Initial jobless claims unexpectedly jumped by 24,000 last week to 399,000 as more workers lost their jobs, the Labor Department said Thursday. At the same time, the economy continues to lose workers.
In the 30 months since the recession officially ended, nearly 1 million people have dropped out of the labor force — they aren’t working, and they aren’t looking — according to data from Labor’s Bureau of Labor Statistics. In the past two months, the labor force shrank by 170,000.
This is virtually unprecedented in past economic recoveries, at least since the BLS has kept detailed records. In the past nine recoveries, the labor force had climbed an average 3.5 million by this point, according to an IBD analysis of the BLS data.
“Given weak job prospects, many would-be workers dropped out of (or never entered) the labor force,” noted Heidi Shierholz of the Economic Policy Institute in her analysis of the BLS jobs report issued last Friday. “That reduces the measured unemployment rate but does not represent real improvement.”
According to the BLS, the “labor force participation rate” — the ratio of the number of people either working or looking for work compared with the entire working-age population — is now 64%, down from 65.7% when the recession ended in June 2009. That’s the lowest level since women began entering the workforce in far greater numbers several decades ago.
If you adjust for this drop, the unemployment rate would be close to 11%, instead of the official 8.5%.
Typically, I try to tie the beginning of Wonkbook to the news. But today, the most important sentence isn’t a report on something that just happened, but a fresh look at something that’s been happening for the last three years. In particular, it’s this sentence by the Financial Times’ Ed Luce, who writes, “According to government statistics, if the same number of people were seeking work today as in 2007, the jobless rate would be 11 percent.”
Remember that the unemployment rate is not “how many people don’t have jobs?”, but “how many people don’t have jobs and are actively looking for them?” Let’s say you’ve been looking fruitlessly for five months and realize you’ve exhausted every job listing in your area. Discouraged, you stop looking, at least for the moment. According to the government, you’re no longer unemployed. Congratulations?
Since 2007, the percent of the population that either has a job or is actively looking for one has fallen from 62.7 percent to 58.5 percent. That’s millions of workers leaving the workforce, and it’s not because they’ve become sick or old or infirm. It’s because they can’t find a job, and so they’ve stopped trying. That’s where Luce’s calculation comes from. If 62.7 percent of the country was still counted as in the workforce, unemployment would be 11 percent. In that sense, the real unemployment rate — the apples-to-apples unemployment rate — is probably 11 percent. And the real un- and underemployed rate — the so-called “U6” — is near 20 percent.
There were some celebrations when the unemployment rate dropped last month. But much of that drop was people leaving the labor force. The surprising truth is that when the labor market really recovers, the unemployment rate will actually rise, albeit only temporarily, as discouraged workers start searching for jobs again.
Yeah, because taking money away from private sector job creators costs jobs. That is straight out of Henry Hazlitt’s “Economics in One Lesson”: Public Works Means Taxes.
When the Obama administration releases a report on the Friday before a long weekend, it’s clearly not trying to draw attention to the report’s contents. Sure enough, the “Seventh Quarterly Report” on the economic impact of the “stimulus,” released on Friday, July 1, provides further evidence that President Obama’s economic “stimulus” did very little, if anything, to stimulate the economy, and a whole lot to stimulate the debt.
The report was written by the White House’s Council of Economic Advisors, a group of three economists who were all handpicked by Obama, and it chronicles the alleged success of the “stimulus” in adding or saving jobs. The council reports that, using “mainstream estimates of economic multipliers for the effects of fiscal stimulus” (which it describes as a “natural way to estimate the effects of” the legislation), the “stimulus” has added or saved just under 2.4 million jobs — whether private or public — at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.
In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the “stimulus,” and taxpayers would have come out $427 billion ahead.
When the government takes a dollar from a job creator, they take half of it for themselves, and then they often give the other half to some favored group, like a “green energy” company or Planned parenthood or a labor union. Then they who turns around and give half of that handout right back to Obama as a campaign donation. The only way to stop them from doing more of this stimulus is to stop giving them money.
Consider this article by the Cato Institute, which discusses how the Reagan tax cuts affected the unemployment rate.
Excerpt:
In 1980, President Carter and his supporters in the Congress and news media asked, “how can we afford” presidential candidate Ronald Reagan’s proposed tax cuts?
Mr. Reagan’s critics claimed the tax cuts would lead to more inflation and higher interest rates, while Mr. Reagan said tax cuts would lead to more economic growth and higher living standards. What happened? Inflation fell from 12.5 percent in 1980 to 3.9 percent in 1984, interest rates fell, and economic growth went from minus 0.2 percent in 1980 to plus 7.3 percent in 1984, and Mr. Reagan was re-elected in a landslide.
