The Incredible Shrunken Economy
You wouldn't know it from reading the wire services' headlines, but the government's Employment Situation Summary released on Friday contained nothing which would cause any sane person to believe that the nation's economic trajectory has somehow changed for the better.
The official unemployment rate increased to 8.3 percent. Alan Krueger, who knows better and apparently doesn't care, harped on the fact that it was "really" 8.254 percent, when he knows darned well that one decimal point is as far as you can take the statistical significance of that rate in the government's Household Survey. But since he insists on playing that immature game, Krueger's three decimal point figure represents the third straight unemployment rate increase -- specifically, from 8.098 percent in April to 8.206 percent in May to 8.217 percent in June to that 8.254 percent in July.
A deeper data dive into the Household Survey reveals almost nothing encouraging (all references are to seasonally adjusted figures):
- Contradicting what the Establishment Survey primarily used to report job growth and contraction contained -- namely that 163,000 more Americans were working in July than were in June -- the Household Survey showed an employment contraction of 215,000 and job growth of only 186,000 in the past four months.
- The civilian labor force, workforce participation rate, and employment-population ratio all dropped, reflecting an economy where a growing number of Americans sees little opportunity, and where the benefits of staying on the dole in its various forms all too often outweigh those involved in trying to get away from it.
- Not coincidentally, the number of adults not in the labor force increased by 348,000. That number has ballooned by over two million in the past twelve months to 88.34 million, and is a shocking 7.4 million higher than when the recession officially ended in June 2009.
- Everyone seems to be assuming that the looming disaster known as ObamaCare is something that, other than its obvious contribution to the "Taxmageddon" visiting us on January 1, 2013, won't otherwise harm the economy until 2014. Really? Then someone needs to explain why the economy is shedding full-time jobs. Full-time employment has dropped by 945,000 in the past four months, while the number of part-timers has increased by over a million.
The above points, especially the cratering in full-time employment, which is now 7.5 million below its November 2007 peak, make a mockery of the establishment press's crowing about how supposedly wonderful the 163,000-job pickup mentioned earlier was. Let's look at the raw (i.e., not seasonally adjusted) data and its seasonal conversions for confirmation:
Overall, the economy actually lost 1.2 million jobs in July, which in historical context is at least somewhat fewer than the past several years, but still more than were lost in July 2004, 2005, or 2006. Oddly, the private sector's July raw employment increase is better than anything seen in the previous decade, but basically no better than last year, which at the time impressed no one.
Both of this year's raw numbers benefitted from an unusually high "birth/death adjustment." The government estimates that 52,000 jobs were created (net of undetected companies going out of business) by individuals and at small companies under their radar. The July 2011 birth/death adjustment was only +5,000. Without that big birth/death boost, July's job additions would more than likely have ended up within the 100,000-125,000 range most forecasters predicted before the report's release, and the press would have had to find some other reason to pretend to be happy with truly miserable results.
The labor market seen since the POR (Pelosi-Obama-Reid) economy began wreaking its awful havoc in the late spring of 2008 has had awful consequences for the American people, best seen in the two graphs which follow. The first (in 2nd quarter 2012 dollars) shows how the economy has still failed to meet Obama booster Warren Buffet's definition of when the recession will truly be over, namely when “real per capita GDP gets back to where it was before":
Real output per person is still $865 below where it was 4-1/2 years ago. At this figure's rate of growth during the first half of 2012, we won't be back to where we were in late 2007 until early 2014. Mr. Buffet has a long wait ahead of him.
The second graph compares what President Obama constantly claims "has never worked," namely the tax-cutting, regulation-minimizing policies of Ronald Reagan, to the Keynesian, stimulus-driven regime Obama still believes, after 42 miserable months in office, has worked:
The difference could hardly be starker. What Obama says "has never worked" brought real per capita GDP back to its previous peak in four quarters and outperformed the Obama economy in post-recession per capita income growth by over ten percentage points.
Let's split the difference, and assume that if Obama and his administration had done what they should have done instead of what they have done, real per capita GDP would have grown by five more points in the past three years than it actually has. If that were the case, the economy would currently be producing almost $2,400 more in goods and services (5 percent times the $47,589 trough seen in the first graph) for every man, woman, and child in America, or about $9,500 for a family of four. A majority of that would be making its way into the pockets of American workers and their families.
Instead, we have falling wages, rising poverty, dangerous levels of dependency on the government, and a previously unthinkable chance of turning into the 21st century's Argentina. Only a change in who is in charge, accompanied by a wholesale housecleaning and permanent pruning of the federal leviathan, can alter this unsustainable situation.