Friday, August 2, 2013

July's Employment Rate Excitement

The Bureau of Labor Statistics reported that the U3 unemployment rate dropped to 7.4% in July. They also reported the number of unemployed persons dropped to 11.2 million.

In Reagan's 5th year in office, this would be considered bad news. In Obama's 5th year, it's being lauded. Why? Simply because our economy is not recovering under Obama. It's been stagnant. It isn't getting worse. In some sectors, such as the housing market, it is getting better. But food costs are rising due to increasing costs of labor and transportation.

Those giving-up looking for job and leaving the workforce increased by 136,000. This accounts for part of the drop in the U3 rate. The other portion comes from the jobs created by companies migrating full-time positions to part-time. To cover the production time, part-time jobs were added. Many long-term unemployed took those part-time jobs. They were not added into the BLS's figures as "part-time for economic reasons" because they had been out of work for over 27 weeks. That skews the way the BLS calculates the U6 rate. It calculates the U6 to be about 12.6%.

Real unemployment is closer to 11.1% with a proper U6 rate of 17.6%, if the workforce participation rate were back at 66% (real recovery labor participation rate, equal to the 10 year average from prior to the late 2008 crash). 

They also do not count "marginally attached" personnel who have not looked for a job in over 4 weeks in their workforce numbers when calculating unemployment. But they do not drop them from the "labor participation rate" until their unemployment benefits window of 99 weeks runs out.

The Workforce Participation Rate (or Labor Participation Rate) dropped, slightly, as well. It is currently at 63.4%. The rate is nearing its lowest point in the post-WWII era.

The average work-week for non-supervisors is down at 33.4 hours a week. That is scarcely 3 hours a week over the government definition of full-time, 30 hours. Most citizens consider a 40+ hour work-week to be full-time. That is the figure most people use to translate their hourly wage to an expected yearly salary.

Most economists concur that the US is not, yet, in recovery. They have crunched the numbers and determined that, given the US population, we need a string of consecutive months of 200,000 or more gains in full-time employment to  constitute a recovery.  July saw one of the highest months of new hires in Obama's tenure at only 162,000.

Compare this will the numbers for July of 2012.  There are two primary contributing factors to the 0.9% drop in the U3 rate. One was the creation of part-time jobs as former full-time are converted to combat the PPACA's "employer mandate". The other factor is that the BLS changed the way it figures the workforce. Even with the change, the workforce continues to shrink, not grow. The WPR was 63.7% a year ago. It is now 63.4%, even with the creation of those part-time jobs. That is not growth.

Applications for SNAP, TANF, TARP, and other subsidies is on the rise. More than two families per "job created" are applying for food stamps and EBT cards. That is not growth or prosperity.

Should the "employer" and "individual" mandates both go into effect on Jan. 1, 2014, the average hours will likely sharply decrease. Consumer prices will likely increase. Citizens will have less disposable income due to increased insurance and healthcare plan costs. This will translate into a higher poverty threshold and a sharp decline in quality of life. 
Sorry, kids, that is not a recovery.