Unemployment explained

Co-blogger extraordinaire Andrew pointed me to this post and asked for a primer on unemployment and such. Before you ‘X’ out of this page, let me note that I think discussions of unemployment, poverty, and related issues are very pertinent for those concerned with social justice, a living wage, and lots of other areas where our charity (caritas) seeks expression in public policy.

In contrast with the apparent Obama administration’s claims that our worst economic days are behind us, the post seems to wish to undermine those claims by showing an upward-sloping chart of those “not in the labor force:”

click to enlarge

 

One of my pet peeves (when did peeves get domesticated?) is the media’s focus on the unemployment rate as the primary variable indicating the economy’s performance. An analogy might be someone who points to Matthew 24:36 as evidence that Jesus is not God; cherry-picking a single data point on which to base a faulty system of thought. The economy is much better described via a series of indicators: GDP, productivity, investment spending as a percent of GDP, inventory-to-sales ratios, with the unemployment rate in there too. The bad thing about the unemployment rate (as with Scripture) is that it is so easily misunderstood  or misinterpreted (unfortunately we don’t have an infallible Magisterium to interpret economic statistics). The unemployment rate dropped from 8.3% to 8.2%; can the Church then relax its charitable efforts a bit? This big rise in the number of people “not in the labor force;” should we apply Paul’s rule when he says “if anyone was unwilling to work, neither should that one eat?”

Take the civilian population and break it into groups: those both willing and able to work are the labor force, and those either not willing and/or not able to work are (duh) not in the labor force. Here are the latest numbers (Mar 2012):

Yay! A pie chart! (millions of people)

 

 

 

 

 

 

So, to put the previous upward-sloping chart in context, you probably should look at the labor force too. I pulled a chart from the same FRED site over the same years:

Labor force slopes up too (click to expand)

 

 

 

 

 

 

 

Both have been increasing with our population growth. Sure, 88 million not in the labor force is a big number, but this includes people not willing to work, e.g., my retired grandmother and father.

Within the labor force, you have a further separation between those who have a job (the employed) and those who are willing and able to work but don’t have a job (the unemployed). In March, 142 million were employed and 12.7 million were unemployed. The unemployment rate is not the percent of the population without a job, rather it is the percent of the labor force who is unemployed.

If you look at the actual Labor Department press release, there hasn’t been much change over the past year. The number of long-term unemployed (27 weeks or more) has been falling since April 2010 (good news); the labor force participation rate (% of population in the labor force; blue slice in above pie chart) was 61% in 1975, peaked over 67% around 2000 but is below 64% now (bad news: fewer people are willing and able to work); the employment-population ratio (% of population with jobs) was 56% in 1975, peaked at about 64.5% again in 2000 but is about 58.5% now (again, bad news). Another group counted as employed are part-time workers who’d rather a full-time job (so-called involuntary part-time); their numbers have fallen over the past year (good news).

Two more charts (click to enlarge) might bolster the blog’s position that the administration has dropped the ball. The first shows the total of the unemployment rate, the percent marginally attached (willing and able to work, looked for a job in the past year but not in the past month), and the percent involuntary part-time:

Bad news for Obama (worse news for workers)

 

 

 

 

 

 

 

The second shows the total of the unemployment rate and the percent of discouraged workers (willing and able, but not looking because they think no jobs are available):

Again, bad news

 

 

 

 

 

 

 

Taken all together, the above paint a grim picture of the labor market since 2008. How much can be laid at Obama’s feet? I’ll lay out some principles:

  1. The President does not orchestrate the economy–Yes, he’s a powerful individual but there are thousands of companies and millions of workers in our economy. The biggest economic problem with Obama, in my humble opinion, is the increased uncertainty he has introduced for businesses (how expensive/burdensome is Obamacare going to be? are the new financial regulations going to be?).
  2. The President can “do” little good but can “do” lots of harm–Since we seem to be at a point in our country where the President (any of them, not just Obama) is viewed as Santa Claus (“If I vote for you, what will you gimme?”), the power that he exerts typically does little to promote growth and does much to harm it. After the recession, who thinks they could get elected on a platform of deregulation? All empirical evidence supports the reduction rather than the expansion of regulations and bureaucracies, but voters see that as “not doing anything to fix the problem” because most voters are extremely short-sighted.
  3. People’s assessment of the President largely reflects their assessment of the economy–People blame Pope Benedict for clergy sex abuse that happened in the 1970s and 80s when he, literally, had nothing to do with it at the time. I think it is erroneous to talk about the “Bush economy” or the “Obama economy” without understanding what exactly these Presidents did or had the power to do to affect things.

