After February’s jobs report, some straight talk about unemployment

By James H. Shott

President Barack Obama told workers at an aircraft-parts manufacturing plant in Virginia that "More companies are bringing jobs back and investing in America. And manufacturing is adding jobs for the first time since the 1990s." "The economy is getting stronger" he said.

The Labor Department revised the figures for job growth up by 61,000 in December and January, even though unemployment remained at 8.3 percent. Cumulative job growth for the three months through February was the fastest pace since early 2006.

Reuters trumpeted the job figures as great news for Mr. Obama: “Employers added more than 200,000 workers to their payrolls for a third straight month in February, a sign the economy was strengthening. … Friday's Labor Department report, which showed nonfarm payrolls increased 227,000 last month, also bolstered President Barack Obama's chances for re-election.”

The glee continued to flow: “The jobless rate held at a three-year low of 8.3 percent even as people flooded back into the labor force to hunt for work, and 61,000 more jobs were created in December and January than previously thought.”

Hooray and hallelujah! After three long years, at last the economy has begun to recover from the Obama Recovery. However, even the media cheerleading for the president cannot change reality.

President Obama boasts of 4 million jobs having been created during his tenure. That’s an impressive number. But it is substantially less impressive when we know the rest of the story. Consider that during the downturn an estimated 8-10 million jobs were lost, so after three years more than half the jobs – approximately 5.2 million – are still missing in action.

Further, if you have a tingle running up your leg after hearing the president’s job creation number, looking at the Initial Claims for Unemployment Insurance will sober you up quickly. For the unemployment rate to be affected positively, fewer than 400,000 new jobless claims must be filed each week. Since March of last year, 30 of those 52 weekly reports showed new jobless claims exceeding 400,000, ranging from a low of 354,000 to a high of 478,000. Weekly new jobless claims since last March averaged 401,300, and the total number of new jobless claims for 52 weeks is 20,866,000. That means that during the last 52 weeks, nearly 21 million Americans lost their job and filed for unemployment insurance for the first time, and some of them are still jobless.

“Some economists say the real reason for the recent fast drop in unemployment isn't that there are suddenly so many new jobs — it's that far fewer people than expected are looking for work,” writes Tim Mullaney in USA Today. “Nearly three years into the recovery, the unemployment rate has tumbled even though new job gains are far smaller than in past recoveries. Americans could see the unemployment rate continue dropping to — or even breaking through — the psychologically important 8 percent mark by Election Day with far fewer net gains in jobs each month,” he notes. He goes on to explain that Mr. Obama may benefit from a politically beneficial unemployment rate as the election approaches, even though there will be substantially fewer jobs in America this year than four year ago.

Since the manner of calculating unemployment was changed in the 1990s, only those who are looking for work count as unemployed, and those who have given up looking are not counted, even though many are likely at some point to start looking again. The unemployment rate is the number of unemployed as a percentage of the labor force, which includes only those working or actively looking for work. A smaller number of those categorized as “unemployed” renders a lower unemployment rate.

Another important statistic is the labor force participation rate, which is the percentage of the civilian population not in penal or medical institutions, and included only 63.7 percent of Americans in January of this year, the lowest rate in 30 years. Near the start of the recession, that rate stood at 66 percent. “If employment stays the same, a lower participation rate drives down the unemployment rate. If employment gains rise and the participation rate falls, the unemployment rate falls even more,” the USA Today story noted.

The story goes on to say that if “the participation rate had stayed at 66 percent, the economy would have needed 5.1 million more jobs to reach today's unemployment rate. And if the labor force had grown about as fast as mainstream economists expected, job gains since early 2010 would have been too little to reduce the jobless rate from the 9.8% level reached in February 2010, when net job losses from the recession finally ended.”

So, while the jobs picture does reflect some positive change, it is not so much a picture of a beautiful beach scene as one of a pig wearing lipstick.

As the election nears, we have to be aware of all the factors affecting the employment problem, not just the unemployment rate, given that it is a manipulated number that omits much of the story of how many Americans are suffering because they can’t find work.

