Some Recovery

The government’s stimulus programs are not working and neither are a growing number of Americans.

In October, we noted that the number of Americans not working exceeded 101 million, setting a record.  But records are made to be broken and the number today is even higher – even while the official unemployment rate continues to drop.

When we wrote in October, the U.S. Bureau of Labor Statistics (BLS) reported that 90,609,000 Americans who are 16 or older were neither working nor looking for work.  Since then, the number has increased to 91,808,000.

But that number doesn’t include unemployed Americans who are looking for work, which was 10.4 million in December, bringing the total number of Americans who are not working up to more than 102 million.  That’s an addition of nearly 1 million since October … during what has widely been viewed as a period of economic recovery.

The civilian labor force fell from 155.3 million to 154.9 million in December, bringing the labor participation rate down from 63.0% to a 35-year low of 62.8%.

While the BLS expected 197,000 jobs to be created in December, only 74,000 jobs were created.  That’s a miss of more than 100,000 jobs.  The BLS says inclement weather affected the number of forced part-time jobs being created.  “Forced part-time” jobs are those where a former marketing manager who has been out of work for two years runs out of money and takes a position working the deep fryer at Wendy’s because there are no other options.

“Forced” makes it sound like slavery, but we didn’t invent the term.  And it’s where most of the job growth has been in recent years.

But don’t worry.  The official unemployment rate is now 6.7%, down from 7.0%.  That’s because, as we’ve previously explained, the U-3 rate doesn’t include people who stop looking for work, but it does include those who are underemployed in part-time jobs.  The real unemployment rate, the U-6 rate, is 13.1%. 

The Ultimate Stimulus Program

Quantitative easing, the Federal Reserve Board’s bond buying stimulus program, has resulted in the purchase of about $4 trillion in bonds over the past five years.  That’s chum change compared with the ultimate stimulus program – the War on Poverty.

President Lyndon Baines Johnson declared war 50 years ago this year and had no more success with that war than he did with the war in Vietnam.

After spending $20.7 trillion (based on 2011 dollars), the poverty level today is essentially unchanged from when the War on Poverty began.  About 15% of Americans live in poverty today, the same as in the ‘60s.

The Wall Street Journal notes that, “The federal government currently runs more than 80 means-tested welfare programs that provide cash, food, housing, medical care and targeted social services to poor and low-income Americans.  Government spent $916 billion on these programs in 2012 alone, and roughly 100 million Americans received aid from at least one of them, at an average cost of $9,000 per recipient.  (That figure doesn’t include Social Security or Medicare benefits.)  Federal and state welfare spending, adjusted for inflation, is 16 times greater than it was in 1964.  If converted to cash, current means-tested spending is five times the amount needed to eliminate all official poverty in the U.S.”

Of course, people living in poverty today have a higher standard of living than they did in the ‘60s.  They have flat-screen TVs, cars, computers, DVD players and cellphones.  Most are not undernourished.

However, the number of traditional families has fallen dramatically.  In 1963, 6% of American children were born out of wedlock. Today an astounding 41% are born out of wedlock.

The Journal notes that, even in good economic times, a parent in the average poor family works just 16 hours a week.

The key to winning the War on Poverty, then, is to create jobs.  That’s an area where government stimulus programs – whether the War on Poverty or QE – fail miserably.


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