Unemployment Report - Some Good News

This month's jobs news from the administration is that unemployment remained steady at 8.3%. Of course this isn't being trumpeted as good news the way last month's numbers were. However, the news is actually good for the first time in a long time. I have stopped believing the official unemployment numbers and concentrated instead on labor force participation. The participation rate is easier to calculate, harder to manipulate and is a better picture of economic health. No matter how you slice it, the people who are working have to produce the goods and services for those who are not. Even if those who aren't working are living off of their savings or government checks, the equation doesn't change. (Calivancouver might help me with the nuances of imports in this equation, but the theory is correct in the aggregate.)

US Labor Force Participation Rate Chart by YCharts

We had a slight uptick in participation rate last month, but as you can see the overall trend is quite grim. It will take many months of improvement before we can say that the economy is really healthier from a jobs perspective. What saved GDP growth in 2009 and 2010 was the increase in productivity. Even as workers lost jobs, businesses made huge leaps in productivity per worker, probably by shedding the least productive workers. (That is not an indictment of those laid off, they may have been the least productive because they were stuck in a factory that lacked modern tooling or had energy inefficient equipment.) Now, the productivity gains have tapered off, and total employment is not increasing. Hard to see how the economy can return to normal growth of 2.5% under those conditions.

Best Explanation for The Ongoing Recession

. . . Comes from Victor Davis Hanson, of course. Please indulge an extended quote, because it crystallizes what we have been saying about the poisonous growth of the federal government.

In the last 30 months, the Obama administration has created a psychological landscape that finally just seemed, whether fairly or not, too hostile to most employers to risk new hiring and buying. Each act, in and of itself, was irrelevant. Together they are proving catastrophic and doing the near impossible of turning a brief recovery into another recession.

Here is the lament I heard: the near $5 trillion in borrowing in just three years, the radical growth in the size of the federal government and its regulatory zeal, ObamaCare, the Boeing plant closure threat, the green jobs sweet-heart deals and Van Jones-like “Millions of Green Jobs” nonsense, the vast expansion in food stamps and unemployment pay-outs, the reversal of the Chrysler creditors, politically driven interference in the car industry, the failed efforts to get card check and cap and trade, the moratoria on new drilling in the Gulf, the general antipathy to new fossil fuel exploitation coupled with new finds of vast new reserves, the new financial regulations, an aggressive EPA oblivious to the effects of its advocacy on jobs, the threatened close-down of energy plants, the support for idling thousands of acres of irrigated farmland due to environmental regulations, the constant talk of higher taxes, the needlessly provocative rhetoric of “fat cat”, “millionaires and billionaires,” “corporate jet owners,” etc. juxtaposed, in hypocritical fashion, to Martha’s Vineyard, Costa del Sol, and Vail First Family getaways — all of these isolated strains finally are becoming a harrowing opera to business people.

While big businesses are as capable as leftists of using government to their own personal advantage, the flood of regulation and the promise of more to come is crushing entrepreneurial spirit. No wonder businesses are sitting on piles of cash and not investing and hiring. Of course, this very sensible policy is coming under attack by the left. Here is Lorena Gonzales, secretary-treasurer of the San Diego and Imperial Counties Labor Council, in today's U-T, complaining that businesses won't hire because the policies she supported have been enacted into law; another "blame the victim" moment from the left.

The irony, of course, is that these corporations need consumers to spend our money. And, to do that, we need these corporations to spend their money hiring people. If they won’t spend on us, we can’t spend on them. It’s the classic chicken and egg. And right now, they are chickening out on the economy.

Irony? You criticize people and threaten them long enough, and they start to believe you. Then you complain that they are paranoid? It's not paranoia when they really are out to get you.

I think KT would call this a John Galt moment. Hard not to agree.

Meanwhile, the President's chances for re-election continue to fall, dropping below 50% for the first time this August, and sitting at 48.9% as of this writing. My only concern is that the odds of defeating the President will peak too soon.

Closing Out the Auto Follies? Hope, but no Change

The Obama administration admitted that the auto bailout will cost taxpayers $14 billion. Of course, that's if you believe their accounting. Judging by prior statements on the repayment of loans, I rather doubt it. Additionally, the slide in car sales this month, may cause this loss to increase. Dean previously posted:

So, if you are scoring at home you have a) a bankruptcy cramdown where unions were shoved to the head of the line before secured creditors, b) a pack of blatant public lies regarding the payback of the TARP loan, c) a $9 billion loss on the first IPO last November and now this... a massive stock dump in order to clear the books ahead of the 2012 presidential elections.

Of course, it was all worth it, for the jobs, according to the administration. Never mind that other car companies would have probably scarfed up assets and workers or that a normal bankruptcy could have resulted in a healthier GM than the one that emerged from this bankruptcy.

In other economic news, consumer confidence is dropping, factories had their biggest one-month slow down since 1984, and the most recent jobs report showed only 38,000 jobs were created in May.


Consumer confidence graph from the Atlantic. If the economy is in recovery, we should see increasing consumer sentiment, which is clearly not the case.

Disconnected on the Economy

Dang, do I have to give up this spiffy uniform?
Photo from Pat Dollard's blog.

Since we're on a car theme today, how are your shares of GM doing? Don't own any? Fail. You do, if you are a taxpayer.

Taxpayers likely to face initial loss on GM IPO-sources

The U.S. government is likely to take a loss on General Motors Co [GM.UL] in the first offering of the automaker's stock, six people familiar with preparations for the landmark IPO said.

KT points out that the domestic content of Obama's Iraq speech was disconnected from reality:

Hundreds of billions of dollars had been spent on precisely what he was suggesting and the results were horrible.

I remember sitting at the blackjack tables in Vegas many years ago and watching an obviously inebriated punter double down on a 5,4 hand while the dealer had a King showing. When the dealer inevitably relieved him of his chips, he loudly complained abut not getting his free drinks fast enough. This reminds of nothing so much as Obama's economic strategy.

Meanwhile unemployment is rising and there is little job creation.


Job creation is slow because of a few simple to understand facts.

1. Uncertainty. The unknowns of future regulatory policy and the impact of Obamacare are injecting uncertainty into the economy.

2. Housing slump. Many small businesses are tied to the real estate market. Businesses that serve the homeowner are often smaller ones. Further, small business owners use the equity in their homes as collateral for lending. Trying to prop up home prices only delays the recovery, because home prices need to fall so that new buyers can start fixing up properties and they can be properly valued for small business owners.

3. Future taxes. Expiring tax cuts, aka tax increases, are injecting fear into the economy.

Exit question: How does doubling down on deficit spending fix any of these problems?