|09-09-2013, 02:29 PM||Topic Starter|
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The Economic Stagnation Named ‘Recovery’
While most of America remained focused on the Obama administration’s machinations regarding Syria, another set of underwhelming economic statistics were released Friday. Those stats reinforced the ongoing reality that America remains mired in the worst recovery since the Great Depression
Once again, the 169,000 jobs created in the month of August was “unexpected,” trailing the median number of 180,000 jobs forecast by 96 economists surveyed by Bloomberg News. The unemployment rate dipped from 7.4 percent to 7.3 percent, but also once again, it was due to the reality that the workforce participation rate dropped from 63.4 percent in July to 63.2 percent in August.
This represents the lowest rate since 1978, and while some of it is attributable to retiring Baby Boomers, Heidi Shierholz, an economist at the Economic Policy Institute, painted the gloomy — but realistic — picture. “We know there’s a lot of hardworking people that want to be productive, we just don’t have work for them to do,” she said.
That is an understatement. Currently, 90.5 million Americans considered job-eligible don’t work and aren’t considered part of the workforce. Those under the age of 16, as well as non-civilians, such as those in the military or prison, are excluded from the total. In addition, many people are retired or in school. Nonetheless, at least 40 million have given up looking for work for a variety of reasons. Schierholz notes the workforce participation rate would be going down regardless, due to retiring Baby Boomers. But she believes that two-thirds to three-quarters of the decline since the beginning of recession is due to a bad job market. “We’re operating way below potential,” she concludes.
That is also an understatement. Last February, a presentation by the Federal Reserve Bank of San Francisco revealed that while the vast majority of jobs lost during the recession were of the middle class variety, since 2010 they have been replaced by low-wage occupations paying less than $13.83 per hour. Forty percent of those replacement jobs have been in the food services, retail, and employment services (such as sales clerks and office workers) sectors of the economy. Furthermore, median incomes in the United States have fallen 4.4 percent, since the beginning of the recovery in 2009.
In addition to the mediocre job numbers for August, the Bureau of Labor Statistics (BLS), as is often the case, revised the jobs numbers for previous months. For the second consecutive month, the original estimates were lowered. July’s jobs number was revised downward by 58,000 from 162,000 jobs created to only 104,000, while June was lowered in from 188,000, and down to 172,000. The BLS methodology, based on the number of jobs they believe — but can’t prove — are being created, is the reason these revisions must be made. Thus it stands to reason that the August number will also be revised in the future, due to the reality that the BLS added 90,000 “theoretical” jobs to its total in August.
This puts the three-month average at 148,000 jobs. Yet even at August’s rate of 169,000 jobs created, it would take the nation another 9 years and 10 months to reach pre-Great Recession employment levels — if there are no additional recessions in the interim. Thus, when Obama economic advisor Jason Furman touts the success of this administration in creating jobs, it must be remembered the nation needs almost another decade to get back to where we were five years ago.
Such happy talk also ignores the reality of this “recovery” in comparison to every other that has occurred since the Great Depression. According to the records kept by the Federal Reserve Bank of Minneapolis, in the 10 recessions prior to this one, it took an average of 25 months to completely recover all the jobs lost from the peak employment that occurs just before a recession begins. Yet by April 2013, 64 months after the prior jobs peak in January 2008, the records revealed that the nation was still down more than 2 percent, or 2.6 million jobs from its 2008 peak. By comparison, 64 months after the 1981 recession, engendered by President Reagan’s monetary policies needed to stop the inflationary spiral of the Carter years, job growth was 9.5 percent higher that it was at the beginning of the recession, or 10 million jobs higher.
The Wall Street Journal’s Stephen Moore reveals the bitter irony of Obama’s economic approach in comparison to Reagan’s and its effect on Obama’s core constituency. After noting that Obama’s reelection was largely engendered by five demographic groups–young voters, single women, those with only a high-school diploma or less, blacks and Hispanics–he explains that those groups “have suffered the steepest economic declines.”
Moore, who cites numbers taken from the Census Bureau’s Current Population Survey and analyzed by Sentier research, reveals that households headed by single women, with and without children present, experienced a 7 percent decline in their income. Those under age 25 lost 9.6 percent, black American and Hispanic heads-of-households lost 10.9 percent and 4.5 percent, respectively, and workers with a high-school diploma or less lost about about 8 percent of their income.
The same groups bore a far higher brunt of unemployment than the national average as well, with black Americans at 12.6 percent, Hispanics at 9.4 percent, those with less than a high-school diploma at 11 percent, and teens at a whopping 23.7 percent.
By comparison, beginning with the Reagan economic boom in 1981 and running through 2008, black women had the largest income gains at 81 percent, followed by white women at 67 percent, black men at 31 percent, and white men at 8 percent. “What all of this means,” writes Moore, “is that the stimulus-led economic revival that began officially in June 2009–Vice President Joe Biden’s famous ‘summer of recovery’–has only resulted in lower incomes for at least half of Americans, the very ones who were instrumental in electing Mr. Obama twice.”
Nor is it likely to get any better. The sobering reality is that we are rapidly becoming a nation of part-time workers. According to the Labor Department’s household survey, almost three-quarters of the new jobs created this year have been part-time.
The likely culprit? Obamacare. And despite evidence presented by researchers at the Center for Economic and Policy Research (CEPR) that workers losing hours due to the healthcare law is “anecdotal,” there is a mountain of such anecdotal evidence offered by employers in the restaurant and fast-food businesses who have moved their workers to a 29-hour work week to avoid the Obamacare mandate, several colleges that now rely on part-time instructors, and state and local governments who have reduced employee hours as well. This goes a long way towards explaining why the ratio of 4.3 part-time jobs for every full-time job being added to the economy is a historical anomaly.
Thus, it stands to reason that the healthcare bill is at least partially to blame. Even the AFL-CIO, one of the Obama administration’s staunchest supporters, believes this to be the case. Its Nevada Chapter released a resolution to that effect. “The unintended consequences of the (Affordable Care Act) will lead to the destruction of the 40-hour work week, higher taxes, and force union members onto more costly plans–eventually destroying (union health plans) completely.”
Then there is also the potential impact of so-called comprehensive immigration reform. In June, the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) predicted that the Gang of Eight bill would reduce the federal budget deficit by $875 billion over 20 years. Yet the same report predicted that the legislation would also drive down the wages of American workers and make it more difficult for them to find a job. For anyone but the politicians looking for votes, and businesses looking for cheaper labor, that’s a lousy tradeoff.
Another lousy tradeoff is the distorted relationship between Wall Street and the Federal Reserve. The market was actually hoping the economic numbers would be worse, so that Fed Chairman Ben Bernanke would continue pursuing his money printing program known as “quantitative easing” (QE). It is QE that has driven Wall Street to record highs even as million of Americans on Main Street languish in the economic malaise known as the “new normal.” This unseemly catering to Wall Street bankers and brokers is something worth remembering the next time the president insists he is a champion of the middle class.
It is a middle class, much like the economy itself that remains mired in stagnation. And unless there is a radical change in the administration’s economic agenda, stagnation may be the best Americans can hope for.