This column by ACRU General Counsel Peter Ferrara was published on January 24, 2014 on the Forbes website.
The Bureau of Labor Statistics (BLS) jobs report for December counted 74,000 jobs created last month. That was less than half the 200,000 new jobs expected.
Nevertheless, the BLS reported those 74,000 new jobs as reducing at least what it calls the U3 unemployment rate by three tenths of a percentage point, from 7.0% to 6.7%. That was because 347,000 workers fled the work force altogether last month, and so were no longer counted as unemployed.
Those 347,000 workers leaving the workforce altogether were almost 5 times (4.689) the 74,000 new jobs created. But the BLS, and the New York Times, still count that as headline unemployment plummeting on net to 6.7% from 7.0%. In fact, all of the decline in the U3 headline unemployment rate since President Obama entered office has been due to workers leaving the work force, and therefore no longer counted as unemployed, rather than to new jobs created.
Those 347,000 for December, 2013, however, are still out there not working, and suffering. Indeed, they joined a near record of more than 102 million Americans not working in December, all still out there and suffering without jobs. Those 102 million Americans are the human face of an employment-population ratio stuck at a pitiful 58.6%. In fact, more than 100 million Americans were not working in Obama’s workers’ paradise for all of 2013 and 2012.
The 102.159 million Americans not working in December is not the all-time record of Americans not working. That all-time record was set in October, 2013, at 102.896 million. The employment-population ratio that month was an even more pitiful 58.2%.
That was the lowest in 30 years, all the way back to 1983, the first year of the recovery from Reagan’s recession, which finally slayed the historic double digit inflation of the 1970s. The employment-population ratio of 57.9% in 1983 was up by the fifth year of Reagan’s recovery to 61.5%, on its way to 63.0% in 1989. That represented an increase of 17 million jobs since that recession started in July, 1981.
But that was when America was following pro-growth economic policies. Today we have President Obama emphasizing equality rather than growth, and after 5 years of Obama as President, we still have not recovered all of the jobs lost since the recession began in 2007. When the recession began in December, 2007, the economy was employing 146.273 million Americans. Today, after 5 years of Obamanomics, in December, 2013 the number of Americans employed was still only 144.586 million, about 1.7 million fewer jobs.
President Obama is not the only President to be challenged by a recession while in office. Since the Great Depression, there have been 10 other recessions before this last one. On average, all the jobs lost in those recessions were recovered within two years after the recession started, as reflected in the official historical data, which is well presented on the website of the Federal Reserve Bank of Minneapolis. But here we are today under President Obama, more than 6 years after the recession started, and we still have not recovered all of the lost jobs!
Moreover, Obama apologists cannot say that Obama’s recovery from the recession is so bad because the recession was so bad. The historical record for the American economy has always been the worse the recession, the stronger the recovery. America has forgotten that experience, because Reaganomics produced 25 years of steady, often booming growth, from 1982 to 2007, with only two, short, shallow recessions. But under every other President in U.S. history, going back for well over a century at least, the economy was in a booming recovery within 5 years as President Obama has had, even under Franklin Roosevelt during the Great Depression!
Today’s economic reality is better represented by what the BLS calls the U6 unemployment rate. That rate includes discouraged workers who have given up looking for a job in the past 4 weeks, and others the BLS considers marginally attached to the work force. It also includes involuntary part time workers who want a full time job but could only find part time work. That U6 unemployment rate was 13.1% in December.
But the full reality is best understood by recognizing that over the past 8 years the U.S. working age population has increased by 19.3 million, but the number of jobs in America has grown by only 1.8 million during that time. That is what never recovering from the recession means in the real world.
Just this past week, however, the Democrat Party posted its own cheerleading for Obamanomics online, claiming that employment in America is at a 5 year high. Even though employment today remains lower today than it was 6 years ago, which hasn’t happened under the economic policies of any other President since the Great Depression. Does that remind you of anything? How about under Obamacare “if you like your health plan, you can keep your health plan. Period.” That was labelled even by the Democrat controlled media as the lie of the year. But which year?
But don’t blame President Obama. Blame Paul Krugman. Despite all evidence, logic, and historical experience to the contrary, Krugman has blindly continued to advocate from his apparently dizzying lofty perch at the New York Times the long failed Keynesian economics wisely left for dead by President Reagan after its disastrous failures in the 1970s, producing double digit inflation, double digit unemployment, and double digit interest rates. That has led the academic cheerleading for Obama’s Rip Van Winkle return to Keynesian economics.
Keynesian economics is the doctrine that economic downturns are due to inadequate economic demand for goods and services, even though human wants are insatiable. So the answer under this thinking is to supposedly increase economic demand by the federal government increasing federal spending, deficits and debt.
The doctrine is refuted by no more than double entry bookkeeping. That is because to increase government spending, deficits and debt, the government has to get the money from somewhere, and there is nowhere else except to drain it from the private sector. So if the federal government increases federal spending, deficits and debt by pouring nearly a trillion dollars into the economy, which the New York Times allows Rip Van Winkle Obama to call “a stimulus,” and finances it by borrowing a trillion out of the economy, the total “stimulus” to the economy on net is ZERO! Which is the grade that should be given to Keynesian Obamanomics, which has produced for the American people the worst recovery from a recession since the Great Depression!
I was tutored in my economics at Harvard University, which was the world leader in promoting Keynesian economics perhaps before Krugman was even born. But because I can think for myself, apparently unlike readers of the New York Times, given the results of recent New York City elections, I realized that the notion of inadequate demand was impossible in a free market economy. If demand for any good or service was inadequate to consume the supply, then in a free market the price of the good or service would decline, until supply equals demand. (Spare me what Keynes had to say in response, which amounted to the argument that all supply and demand curves are vertical and parallel, and so never cross. Too bad only Nobel Prize winning libertarians Friedrich Hayek and Milton Friedman figured that out before the 1970s, which could have saved America trillions, real money back then).
If Obama and the Democrats wanted to eliminate the causes of the financial crisis, which effectively continues to impose disastrous results on America to this day, Dodd-Frank would have focused on shutting down the Princeton economics department, rather than Wall Street.