Commentary by James Shott
President Barack Obama’s last chance before the election to show that Democrat policies are producing favorable economic and job conditions has ended, and October’s economic numbers contain some positive news, but not a lot.
Among the better news, the most often cited unemployment rate dropped slightly, and average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents.
President Obama and the Democrats are thrilled that the U-3 unemployment rate dropped a bit in October to 4.9 percent, the same level at which it stood in June, July and August before rising to 5.0 percent in September. Unemployment of 4.9 percent is a respectable rate, so long as other factors do not provide contradictory facts. But, alas, they do.
The U-3 rate is one of six different looks at alternative measures of labor underutilization in the country, and counts those in the labor force who are working as well as those who have lost their job, but are actively looking for another one.
The weakness of the U-3 is, however, that there are a tremendous number of Americans of working age who are not working or looking for a job any longer because they became discouraged at being unable to find a job, and have dropped out of the labor force, although they would gladly go back to work if the business climate improved and the economy produced a job for them. The U-6 rate reflects the unemployment rate with these folks included in the calculation, and stood at 9.5 percent at the end of October. The U-6 rate is far more reflective of the actual health of the employment environment than the more frequently cited U-3 rate, and 9.5 percent is not good.
Thus far in 2016, employment growth has averaged 181,000 per month, compared with an average monthly increase of 229,000 in 2015. Neither level has been enough to help those millions of discouraged workers who have given up looking for work, as demonstrated by the U-6 unemployment number.
In October, 1.7 million persons were marginally attached to the labor force. While total nonfarm payroll employment rose by 161,000 in October, 487,000 discouraged workers dropped out of the workforce; three times as many people quit the workforce because they couldn’t find a job as were hired for a new job. That explains the small improvent in the U-3 rate.
“The sectors witnessing the strongest boost in hiring over the past year included education, health and professional and business services in October,” write Nick Timiraos and Josh Zumbrun on The Wall Street Journal blog. “The sectors with the weakest performance included manufacturing and mining.” Service sector jobs thrive while manufacturing sector jobs continue to suffer. And, since the last recession began in December of 2007, the number of new full-time positions and the number of new part-time positions are nearly equal.
Neither of these are good signs. Most people want full-time jobs, but they are in short supply, and that means lower earnings as a part-timer, or having to work multiple jobs to make ends meet. And in terms of worker earnings, manufacturing jobs most often pay better wages than service jobs.
The Labor Force Participation Rate was at 62.8 percent at the end of October, muddling along at levels not seen since the late 1970s.
A participation rate of 62.8 percent means that of every 1,000 people of working age that are actively in the labor force or have dropped out but are willing and want to work, only 628 have a job, a little less than two out of three. That translates to 94.5 million Americans of working age that are not working. The highest the participation rate has been in 2016 is 63.0 percent and the lowest is 62.6. Until after the recession began near the end of 2007, the participation rate hovered around 66.0, and nothing President Obama has done in eight years has reversed the steady slide and the leveling out in the 62 percent range.
After seven years in office the Obama economy had produced an average real GDP growth rate of a weak 1.55 percent, ranking Obama as fourth from the bottom of previous Presidents of the United States. In October 2016, GDP registered a growth rate of 2.9 percent, by far the best this year. However, by comparison, U.S. real GDP growth averaged 3.79 percent from 1790 to 2000. The Obama administration’s over-regulation and poor tax policies hampered business activity, hence job production.
As voters go to the polls to complete the process of choosing Obama’s successor, a major question is whether they will vote to elect Hillary Clinton and stay on the present failed course for four or perhaps eight more years of economic weakness, millions of Americans out of work, weak GDP, and jobs forced overseas by foolish tax and regulatory policy.
Or, will they vote for a change by electing Donald Trump, who at least very well understands business and how economic policies like those of Obama and Clinton harm the very people they are elected to serve. Let us hope for the latter, and provide America the chance for better things in the future.
Cross-posted from Observations