Archive for the ‘Unemployment’ Category

The Not-Working Class

Monday, March 6th, 2017

In a capitalist country like ours, hard work is supposed to be rewarded and slothfulness is considered one of the seven deadly sins.

So what to make of the “quiet catastrophe,” which George Will describes as follows: “After 88 consecutive months of the economic expansion that began in June 2009, a smaller percentage of American males in the prime working years (ages 25 to 54) are working than were working near the end of the Great Depression in 1940, when the unemployment rate was above 14%. If the labor-force participation rate were as high today as it was as recently as 2000, nearly 10 million more Americans would have jobs.”Working

If even half of those 10 million men were working, the economy would be growing at a faster rate, productivity would increase and consumer spending would be higher. So why are they out of work when the economy is allegedly booming and the unemployment rate has fallen to just 4.8%?

Of the 23 affluent countries in the Organization for Economic Co-operation and Development, the United States ranks 22nd, ahead of only last-place Italy, in 25-to-54 year-old male labor-force participation.

Two plausible explanations exist—and neither one is complimentary to the economic policies of former President Obama or his predecessors. (more…)

Take This Quiz before You Vote

Monday, September 19th, 2016

Citizens of many countries would envy us for having the right to vote, the right to express our opinions, the right to practice whatever religion suits us, and the right to say, do and think pretty much whatever we want.

Yet many of us take these freedoms for granted.  Many people neglect to vote.  Others vote, but shouldn’t because they don’t know what they’re voting for.  While “get out the vote” efforts have become popular, it’s unlikely that anyone who won’t make the effort to cast a ballot is going to make an effort to know what the issues are and where the candidates stand on those issues.  Voting when you don’t know the issues dilutes the democratic process.screen-shot-2016-09-15-at-1-20-35-pm

So take this simple quiz.  Maybe it will help to inform you.  Maybe you’ll decide after taking it that you shouldn’t vote.  And maybe it will just reinforce what you already believe.

True or false.  The Affordable Care Act (aka Obamacare) is making healthcare more affordable.

False. Health insurance is becoming increasingly unaffordable and, shortly after the November election, the new open enrollment period will bring double-digit rate increases for many.  Healthcare costs jumped 1% just in the month of August, which was the largest increase in 32½ years. (more…)

Doubling Down on Bad Ideas

Tuesday, September 6th, 2016

Uh oh.

Until now, about the only thing good you could say about the Federal Reserve Board in recent years is that it hasn’t followed central banks in Europe and Japan by lowering interest rates below zero.

But that may be where we’re going next.

Fed Vice Chair Stanley Fischer told Bloomberg Surveillance last week that he and his Fed colleagues believe that negative interest rates are a legitimate tool for central bankers to use in their efforts to achieve full employment and economic health.Fischer

If by Fed colleagues, he means his imaginary friends, we should be okay.  But if he means his gal pal Janet Yellen et al, look out below.  Over the cliff we go.

Negative rates would be doubling down on failed policies. If you’re a political figure, like Fed Chair Yellen and her Fed brethren, it would be anathema to admit that you’re wrong about anything, so if something doesn’t work, you rationalize that you just didn’t pour enough gasoline on the fire and you pour more.

Anyone who has to pay for health insurance will recognize the doubling-down approach being used in the coming election by the Democrats who gave us Obamacare. The Affordable Care Act, to the surprise of no one who is not a Democratic member of Congress, has become unaffordable, with a majority of exchanges shutting down because they are losing money. But, with premiums increasing by about 30% this year in some states, Democrats believe the answer is more government control of healthcare. The insurers, of course, are the bad guys, because they are no longer willing to lose billions propping up Obamacare. (more…)

At a Loss over Profits

Monday, July 25th, 2016

Apparently, there are two Americas.

In one, corporate profits are soaring, the economy is booming and jobs are available for the asking.

In the other, corporate profits are dismal, America is in or close to a recession and more than 100 million Americans have left the labor force.

In one America, more people approve than disapprove of the job President Obama is doing (49.2% approve, 46.8% disapprove, according to Real Clear Politics).  In the other America, more than two thirds of the country believe the country is on the wrong track.  Real Clear Politics found that 69.3% of Americans believe the country is on the wrong track, while only 22.5% believe it is on the right track. Profits

While media are increasingly reporting that the economy is at or near full employment, that America is at odds with reality.  As we’ve written, participation in the labor force has dropped to 62.6%, which is near a four-decade low.

The America where the economy is booming is even more delusional.  Some may say that it’s all relative.  They may concede that U.S. growth in gross domestic product (GDP) is sluggish at best, but typically add that it’s better than GDP growth in the rest of the world. (more…)

Can We All Be Greeters at Wal-Mart?

Monday, July 11th, 2016

Job reports typically report on jobs as if they are a commodity; a job is a job, whether you’re a CEOs or a greeter at Wal-Mart.

So it’s good news that 287,000 new jobs were added to the economy in June—assuming you believe government statistics—but it’s bad news if the jobs are so mediocre, illegal immigrants wouldn’t work them. Older workers

First, let’s consider the numbers. In May, the experts predicted that 160,000 new jobs would be created, but the U.S. Bureau of Labor Statistics reported that only 38,000 were created. The unemployment rate dropped to 4.7%, though, because 458,000 workers dropped out of the labor force and were no longer counted in the statistics.

For June, experts predicted that 175,000 new jobs would be created, which is 112,000 fewer than the BLS reported. At the same time, the BLS revised the May figure downward to just 11,000 new jobs. The question no one seems to be asking is why there was so much volatility between May and June. How does the economy add virtually no jobs one month and then produce 26 times as many jobs the following month? Even the stock market isn’t that volatile.