Cross-posted from Observations

Unemployment rate drops to 8.3 percent; but economy still struggling

Commentary by James H. Shott

The headline in The Washington Post trumpeted “U.S. adds 243K jobs in January; unemployment rate drops to 8.3%,” and the story which followed provided the detail. “The nation’s unemployment rate dropped for the fifth straight month to 8.3 percent, its lowest level in three years, the Labor Department reported Friday, with widespread hiring across the economy,” the story said. “The Labor Department recorded gains in many parts of the economy including the restaurant business, accounting, health care and retail stores,” and “the ranks of the unemployed dropped to 12.8 million in January from 13.1 million the month before,” the story continued.

President Barack Obama lost no time making hay in that little bit of sunshine. "The unemployment rate came down because more people found work, and altogether we've added 3.7 million new jobs over the last 23 months," he said. And the San Francisco Chronicle issued this rose-colored account: “With Friday's jobs report punctuating the nation's steadily improving conditions, Mitt Romney and his advisers are confronting an unexpected economic turnaround that threatens to undercut the central rationale for his candidacy.”

Make no mistake: anytime an unemployed American gets a job these days it is reason for happiness. But while the president, the Post and the Chronicle were satisfied with that little bit of information, there is a good bit more that we need to know before popping the corks on the bubbly.

The rest of the story is that while 243,000 jobs were added to the economy, more than four times that many people – 1.177 million– gave up looking for work last month. If you want the unemployment rate to look better, all you have to do is lower the number of people in the job market, and that’s precisely what happened when those people dropped out. Furthermore, in the week ending January 28, the advance figure for seasonally adjusted initial jobless claims was 367,000, and that is 124,000 more than found work.

If 243,000 new jobs caused the unemployment rate to drop by two-tenths of a percent, from 8.5 to 8.3 percent, when you add back into the equation the 1.177 million that dropped out of the job market, the more accurate unemployment rate is around 9.4 percent.

One of the many serious problems getting little attention from an administration focused on putting the best possible spin on things is long-term unemployment. Testifying before the House Budget Committee last Thursday, Federal Reserve Chairman Ben Bernanke called the problem “particularly troubling.”

Economists at the Federal Reserve Bank of San Francisco compared the number of unemployed with the number of job openings in the United States and found that the main reason for the spike in long-term unemployment is that there simply are too few jobs to be had. “It is likely that the recent pattern of massive job losses and a weak jobs recovery is the primary explanation for elevated unemployment duration,” according to the authors, Rob Valletta and Katherine Kuang. Twenty-four million Americans are unemployed, under-employed or have stopped looking for work. Today’s labor force is the smallest since the 1980s.

So, despite all the grand rhetoric emanating from Democrat circles in Washington, things aren’t exactly peachy in Employment Land. The National Center for Policy Analysis reports figures showing a big “fail” from the $787 billion Obama stimulus: “In February 2009, when the American Recovery and Reinvestment Act (ARRA) became law, 12.5 million Americans (8.1 percent of the work force) lacked jobs. In December 2011, with 80 percent of the ARRA's government ‘stimulus’ money spent, 13.1 million Americans (8.5 percent of the work force) lacked jobs.”And the near future holds no better news. The Congressional Budget Office (CBO) forecasts that the unemployment rate will remain above 8 percent both this year and next.

Mr. Obama was also spinning wildly on the nation’s economy. "We're also seeing more optimistic economic forecasts for the year ahead, in part due to the package of tax cuts I signed last month," he said. But the CBO sees things differently. Growth in GDP is forecast to be poor, with real GDP growing by an anemic 2.0 percent this year and just 1.1 percent next year.

With those kinds of results after three years of liberal, big-government policies, perhaps it would be wise to try something different.

During and after the campaign Mr. Obama often reminded us that we were suffering the most serious economic crisis since the Great Depression. Yet, he wasted three years “not letting a good crisis go to waste,” focusing on his ideological dreams, like ruining the nation’s health care system by turning it into just one more government-run nightmare; spending nearly a trillion dollars on a stimulus program for projects “that weren’t as shovel ready as we thought”; throwing away more than a billion taxpayer dollars on green energy companies that have now declared bankruptcy; and blocking every effort to develop domestic energy resources.