[…]Despite the fact that federal revenues have varied little (as a percentage of GDP) over the last 40 years, there has been an enormous variation in top tax rates. When Ronald Reagan took office, the top individual tax rate was 70 percent and by 1986 it was down to only 28 percent. All Americans received at least a 30 percent tax rate cut; yet federal tax revenues as a percent of GDP were almost unchanged during the Reagan presidency (from 18.9 percent in 1980 to 18.1 percent in 1988).
What did change, however, was the rate of economic growth, which was more than 50 percent higher for the seven years after the Reagan tax cuts compared with the previous seven years. This increase in economic growth, plus some reductions in tax credits and deductions, almost entirely offset the effect of the rate reductions. Rapid economic growth, unlike government spending programs, proved to be the most effective way to reduce unemployment and poverty, and create opportunity for the disadvantaged.
President Bush signed the first wave of tax cuts in 2001, cutting rates and providing tax relief for families by, for example, doubling of the child tax credit to $1,000.
At Congress’ insistence, the tax relief was initially phased in over many years, so the economy continued to lose jobs. In 2003, realizing its error, Congress made the earlier tax relief effective immediately. Congress also lowered tax rates on capital gains and dividends to encourage business investment, which had been lagging.
It was the then that the economy turned around. Within months of enactment, job growth shot up, eventually creating 8.1 million jobs through 2007. Tax revenues also increased after the Bush tax cuts, due to economic growth.
In 2003, capital gains tax rates were reduced. Rather than expand by 36% as the Congressional Budget Office projected before the tax cut, capital gains revenues more than doubled to $103 billion.
The CBO incorrectly calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion. Revenues for 2006 came in $47 billion above the pre-tax cut baseline.
Here’s what else happened after the 2003 tax cuts lowered the rates on income, capital gains and dividend taxes:
GDP grew at an annual rate of just 1.7% in the six quarters before the 2003 tax cuts. In the six quarters following the tax cuts, the growth rate was 4.1%.
The S&P 500 dropped 18% in the six quarters before the 2003 tax cuts but increased by 32% over the next six quarters.
The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.
The timing of the lower tax rates coincides almost exactly with the stark acceleration in the economy. Nor was this experience unique. The famous Clinton economic boom began when Congress passed legislation cutting spending and cutting the capital gains tax rate.
It worked for Reagan and it worked for Bush – they made unemployment go down, while Obama’s public works spending has made unemployment go up. Those are the facts. And we have to live in the world as it is. We may not like it, it may not be intuitive to us, it may not line up with our feelings, but that is the way the world is. When you let people with capital keep more of the money they earn, they hire more people and they try to make more money. When the rich risk their capital, they take the rest of us up with them – either by giving us jobs, or by offering us things that we are free to buy or not. Things like iPods, laptops and kitchen appliances. And the more competition there is among sellers in a free market, the lower the prices go, and the higher the quality gets.
Have you heard about “The Forgotten 15“? Here’s a news article by the Washington Times that explains it.
Excerpt:
Last week, the House passed a strongly bipartisan bill which would prevent a job-killing 3 percent withholding tax on all government contractors from going into effect. Even though the White House supports the measure, Mr. Reid, a Nevada Democrat, has chosen instead to bring another “small bite” from the president’s failed American Jobs Act to the floor. He wants to hike taxes on business owners so he can blow $60 billion in more stimulus for bike paths, choo-choo trains and bus stops.
Mr. Reid can’t even round up all the Democrats behind his partisan plan, but he continues to drag his feet on items that could pass because the last thing he wants to do is adopt legislation that gives the GOP the chance to take some credit with the public.
The Senate has not been this inactive in at least a quarter-century. As of Tuesday, the Senate had held 194 votes for the year, 54 fewer than at this time last year.
The intransigence has real-world implications. In March, the House passed a strongly bipartisan bill which would have stopped a court order from imposing duplicate and expensive regulations on farmers and ranchers. The Senate never brought the bill up for a vote, and on Monday a key deadline passed, allowing new regulations on pesticide applications to go into effect. That’s bad for jobs.
House Republican leaders want the public to know that they aren’t to blame for the stalemate on Capitol Hill. Speaker John A. Boehner produced a card listing the “forgotten 15” jobs bills that have passed the House but not the Senate. The Ohio Republican gave the card to members, telling them to carry it with them, hold it up at events at home, and flash it during interviews to remind Americans that Republicans are doing everything they can to address the employment situation.
