By Louis Woodhill
What do President Obama’s economic recovery and a unicorn have in common? They are both mythical creatures. In terms of employment, the recession never ended.
Recently, the Bureau of Labor Statistics (BLS) released their monthly report on “The Employment Situation”. Forget the reported 163,000 increase “non-farm payroll employment”. This includes a huge guess regarding jobs being created by companies that the BLS can’t locate. The BLS “Household Survey” numbers are more statistically sound, and July’s were truly awful.
The number of Americans with jobs actually fell by 195,000 in July. The number of people officially counted as unemployed went up by 45,000, and the “headline” unemployment rate rose from 8.2% in June to 8.3% in July.
However, these numbers don’t express how bad July really was. Even though the working age population increased by almost 200,000, the labor force fell by 150,000, as more people gave up on finding jobs. If the labor force participation rate had been the same in July as it was during George Bush’s last month in office, the unemployment rate would have been reported at 11.2%, rather than 8.3%.
The comparable unemployment number for June 2009, the month when the recession supposedly ended, was 9.7%. In other words, for people who need jobs, there has been no economic recovery at all. The employment situation has gotten worse-a lot worse.
During the first 37 months of Obama’s mythical recovery, labor force participation fell by a massive 2.0 percentage points. This is equivalent to 5.1 million people giving up on looking for work. The decline in labor force participation under Obama is unprecedented in America’s post-war history.
If this were a real, rather than a mythological economic recovery, America would be progressing toward full employment. However, the nation moved 324,000 jobs father away from full employment during July. Full employment is now 2.8 million jobs more distant than when Obama’s so-called “recovery” began.
So, if the BLS report was so bad, why did the stock market leap for joy on Friday? The Dow was up by 217.29 points, or 1.7%. Yes, but the Real Dow, which is the Dow divided by the price of gold, was up only 0.5% on the day. The Real Dow is down by 10.7% since the start of Obama’s recovery.
The Real Dow is a measure of the impetus for productive capital investment, which is what propels economic growth. During real, rather than mythical economic recoveries, the Real Dow rises. During the first 37 months of Ronald Reagan’s economic recovery, the Real Dow nearly doubled.
So, if the BLS report was so bad, why did the stock market leap for joy on that Friday? The Dow was up by 217.29 points, or 1.7%. Yes, but the Real Dow, which is the Dow divided by the price of gold, was up only 0.5% on the day. The Real Dow is down by 10.7% since the start of Obama’s recovery.
The Real Dow went up because the markets believe that the favorable headline payroll jobs number makes it less likely that the Fed will do something stupid. QE2 depressed both GDP growth and job creation, and there is every reason to believe that QE3 would do the same.
There are three more BLS reports due before the election. They will not be pretty.
Entrepreneurs and businessmen are throttling back on capital investment in the face of Obamacare, “Taxmageddon”, and the Obama administration’s regulatory blitzkrieg. Because it is private capital investment that drives jobs, wages, and economic growth, the employment situation can only get worse from this point.
The administration’s reaction to the deteriorating jobs situation seems to be, “Don’t read too much into any 37 monthly reports.” Meanwhile, President Obama appears to be pinning his hopes for the economy on yet another mythical creature, the stimulus fairy.
Back in the real world, it is going to take new leadership in Washington to produce a real recovery. Obamunism must be replaced by Reaganomics. Otherwise, America’s unemployed workers are going to have to hope that they can make a living by raising unicorns. (my emphasis)
By Louis Woodhill for Real Clear Markets
By permission Louis Woodhill
Louis Woodhill (firstname.lastname@example.org), an engineer and software entrepreneur, is on the Leadership Council of the Club for GrowthPrint This Post Send To A Friend