Obama’s Job Statistics Vs Main Street Reality

President Obama defines jobs “success” in a unique new way.

President Obama has “pivoted to the economy” once again, in an appearance on Sixty Minutes, followed by Speech at Northwestern University.  Here’s an excerpt from Sixty Minutes:

Question: Right now public opinion polls show a majority of Americans disapprove of your handling of foreign policy and the economy. You’ve got midterm elections coming up…What are you going to tell the American people?

President Obama: Here’s what I’m going to tell the American people. When I came into office, our economy was in crisis…businesses were laying off 800,000 Americans a month…We had unemployment up at 10 percent. It’s now down to 6.1..

Note that the President does not compare his economic record with previous administrations, or with historic averages.  Instead he compares a gradually declining, post recession unemployment rate with the highest rate reached during the recession.  On this basis he claims success.

LPR-through-Sept-14

Obama  hopes we’ll see this comparison as appropriate because, as reminds us often, he took office during of a severe, inherited recession and he takes credit for it coming to an end in June 2009.

There have been 33 recessions over the past 157 years and they all ended with little or no government intervention in the economy.  But Obama apparently would have us believe that 2008-09 would have been the first ever permanent, unending recession were it not for his Presidency.

A week after the Sixty Minutes interview excerpted above, the Labor Department published its monthly jobs report indicating the unemployment rate had ticked down from 6.1% to 5.9%.  The President and his supporters were euphoric.  But, it turns out that the falling unemployment rate is a deceptive indicator.

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 the 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” even though they are still jobless and still want to work. 

The unemployment rate dropped from 6.1% in August  to 5.9% in September only because 315,000 jobless people were reclassified from “unemployed” to “not in the labor force.”

If the labor force participation rate were the same now as it was in June 2009 when the recession ended the current unemployment rate would be just over 10%, not 5.9%.

The chart above shows that the nearly all the decline in labor force participation rate has been, since the end of the recession.  This five year decline is the deepest ever recorded since monthly reports began 67 years ago. The second worst was less than half as deep and started during a recession, not after the end of a recession.

Later in the Sixty Minutes interview we heard this exchange:

President Obama: Ronald Reagan used to ask the question, “Are you better off than you were four years ago?” In this case, are you better off than you were in six? And the answer is, the country is definitely better off than we were when I came into office.

Question: Do you think people will feel that?

President Obama: They don’t feel it. And the reason they don’t feel it is because incomes and wages are not going up.

This is not complicated.  Wages, like prices result from the market forces of supply and demand.   Since the beginning of the recession in 2008 the working age population – supply – has increased 10.4 million.  But as of September only 222 thousand more people are employed than when the recession began.  This is the first time since the current system of monthly statistics began in 1948 that job creation has lagged so far population growth.  In fact, throughout the 1970s and 1980s job creation outpaced population growth, accommodating a larger percentage of women in the labor force than in past decades.  Today, wages are down because the supply of potential employees has increased while the demand for employees is static. 

The President also hyped 55 months of uninterrupted private sector job growth which he claims is a record.  It is true that there is no previous 55 month period without a single negative month.  But it is far from the best 55 months on record.  There have been dozens of 55 month periods with stronger job growth, in spite of a few negative month interruptions.

The grim reality is job creation is down and wages are down because of Obama’s implementation of myriad progressive schemes, including tax increases, dramatic increases in regulation and Obamacare, a major barrier to hiring.

The People will “feel” prosperous when the federal footprint has been reduced, freeing entrepreneurs and investors to do what they always do if not impeded by centralized government control: create new products and services and build new businesses raising the demand for employees.  Only then will there be wage increases.

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