Is It Getting Better….
…or do you feel the same? Who knew that the Rev. Bono of U2 was so prescient when he wrote the song, “One“.
Many liberal friends are pointing at the Dow as a sign of an economic recovery. It’s usually accompanied with some sort of quip about how sad it is that conservatives or republicans are “anti-recovery” for the political purpose of being bad for Obama. Some liberals even claim that the democrat policies are kicking in now and the recovery is due to that – “Summer of Recovery III” ??. Of course, they can’t point at a concrete example.
First, let’s be clear: regardless of whether it means that Obama would be re-elected or not, I truly believe that it is more important that the economy recovers and improves. Capitalism has done more to benefit this world than any other system. Strong economies, especially in this very connected world, are critical.
Second, it’s all about the numbers. The economy is going to be driven by participation. Participation in both the investment (the stock market, bonds, etc.) side as well as the labor force side. Correlate participation and behaviors with population data and you should be able to begin to see the problem. A large portion of the American population is nearing and entering retirement, a point at which participation in both sides eases. Add to that the state of the various entitlement programs in the country and it begins to look real messy. Politicians for the most part are content to kick the can down the road and not address these programs.
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| Civilian Labor Force Participation Rate (1980-2012) |
Third, it really is all about the numbers. So let’s back up to the original quote, “Is it getting better…or do you feel the same?” The administration is touting that unemployment is getting better. A closer look at the numbers reveals some issues. Starting with the January 2012 labor numbers, the Bureau of Labor Statistics is factoring in the results of the 2010 Census. This has adjusted labor force participation as well as population figures. The initial message is that the adjustments don’t affect the total unemployment numbers as the groups that had the population increases were in the the 16-24 and over 55 age groups. Specifically, the BLS has adjusted the numbers adding 1,510,000 to the civilian non-institutional population which breaks down into the addition of 258,000 to the civilian labor force and the addition of 1,252,000 to the “not in labor force” population. The net result is a -0.3 percent participation rate in employment, down to 63.5%. This is the lowest this figure has been since May 1983. By the government’s definition of the unemployment rate, those in the “not in the labor force” do not count.
However, some of the numbers in the detail part of the report are interesting. Consider the numbers for the 25 to 54 demographic, where the civilian non-institutional population was reduced by 299,000 (a reduction of 0.2%) but the civilian labor force was reduced more steeply (0.4%) by 408,000. The employed count was also reduced by a similar steep value (0.4%) amounting to 370,000 fewer employed. Savor that for a moment. The employed and participation numbers were reduced by double the percentage of adjustment to the civilian non-institutional population.
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| Employment to Population Ratio (1980-2012) |
In fact, the employment to population ratio has been hovering around 58.5% for the past years as can be seen in the second graph. This figure historically has been three to six percentage points higher for the 25 years (ever since the dip around 1983). It doesn’t make a lot of sense to have this figure remain steady and claim recovery. In fact, the Congressional Budget Office projects that unemployment will stay above 8% until 2014. This, of course, doesn’t include those who have supposedly stopped looking for work or are part-timers that want more permanent employment (January’s true unemployment would be 15%).
Look, everyone should want the economy to recover but clearly the President isn’t doing all he could to help it along. Gas prices remain higher than they need to be and that affects more than just people’s commutes – it factors into the transportation costs for goods and services, travel and the hospitality industry.
To continue with Bono’s song, “Will it make it easier on you now / You got someone to blame / You say.” and “Did I disappoint you / Or leave a bad taste in your mouth.” Hmmmm.
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