The report prompted headlines such as, “U.S. employment rebounds strongly in June, calming fears of economic slowdown” (The Washington Post), “Job growth surges in June as employers add whopping 287,000 jobs” (USA Today) and “Jobs Roar Back With Gain of 287,000 in June, Easing Worry” (The New York Times).

And, by the way, the unemployment rate increased from 4.7% to 4.9% in June, primarily because some Americans rejoined the work force.  (more…)

The Job Creation Snow Job

Monday, June 6th, 2016

Consider this headline from the U.S. Bureau of Labor Statistics: Unemployment rate declines to 4.7% in May; payroll employment changes little (+38,000).

Great news, right? The unemployment rate fell to just 4.7% in May, the lowest it’s been since before the financial crisis began.

But take a closer look.

The consensus was that the U.S. economy would create 160,000 jobs in May. That’s a pretty modest number—but not nearly as modest as the actual number. It turns out that the experts were off by about 420%. The U.S. economy created a meager 38,000 jobs in May.Employment

And, by the way, the BLS also announced that the economy created 59,000 fewer jobs in March and April than previously estimated. In other words, the BLS reported a net loss of 21,000 jobs. (more…)

Set. Down. No Hike.

Monday, March 21st, 2016

The economic outlook can be summed up in five words: Everything’s great, except what isn’t.

We’ll lead with the “everything’s great” part, as seen through the filter of the Federal Reserve Board.  As Fed Chair Janet Yellen reminds us after every meeting, the Fed has two goals—lowering the unemployment rate and stabilizing prices.

The Fed’s target unemployment rate is 4.7% to 5.8% and, if you believe the U.S. Bureau of Labor Statistics (see below re: why you shouldn’t), the Fed has accomplished that goal, as the current rate is at an eight-year low of 4.9%.  The Fed’s target inflation rate is 2% and, depending on how you measure inflation, it’s close to that number.Stock Prices

“The Fed’s preferred measure, the personal consumption expenditures price index, rose 1.3% in January from the previous year, and so-called core inflation—which excludes volatile food and energy prices—was 1.7%,” The Wall Street Journal reported. “The consumer-price index rose 1% in February from a year earlier, but core CPI was up 2.3% for the year, the largest 12-month increase since May 2012.”

So the Fed could have logically declared its mission accomplished and begun to gradually increase interest rates, as was expected after December’s initial miniscule rate increase.  So why was the vote at last wek’s meeting 10-1 against a rate hike? (more…)

The Stock Market Needs “Seasonal Adjustment”

Monday, January 18th, 2016

How many jobs did the U.S. economy generate in December?

The correct answer is:

  1. 292,000
  2. 281,000
  3. 11,000
  4. None of the above

David Stockman wrote on his “Contra Corner” blog: “According to the BLS (Bureau of Labor Statistics), the US economy generated a miniscule 11,000 jobs in the month of December. Yet notwithstanding the fact that almost nobody works outdoors any more, the BLS fiction writers added 281,000 to their headline number to cover the ‘seasonal adjustment.’”

Before "seasonal adjustment."

Before “seasonal adjustment.”

After "seasonal adjustment."

After “seasonal adjustment.”

When we checked the jobs report, the BLS claimed that the economy generated 292,000 jobs in December (after seasonal adjustment), not 281,000.  We couldn’t verify Stockman’s claim that the actual figure should be 11,000, but searching the term “seasonal” turned up a whopping 41 hits in a single news release.  So Stockman’s numbers may not be 100% accurate, but he’s clearly on to something.

The BLS press release noted, “The effect of such seasonal variation can be very large.” But large enough to use a multiplier of 25+?

Stockman wrote that an upward revision for December is typical as an adjustment to account for cold weather, but December 2015 was an exceptionally warm month.  Santa arrived in shorts and sunglasses.  (more…)

How Ben Bernanke Saved the World

Monday, October 12th, 2015

“It became necessary to destroy the town to save it.”

                    U.S. major talking about Bến Tre, Vietnam

The Wall Street Journal doesn’t have a humor section, so “How the Fed Saved the Economy” appeared on the op-ed pages under the byline of Ben Bernanke, former chair of the Federal Reserve Board.

In his commentary, Bernanke takes credit for saving the economy – rather than responsibility for the most dismal recovery in history.Bernanke

Anyone who has read even one of our blog posts knows that we would disagree with any claim about the Fed saving the world, especially given that the economy continues its slow-motion deterioration after nearly eight years and several trillion dollars’ worth of “saving” by the Fed.

However, Mr. Bernanke has a book to sell.  And while it will likely appear in the non-fiction section, we’re guessing by its title that it is even more self-congratulatory and less fact-filled (if that’s possible) than his op-ed piece. (more…)

Today’s Economic News: Woe Is Me

Monday, July 27th, 2015

The summer weather and the media’s focus on positive economic news may have you feeling cheerier than usual these days.

Two words: “Bah, humbug.”  Or maybe, “Get real.”

Focus, for a minute, on the cloud, rather than the silver lining; recognize that evaporation has caused the glass to be less than half full (and more than half empty); see the bubble bursting, the interest rates rising and stock prices dropping.  In other words, get realistic about the economy.

In the Keynesian world, the more government spends, the more the economy is “stimulated.” In the real world, more spending means more debt, higher taxes, more regulation and GDP growth well below the historic norm. Chart 1

In the imaginary world, central bankers and government officials can keep the economy growing indefinitely and can boost asset prices to new records forever.  In the real world, asset prices are at artificially induced levels; reality will take hold when the Federal Reserve Board raises interest rates, when China’s stock market tanks (as it has begun to), when Greece is booted out of the Eurozone, or when Iran uses the $150 billion it receives from the lifting of sanctions to further its war against the U.S. and Israel.  (more…)