Now the president tells us that he is at long last focusing on unemployment, if only out of political necessity. He may have no idea how to help the economy repair itself, but he sure does know how to campaign.

Cross-posted from Observations

The administration’s policies are killing jobs, not creating jobs

Commentary by James H. Shott


One of the major failures of Barack Obama’s presidency is that he has not kept unemployment at eight percent or below, as he told us the $787 billion stimulus package would do, or even reduced the unemployment rate below 9.5 percent after more than a year-and-a-half in office.

Given the pain the unemployed feel, one might expect the President to be doing everything possible to foster job creation. But his actions, and those of the administration, prove that assumption to be incorrect.

Immediately following the Deep Water Horizon explosion in the Gulf of Mexico that killed 11 workers and unleashed a torrent of oil into the Gulf, Mr. Obama imposed a six-month ban on all drilling. Based upon the performance of the thousands of drilling projects past and present that have gone along without serious problems, this action was completely unwarranted, but the ban’s defenders said it made sense to stop drilling and evaluate the other deep water projects to be sure there would not be a repeat of this disaster, even as predictions of substantial job losses were reported in the news.

Months later, the ban was still in force, and had shut down all deep water projects, and caused rig owners to relocate their platforms to productive areas outside the US, and slowed down or halted shallow water projects, as well. This over-reaction severely damaged the economy of Gulf States, as shown by a study by two Louisiana State University professors that estimates the economic losses from the ban at $2.7 billion.

The ban put thousands of oil and natural gas industry workers in the unemployment line, as well as thousands more workers in related jobs. Curiously, the Interior Department knew this would happen. Among Federal court documents examined by The Wall Street Journal was a July 10 memo sent to Interior Secretary Ken Salazar that said, in part: “a six-month deepwater-drilling halt would result in ‘lost direct employment’ affecting approximately 9,450 workers and ‘lost jobs from indirect and induced effects’ affecting about 13,797 more.”

The administration ignored this dire warning, adding to the high unemployment afflicting the nation. And now the Environmental Protection Agency’s proposal to tighten air quality standards for ground level ozone threatens even more jobs.

The EPA wants to lower ozone from 75 parts per billion to a range of 60 to 70 parts per billion, which may seem a small and manageable reduction. However, Kyle Isakower, vice president of regulatory and economic policy at the American Petroleum Institute, said that the standard “is being set so close to background levels that essentially the only way to reach attainment here is to reduce nitrogen oxides (NOx) down to 60, 70, 80 percent or more of current levels. So you're really talking about virtually shutting down most, if not all, commercial and transportation use in this country.”

And Don Norman of Manufacturer’s Alliance/MAPI has researched the nation-wide ramifications of such an action. “I took a very detailed study conducted by NERA consulting, which was limited to 11 states,” he said, “and tried to expand the results for the entire nation. I found that the annual attainment cost is estimated to be just over $1 trillion per year between 2020 and 2030. This is equivalent to 5.4 percent of projected GDP in 2020. GDP itself would be reduced by approximately $677 billion in 2020 and further, we'd have significant losses of jobs, something like 7.3 million based upon current Bureau of Labor Statistics projections for the labor force.”

Those huge numbers ought to get your attention. The $677 billion in lost GDP is 86 percent of the amount of the Obama stimulus, and the 7.3 million lost jobs is about half of the number of total unemployed persons reported in September. It is small comfort that these severe losses in GDP and jobs won’t occur for a few years.

Clearly, Mr. Obama’s background as a community organizer and as a law school lecturer did not provide him even the most elementary understanding of economics, and everything in his performance as president indicates that economic principles are as foreign to him as speaking Martian. Or perhaps they are just less important than other things.

If President Obama really wanted to create jobs or help the economy recover would he have done what he did in the Gulf and let the EPA do what it intends to do? Reasonable people may conclude that his agenda instead is to do whatever it takes to force the US to adopt alternative energy, and apparently no cost is too great to accomplish this goal, even if it means transforming the most successful nation in history from an economy that is still mostly free and market-based into a centrally-planned, government-dominated economy not unlike China, North Korea and Cuba, or the socialist economies of Europe.

