The Recovery™ - Stagnant Wages, Lowest Labor Participation Rate in 37 Years

"While it has taken a long time, and extraordinary monetary policy actions, the U.S. economy is now close to full employment..."

Stanley Fischer, Vice Chairman Federal Reserve, Monetary Policy In the US and Developing Countries, 30 June 2015

 

While officialdom celebrates the unemployment rate falling to 5.3%, even a cursory look at the numbers today tells the real story for those who would look at them.

Wage growth in the latest month was 0.0%. That is consistent with a long trend of wage stagnation.

Non-Farm payrolls came in light, and the prior month was revised sharply lower from 280,000 to 254,000.  But it made for a good cheery headline last month.

For a more contemporary number, new unemployment claims rose to 281,000 and continuing unemployment claims rose to 2,264,000.

The reason that the unemployment percentage is falling is that as more unemployed workers fall off the roles of unemployment compensation the government stops counting them as ready to work. 

People become discouraged by the bleak prospects of finding gainful employment, and they even fall further into the 'off the books' economy that is a portion of the decay caused by policy errors of fiscal blockheadedness and monetary largesse for the one percent.

And the sign of economic vigor and the breadth of economic recovery, the labor participation rate has fallen to a 37 year low.

And the spokesperson comes down from the big house and assures us that the President is thinking about what to do about this terrible situation every day.  He has certainly been mulling this over for a long time.  And in fairness, most of the Congress could care less about what happens to anyone who does not have a lackey sitting in their waiting room without a sack full of 'campaign donations' and honorariums.  Oh they may talk a good game, but at the end of the day, they are getting paid.

 

We are now in the seventh year of  The Recovery™.

 

I know, let's shove a corporatist trade agreement, trading jobs for corporate profits, down the nation's throat over the people's strong objections, and call it a jobs creator in true Orwellian fashion, while transforming the US into a nation of insecure, underpaid servants.

 

Oh, well done.

Non Farm Payrolls Benchmark Revision and the Unemployment Rate as Cruel Farce

Well, we forecast the headline number exactly, with a loss of 20,000 jobs. No credit taken, it was as much a judgement call (aka SWAG) as any product of careful measurement.

As you may have heard, the Bureau of Labor Statistics did a benchmark revision. This is Washington speak for 'revised the numbers as far back as anyone might care to remember to give ourselves more wiggle room.'

The benchmark is a product of the Bernays Factor, that measure of public gullibility which permits obviously contrived government statistics to be taken seriously.

Did you react to the positive jobs trend initially announced in September - October 2009? Oops, it was really a greater loss than expected, and not a gain at all. One can only suspect that in a few years this whole recovery could be revised away without so much as a bureaucratic blush.

Here is a picture comparing the old and new headline numbers.



The change is pervasive. One item of note is the taking of more job losses in the earlier years, setting up a stable base for potential job gains in the present, without embarrassing oneself by getting out of synchronization with the actual growth of the civilian population. There will be more 'truing up' of the numbers in the future.


Unemployment Rate as Cruel Farce

Regarding that 'surprise drop' in unemployment to 9.7%, this is the result of people falling off the unemployment benefits radar, and becoming discouraged. It is essentially meaningless, if not downright misleading.

One may as well solve an unemployment problem by shipping people to Australia. Well, that does have some historical precedent. Hard to tell who has gotten the better deal on that one, at least over the long run.

A better measure of unemployment is the Labor Force Participation Rate, which provides information about the total number of people employed as a percent of the population, without benefit of official banishment.



That number continued its downtrend from 64.9% in November to 64.7% in January, with a slight uptick from December's low of 64.6%.

Here is a chart from the good folks at Calculated Risk that shows the employment situation in context with other post World War II recessions.



"Recession" hardly does it justice, does it?

Peak Employment

The Labor Participation Rate is the total number of people employed expressed as a percentage of the total non-institutionalized working force over the age of 16.

It is a good number to watch, because it is harder to play games with it, as the government tends to do with the unemployment rate, making people disappear when their benefits expire.

Granted, it is not perfect, because it does not account for those who are underemployed, working part time or at a minimum wage job far below their aspirations and capabilities.

Nevertheless, we are seeing a flatness in the employment figures that is pronounced.



This might not necessarily be a bad thing, if the average real wage was rising sufficiently so that one might put forward the hypothesis that people are not working because they do not need to work, and their disposable income is sufficient for their needs.

But this is not the case in the USA.

A painful adjustment to free trade and globalization? Sending your working class against nations that are executing aggressive industrial policies is like sending troops marching upright in ordered ranks into heavily entrenched machine gun fire.

Most would feel better if that pain were more equally and equitably distributed. The wealthy elite often like to use a crisis to send a nation to war at times such as these, to create work and control the population. In WWI there was also a vigorous pandemic to help cull the herd as the eugenicists used to say. Good for employment, perception control, and of course profits.

And so it is, that the generals, besotted with the favors of industrialists, and the institutionalized thinking of craven staff, are fighting the last war once again, and losing badly.