The Democratic strategy is to set up Republicans as a foil for their 2012 re-election bids. Even though the congressional approval rating is down in the single-digits, Mr. Reid wants to draw a distinction between his party and the GOP by only bringing up bills that Republicans will oppose so his caucus can send out accusatory press releases.
The messaging is carefully crafted to fit with Mr. Obama’s latest campaign trail slogans about how “we can’t wait” for Congress to act. He showed his true motives on Tuesday when the president invited congressional Democrats to the White House to ostensibly talk about the jobs agenda. He has no plans to invite Republicans over to chat.
Projected vs Actual Unemployment With Stimulus 2011
Back in 2007, when the Republicans controlled the House and Senate, the unemployment rate was near 4%. FOUR PERCENT. And we had a deficit of $160 billion – NOT 1.6 TRILLION.
Campaigning for another failed stimulus and more job destroying taxes, President Obama has repeatedly—and falsely—asserted that “Congress isn’t willing to move” legislation to facilitate job growth. While the president plays politics, House Republicans have been working and approving legislation to promote economic growth and job creation. The House has approved more than 15 bills that, if enacted, would immediately help to grow the economy without more failed stimulus spending. These bills are currently stalled in the Democrat-controlled Senate and the president has not encouraged the Senate to act.
Here is a sample:
4) H.R. 1230—Restarting American Offshore Leasing Now Act: H.R. 1230 would require the Department of the Interior (DOI) to auction offshore oil and gas leases in the Central and Western Gulf of Mexico, as well as in an area off the coast of Virginia. The bill would help to reduce energy prices and promote job creation by expediting offshore oil and natural gas exploration in the Gulf of Mexico and the Virginia coast.
6) H.R. 1231—Reversing President Obama’s Offshore Moratorium Act: H.R. 1231 would require that each five-year offshore oil and gas leasing program offer leasing in the areas with the most prospective oil and gas resources, and would establish a domestic oil and natural gas production goal. The bill would essentially lift the President’s ban on new offshore drilling by requiring the Administration to move forward on American energy production in areas estimated to contain the most oil and natural gas resources.
7) H.R. 2021—The Jobs and Energy Permitting Act of 2011: H.R. 2021 would eliminate needless permitting delays that have stalled important energy production opportunities off the coast of Alaska. The bill would also eliminate the permitting back-and-forth that occurs between the EPA and its Environmental Appeals Board. Rather than having exploration air permits repeatedly approved and rescinded by the agency and its review board, the EPA will be required to take final action – granting or denying a permit—within six months.
10) H.R. 1938— North American-Made Energy Security Act: H.R. 1938 would direct the President, acting through the Secretary of Energy, to coordinate with all federal agencies responsible for an aspect of the President’s National Interest Determination and Presidential Permit decision regarding construction and operation of Keystone XL, to ensure that all necessary actions are taken on an expedited schedule. The bill would promote job creation and energy security by ending the needless delay of the construction and operation of the Keystone XL pipeline.
16) H.R. 2433—Veterans Opportunity to Work Act: H.R. 2433 would create or modify programs that provide employment and training services to veterans and service members separating from active duty. The bill would also make changes to programs that offer home loan guarantees, ambulance services, and pension payments to qualifying individuals. Among other things, the bill would provide up to 12 months of Veterans Retraining Assistance to no more than 100,000 unemployed veterans that enter education or training programs at community colleges or technical schools to prepare them for employment in an occupational field that is determined by Department of Labor to have significant employment opportunities.
17) H.R. 674—To amend the Internal Revenue Code of 1986 to repeal the imposition of 3 percent withholding on certain payments made to vendors by government entities: H.R. 674 would permanently repeal the imposition of 3 percent withholding on certain payments made to vendors by government entities. Currently, the imposition of the 3 percent withholding is set to take effect on January 1, 2013. If the 3 percent withholding tax were implemented as scheduled, government entities would be required to withhold 3 percent of payments to persons providing property or services to the government. For example, on an invoice for $20,000 the government would pay the business $19,400 and withhold $600 as a preemptive tax. These added costs would almost certainly translate into fewer private-sector jobs and higher costs for the government and taxpayers.
They are actually up to 17 jobs bills now.
And finally, I have to post this funny John Boehner clip:
We need more of that Mr. Boehner. I think that was a good opportunity to say “freaking” as well. Because he should be pissed off with this Solyndra-bailout President.
WINTERY KNIGHT 