Unemployment inched down to 8.6 percent in the United States last week, the lowest since March 2009. But that’s nothing to celebrate. The numbers aren’t telling the whole story.
Reporting guidelines have been changed periodically since the early 1980’s, and each revision has made it easier to fudge the numbers. If we were still using the pre-1983 standards, the headline unemployment wouldn’t be 8.6 percent.
It would be 21 percent, more than double that.
But two indicators give us an idea for the real unemployment situation in America. The first is the duration of unemployment.
The average duration of unemployment lasted between 15 and 20 weeks in the decade before the market crash. That’s how long the average worker would spend between getting the pink slip and starting at a new job. Following it, however, the duration has exploded to over 40 weeks. That’s nine months!
Consider this: Financial planners estimate that most only need to carry six months worth of savings in case of an emergency. Most individual investors have less than $30,000 in liquid retirement assets to tap if necessary.
As long as rising duration continues, millions of Americans will slip from the middle class into the non-working poor.
The second key piece of data is the labor participation rate. It’s on the decline, indicating that fewer workers out of the total population are participating in the economy.
And therein lies the problem. Labor participation is in the decline because workers have exhausted their unemployment benefits. They’re no longer considered looking for work, making them no longer part of the system. For the purposes of government statistics, they don’t exist.
On the investment front, the results are mixed. Companies that lay off employees typically see their expenses go down and profitability go up.
But with unemployment rising, fewer people are able to purchase goods and services outside of core needs like gas and groceries. So it’s no surprise to see huge volatility in the markets as new job data is digested.
In order to get back to the peak employment numbers of 2006, more than a quarter millions jobs need to be created every month between now and the end of 2016, the end of the next presidential term.
It’s a shame that Obama’s focus has been on imposing a heavy regulatory burden on employers rather than encourage them to hire by clearing governmental hurdles. Obama’s presidency is on the rocks. Job creation during his administration has been non-existent. Historically, that’s spelled doom for presidents seeking re-election.
But with the right lies, damn lies, and government statistics, we could be in for another four more years of job destruction at the heavy hand of government.
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