George Rebane
Today the feds announced that almost a quarter million jobs were created in January, and the unemployment rate dropped to 8.3%. As an aside, it was reported that all the "economists and analysts" were again surprised because their predictions missed reality again by over a 100% – albeit 'reality' was a bit munged again by the feds. It continues to amaze me that these jokers can keep their jobs and still sway markets with their random dart throwing.
Nevertheless, here and on other blogs (e.g. Russ Steele's NC2012) we continue to point out the hokey way that unemployment is calculated. A few days ago I presented a little 'back of the envelope' (BOE) model of employment as affected by some gross national variables (here). In it I focused on the effect of technology driven productivity increases on unemployment rate. But I kept the historically declining fraction of the working age cohort constant that is still in the labor force. If you allow this fraction to continue decreasing, that means convincing more people to quit looking for work, then the unemployment rate will keep dropping. But does that represent a good situation for the country?
As more people give up on the jobs market, they are ensnared by the dole departments of government. And, of course, income inequality (see Gini index) continues to get bigger. And just like night follows day, the Democrats get more voters because they 'care about the poor'. And with more socialist hands on the levers of government, national debt keeps skyrocketing and the economy heads at the same brickwall that EU countries are speeding towards as you read this.
The above Excel spreadsheet is an expanded version of the last one; I have added the ability to play with the fraction of working age people actually in the workforce, i.e. working or looking for work. In the above scenario we reduce this fraction by half a percent per year. And, wonder of wonders, unemployment rate plummets over the next ten years. Eveyone who wants a job is working, and with numbers like 0.5% unemployment in 2022, we'll be happy dancing in the streets. The problem with this vision of Ameritopia is that over a hundred million working age people are sitting on their butts cashing in food stamps. Now there's a picture of social stability for you.
But what happens if we adopt national policies that attract a greater fraction, say 0.5%/year, of working age into the workforce? Even with productivity increases maintained at a modest 2%/year, we see the unemployment rate almost double in the next ten years. So if unemployment rate is the critical measure, as it today seems to be, then you don't want to create a situation where too many sheeple get enthused and actually start looking for a job.
So there you have it, a winning formula for the Democrats – point to the increasing number of jobs and dropping unemployment rate, but keep things hopeless enough to discourage job seekers, promise more government relief for the growing number of unemployed, and the whole thing is guaranteed to be impenetrable to the country's rank and file voters.
[The spreadsheet can be downloded here Download Employment2022A. The blue numbers are inputs you can change and watch the effect on that all important and little understood unemployment rate.]
[6feb12 update] Saw a remarkable interview with a senior analyst from the Brookings Institute on Fox News tonight. Apparently the steady stream of lies from the administration, progressives in Congress, and the lapdog lamestream about the middle class losing to the upper quintile is getting too much for even this prestigious left-leaning policy analysis organization. They had to set the record straight, else by their silence it would be reasonable to infer that they were party to the ongoing detour around truth. It turns out that their analysis also shows that the gains to the upper class did NOT come at a loss to the middle class. Furthermore, there is no loss of mobility between the American economic classes. For example, the chances that someone from the lowest quintile moving to the middle quintile is greater than 50%, and the chance that someone in the top quintile moving down is greater than one out of three. And yes, amazing as it is, the chance of getting to the top quintile from one of the upper quintiles is higher than getting there from the bottom quintile. Sumbich, now there's a clear reason for a fundamentally transformative revolution in America. (You think that ABC, NBC, CBS, MSNBC, NYT, Wash Post, … carried this report?)
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