When he said he would fundamentally transform the country, most thought it meant healing racial and political divisions and straightening up the government. Now it appears he meant something completely different.

The world has plenty of government-run economies; it has only one United States of America. Let’s keep it that way.

Cross-posted from Observations

Will Raising Taxes On The Rich Threaten Your Job?

Will Raising Taxes on the Rich Threaten Your Job?
Poor People Don’t Provide Jobs!
A Commentary by J. D. Longstreet

*******************

Rich people provided every job I have had in my life. I expect the same is true of your work history.

One of the truisms in life is this: “If You Bought Something, Someone Worked to Make It; If You Have Something that Requires Service, Someone Is Servicing It; If You Have A Lot of Money, It Is Working Somewhere.” (SOURCE)

Today in America unemployment is hovering near the ten percent mark. Well, that is the figure supplied the public by the government. Honestly, I am not comfortable with the unemployment figures provided us by the government. I have heard reports from private organizations that the REAL national unemployment figures are closer to 22% than 10%.

How can that be? Because the government plays all sorts of “tricks” with the numbers to get a, shall we say-- more favorable figure for the administration in power at the time. A true accounting would very likely result in a figure closer to 22% than that ten percent we have been offered for sometime now.

Let’s say we split the difference and agree that the real unemployment rate in America today is around 16% to 17%. That is still a whopping chunk of the American workforce out of work.

Why are there no jobs, then? Well, that takes us back to the point I made at the beginning of this piece. Wealthy people provide the jobs in America.

Yes, the wealthy still have money. Maybe not as much as they had before the recession hit us so hard, but they still have an ample supply. But they are not spending it on plant expansions, new operations, purchasing new equipment, building up their inventory, etc, etc. When that money they are sitting on is static, when it is not working, then it is not creating jobs. As a result, Americans can’t find jobs.

For the most part, rich people are not fools. They did not get rich by doing stupid things. Risking their fortunes on an American economy on the threshold of being regulated into oblivion by a President and a government on the cusp of completely embracing socialism and fascism would, indeed, be stupid.

Wealthy Americans are nervous. They are sitting on their money waiting, and hoping, for better times, when they can again put their fortunes to work creating jobs for the American work force and making lots more money for themselves. That’s the way business works.

I don’t know where the idea that -- business is in business to do you and I a favor -- originated. But I tell you as strongly as I can, that it is untrue. Business is in business to make money, to make a profit, for the owners and the stockholders of that business.

Bludgeoning the wealthy with even more taxes is certainly not going to make them take what’s left of their fortunes and blow it on “make work” jobs creating “stuff” the public doesn’t have the money to buy because they don’t have the jobs with which to earn the money it takes to purchase that “stuff.”

If anything, increased taxes will result in the wealthy holding even tighter to their fortunes and spending even less of it. It will also result in corporations looking for countries around the globe that have a ready workforce, willing to work for much lower wages, and a government that is willing to provide a tax friendly environment within which that corporation can operate at a substantial profit. The latter is happening even as America is beginning the long road back from the recession.

Corporations have seen where the American government is going with their regulations and taxes and they are not stupid enough to sit here on American soil and allow the new American socialism to take over their corporate investments. They are getting out – sooner, or later -- and they are taking their companies offshore to countries that welcome the jobs they bring to that country’s people with open arms.

So, the answer to the question I posed above is – yes. Higher taxes, on the rich, do threaten your job. There is no question about it.

We haven’t even touched on the whether, or not, the government’s taking over half of what a wage earner makes to redistribute to those who make less, is even moral. I didn’t bother to spend much ink on that topic because the answer is so obvious. NO, it is NOT MORAL. It is, in fact, thievery. When a government does it -- it is called taxing. When an individual does it, it is called robbery.

In the next few weeks, we Americans are going to hear and see a lot of debate about raising taxes on Americans, and on American business. Raising taxes will prolong the recession, and make the unemployment figures continue at unacceptable highs. It will also drive many large corporations away from America and stop those considering locating in America to look elsewhere. In short, higher taxes will crush what is left of the American economy.

With Election Day approaching we ask that you observe which political party is pushing those higher taxes, and remember them when you cast your vote in November.

J. D. Longstreet