Wednesday, February 04, 2015

The Unemployment Rate is Just One of Several Big Lies, Brought to You Every Day by the Political Class

Jim Clifton, Chairman and CEO at Gallup, wrote an interesting piece about unemployment numbers called "The Big Lie: 5.6% Unemployment" yesterday.

He makes the somewhat obvious point that the government, by refusing to count people in the unemployment statistics who want a job but have stopped looking after several months is, well, telling a Big Lie. Some government bureaucrat, in an appalling lack of judgment and honesty, decided it was OK to assume that some guy in his late 40s who got laid off and now can't find a decent job, but who still has a wife and kids and a mortgage, is somehow no longer in trouble after he stops paying his mortgage and moves in with extended family. Right. That would be news to him, his family, and his mortgage company.

You still need to eat, even after the BLS decides you are no longer "unemployed".

Likewise it strains belief to suppose that a 27 year old college graduate who can only find work as a coffee house barista, part-time, is starting on the path to success that we all picture in our heads after graduation: moving out into the world and into their own apartments, buying their first car, and starting their young adult lives. A big part of that is having financial leverage: a solid job and a good income. Working 29 hours - or even 49 hours - at an hourly rate cannot really move you forward in that journey. Such a job is a place-holder, nothing more, and was never intended for college graduates in the first place. We should quit pretending there is anything normal about it. There isn't. It's a big picture, long term disaster in slow motion.

There are millions and millions of these types of people out there, and all of them are probably pretty damn angry when the White House and the media carry on about how unemployment is not high any more. And they have a right to be. Because that 5.6% number is just not valid. It's insulting to everybody affected by joblessness over the last 6 years, to be truthful. These are people's families, houses, and lives we are talking about.

In a real recovery, hiring and income grow quickly, and people either never end up in the situations above, or quickly move out of them. That's what a recovery *is*. Take away either hiring or income, and you cannot really call it a recovery any more.

And that's what we have today, hiring without rising income. Incomes and wages are stagnant or declining for the middle class, and that is because the middle class needs economic growth in order to thrive, unlike the bottom 50% and the top 5-10%, who can rely on government freebies and existing capital respectively.

It's nice that Mr. Clifton spoke up, but I question why it took so long. I suspect that having Mr. Obama rather than Mr. Bush in the White House explains most, or all, of it.