities for pretty much anyone, there is no need to hunt for a job with urgency.
Fed Chairman Ben Bernanke threw some cold water on the “positive” job numbers highlighted by the mainstream media. Commenting on the need for policy makers to look beyond the regular unemployment rate, Bernanke stated, “The 8.3 percent no doubt understates the weakness of the labor market in some broad sense.”
He then warned, “We still have a long way to go before the labor market can be said to be operating normally… Particularly troubling is the unusually high level of long- term unemployment.” The average length of unemployed persons in America is historically high. According to the recent CBO report, “The share of unemployed people who have been looking for work for more than six months—referred to as the long-term unemployed—topped 40 percent in December 2009 and has remained above that level ever since.” When President Obama took office, 20 weeks of unemployment was considered long-term.
As President Obama begins to campaign on a deceptive, decreasing unemployment rate, it is important to be informed of the whole story. Millions of Americans each month are leaving the labor force and have completely given up on trying to find a job. The Pew Research center finds only 54% of young adults (18-25 year olds) are employed– the lowest percentage on record. The President has enacted policy after policy discouraging economic growth. We must hold the president accountable for his actions in some areas and lack thereof in others.
David Milstein :: Dickinson College :: Carlisle, Pennsylvania :: @DavidAMilstein