My conclusion from all this is that, yes, Obama can take a lot of the blame for the stalled recovery. He didn’t cause the recession but he hasn’t helped us get out of it; not because he isn’t passing big enough stimulus plans or cutting our taxes enough. Companies do not know what to expect from him in terms of their costs of doing business; he has engaged in excessive consumerism (exploding federal deficits and debt to the detriment of our kids and grandkids); and he is moving us in completely the wrong direction in terms of promoting institutions that foster economic growth.

But, you can skip all of the above. For Catholics, the President and administration are the most anti-life and anti-religious liberty in history. Even if the economy were spectacular now, the overturning of the Mexico City policy  (like Clinton did) and the HHS mandate pushing contraception and abortifacients takes precedence.

Note: Truth & Charity is not affiliated with the Diocese of Shreveport or any other Catholic institution in any way. All opinions expressed herein are solely those of the respective authors. We do not enjoy tax-exempt status and thus CAN tell you who you should and should not vote for based on Catholic principles.

7 Comments

  1. Margaret /

    I think that your analysis is very accurate and balanced.

    However, I strongly believe that any discussion of unemployment is hopelessly incomplete if it does not address illegal immigration.

    In the vast majority of cases illegals are NOT working jobs that Americans don’t want. That has not been the case for many years. Illegals are working good paying jobs in manufacturing, construction and service. They are having a terrible impact on employment prospects for the young and for minorities.

    If you discuss unemployment without addressing illegal immigration then you are being dishonest. And to me, this dishonesty starts at the top with Obama.

    Also, our Bishops’ position on illegal immigration is transparently self-serving and wrongheaded. They are kidding themselves if they think they can rebuild the American Church by filling the pews with Mexicans and their agenda is obvious to everyone. No one in their right mind believes the Bishops would be so enthusiastically pro-illegal immigration if our illegals were coming from moslem countries.

    Thank you for giving me a chance to express my opinion. God bless you and your work.

    • Tim Shaughnessy /

      I’d point you to the work of Ben Powell of the Beacon Hill Institute on the economic effects of immigration. You can also find videos of him at LearnLiberty.org (though I won’t vouch for every video there; they have some that support a pro-choice position).

  2. I think your assessment is more or less correct, and I totally agree with your last bit. As Catholics, we can’t vote for Barry O. End of sentence. Period. His policies are simply anathema to those who respect human life. It may make us single issue voters, but it’s a pretty damn big issue.

  3. Robert John Saunders /

    WOW, and all that is so confusing, so it needs to be ‘broken down’.
    Mrs. Ghandi gave me a gr8 chart to expand our thinking, and where we could effect a change for the bttr. When we read the normal news-papers they are a public confession of our National peoples “SINS”, even in New Zealand. However if we look at politics without principles, wealth without work,pleasure without conscience, knowledge without character,commerce without morality,science without humanity, and worship without sacrifice this certainly points at a direction where $$$ and shareholders need to be separated to create more activity in the market place . . .IS THE WORLD REALLY SHORT OF FOOD, THEN GO PLANT SOME SEEDS! Hey, thats work . . ….

  4. Matt Sciba /

    Are independent contractors factored into the equation? I know that as an independent contractor, I’m ineligible for unemployment benefits if I should lose my job, and I have the added bonus of having to pay both the employer and employee sides of Social Security.

    • Tim Shaughnessy /

      The unemployment rate is determined by the Bureau of Labor Statistics (BLS) from a household survey so if you were surveyed and reported that you worked at least one hour per week for pay, then you’d be considered employed.
      Unemployment benefits are handled by another entity besides the BLS.
      Just so you don’t feel bad, EVERY employee pays both the employer and employee side of Social Security. Most just don’t know it. Employers compensate for having to “contribute” by reducing wages accordingly.

      • Matt Sciba /

        It just hurts more when you have to take it out of your own paycheck four times per year. If everyone had to do that, we wouldn’t have social security OR an income tax!