The Unemployment Rate Falls but the Economy is Still Horrible

Posted by PITHOCRATES - December 8th, 2012

Week in Review

The Labor Department released the official unemployment rate (U-3) for November.  It fell from 7.9% to 7.7%.  Hurrah.  Sadly, the U-6 unemployment rate remains north of 14%.  Which is a better reflection of the economic climate as it shows basically everyone who can’t find a full-time job.  That’s about an 8 point gap between U-6 and U-3.  When George W. Bush was president this gap was only about 4 points.  Which means the economy is far worse than the official unemployment rate tells us it is.   In fact, if you plot these numbers along with the labor force participation rate (the percentage of people who can work that are actually working) the employment picture gets even worse (see Alternative measures of labor underutilization and Labor Force Participation Rate on the Bureau of Labor Statistics).

The only reason why the unemployment rate has been falling is that people are disappearing from the labor force.  Since President Obama took office the labor force participation rate has fallen from about 66% down to 63.5%.  A decline of 2.5 points.  Or a fall of some 3.79%.  Which is more than President Obama has been able to lower the unemployment rate.  Worse, the labor force participation rate has fallen at a greater rate than the unemployment rate.  Which explains why there are fewer people working today than when President Obama took office.

Why the horrible numbers?  Is it because of George W. Bush?  No.  People aren’t working because this is one of the worse business climates in U.S. history.  Higher regulations.  And higher taxes on the horizon.  And, of course, Obamacare.  The great job killer.  Businesses have basically frozen all hiring in the face of the impending Obamacare new taxes, fees and penalties.  And started reducing their full-time workforce.  Cutting hours of their workers to push them into part-time status.  As they cannot pass these costs on to their customers without losing their customers.  For people just aren’t going to pay $9.50 for a Big Mac.  If they do they will be spending less at McDonald’s overall.  And everywhere else.  Because they simply won’t be able to afford as much as they used to.

You will hear economists saying how much better things are getting.  But they’re not.  And won’t be for a long, long time.  At least not under this president.  Or his Keynesian policies.  For President Obama is a Keynesian.  But there is a problem with Keynesian stimulus spending.  It doesn’t work.  As proven by his $800 billion stimulus bill that failed to create any jobs.  At least, based on the historical data from the Bureau of Labor Statistics.

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