The Victims of Fundamental Transformation

President Obama roared into office vowing a “fundamental transformation” of America.  His transformation has not been kind to middle class workers.

The Labor Department just published it’s monthly, new normal – miserable – jobs report.  The headline, that in December the unemployment rate ticked down from 7.0%, to 6.7% was an illusion that masked the real news.  In fact, the bad news, as shown in this chart is now so stark, even the establishment media are beginning to be skeptical of the validity of the declining unemployment rate.  Arc-of-participation-Jan14

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.  These “discouraged workers” are no longer counted as unemployed.  In December while employers created a meager 74,000 jobs, 347,000 jobless people were reclassified from “unemployed” to “not in the labor force,” and thus not counted as unemployed.

As the chart above shows the labor force participation rate has declined dramatically since 2008 to it’s lowest level since the Carter Administration, 37 years ago.

If the labor force participation rate were the same as it was at was in June 2009 when the recession officially ended the December unemployment rate would have been 10.4%

The next chart tracks the unemployment rate and the labor force participation rate over the 50 months since unemployment peaked at 10% in October 2009.  As it shows the drop in the unemployment rate runs parallel to and is almost entirely due to the shrinking the labor force participation rate.Obama-participation

This parallel decline in both rates is unprecedented.  In every previous post-recession job market, the labor force participation rate was flat or increased as the unemployment rate declined. 

Barack Obama’s “transformation” agenda of higher taxes on small business employers, aggressive increase in regulations, and new costs and mandates on employers are obvious barriers to business expansion and job creation.  His bureaucrats are busy with ObamaCare implementation, making job creation even more risky and expensive.

The next chart tracks the first 50 months of job market recovery after the deep recession of the 1980s.Reagan-participation
In the 1980s President Reagan worked with Congress to reduce tax rates on entrepreneurship, investment and capital gains.  He enhanced economic opportunity and decreased the cost and risk of hiring employees by scaling back regulations.

The route to prosperity is the same as it has always been, more liberty.  What can government do to help employers create more jobs?  Stop being a barrier!  Cut taxes, repeal ObamaCare, and reduce regulation.

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