Job Market Deception by the “Experts”

How Government-Media “experts” spin bad news as good news.

The headline unemployment rate dropped from 6.3% in May to 6.1% in June.  A round of cheers was herd from the “experts” in the Obama Administration and the media. 

Unfortunately, we live in a new kind of economy now, an economy with more government intervention than ever before, an economy where an unemployment rate decrease can be, and in June was, a symptom of a labor market deterioration.LPR-to-June-2014In only three months, from March to June, Labor Department Statisticians reclassified just over one million jobless people from “unemployed” to “out of the labor force.”  If those men and women were still counted as unemployed the June unemployment rate would have been 6.7%.

Since the Recession ended in June 2009 4.4 million jobless people have been reclassified from “unemployed” to “not in the labor force.”  If they were still counted as unemployed the June unemployment rate would have been 8.7%.

In February 2009 the Democrat controlled Congress enacted the President’s $840 Billion “stimulus,” promising millions of high paying jobs on “shovel ready projects.”  Since then 7.4 million jobless people have been reclassified.  If they were all still counted as unemployed the June unemployment rate would have been 10.3%

The Labor Force Participation Rate

The labor force participation rate is the percentage of the working age population counted as “in the labor force” either because they have a job or because they qualify by government criteria to be counted as “unemployed.”  The unemployment rate is the percentage of men and women in labor force who are counted as unemployed.

People who have been jobless for a long time become discouraged and don’t actively look for work often enough to meet arbitrary, government criteria for inclusion in the ranks of “unemployed.”  They are reclassified from “unemployed” to “not in the labor force.”

Typically, the labor force participation rate declines slightly during a recession, then comes back up during the post-recession recovery.  But as the chart above shows, most of the recent decline has been since the end of the recession in mid 2009.  This has never happened before.  Thus, customary indicators of employment and unemployment generate misleading headlines.  What has always been good news, a drop in the unemployment rate was, in June, an indicator of bad news.

The excuse makers in the Administration and the establishment media glibly dismiss the alarming decline in labor force participation as the result of the baby boom generation beginning to retire and thus not bad news at all.  This explanation seems plausible until one looks at the data by age group.over-under-65-June-14As the chart shows labor force participation has increased in the over 65 age group, and decreased in the prime working age groups, under 65.  So the overall decline in participation shown in the first chart above is not the result of the retiring boomer generation.  It results from jobless people who are still in their prime working years being reclassified out of the labor force because they have become discouraged and don’t look for employment every week.

We know from history what steps government can take to facilitate economic growth and job creation.  But the progressive movement President Obama represents ignores history in favor of politically motivated theories.  They insist that activist government, imposing higher taxes and more regulations and granting subsidies or protection from competition to companies chosen by the Washington elite, will somehow create jobs.

Hopefully, the Republicans will regain control of the Senate in November.  And hopefully those Republicans will shake off the special interest pleaders and use their power as the House & Senate majority party to dismantle some of the more onerous regulations of the past decade and to liberate the American economy to do what it has always done when free of government excesses, expand and create jobs.

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