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June 21, 2011

Zuckerman: The Jobs Situation Is Worse Than It Looks (Much Worse Than the Administration Claims)

Topics: Political News and commentaries

Mortimer B. Zuckerman writes in his piece at USNews titled 'Why the Jobs Situation Is Worse Than It Looks' that we shouldn't pay too much attention to the headline unemployment rate of 9.1 percent, we now have more idle men and women than at any time since the Great Depression. The 9.1 figure may be scary enough, but it is a gloss on the reality. These numbers do not include the millions who have stopped looking for a job or who are working part time but would work full time if a position were available. And they count only those people who have actively applied for a job within the last four weeks:

The Great Recession has now earned the dubious right of being compared to the Great Depression. In the face of the most stimulative fiscal and monetary policies in our history, we have experienced the loss of over 7 million jobs, wiping out every job gained since the year 2000. From the moment the Obama administration came into office, there have been no net increases in full-time jobs, only in part-time jobs. This is contrary to all previous recessions. Employers are not recalling the workers they laid off from full-time employment.

The real job losses are greater than the estimate of 7.5 million. They are closer to 10.5 million, as 3 million people have stopped looking for work. Equally troublesome is the lower labor participation rate; some 5 million jobs have vanished from manufacturing, long America's greatest strength. Just think: Total payrolls today amount to 131 million, but this figure is lower than it was at the beginning of the year 2000, even though our population has grown by nearly 30 million.

The most recent statistics are unsettling and dismaying, despite the increase of 54,000 jobs in the May numbers. Nonagricultural full-time employment actually fell by 142,000, on top of the 291,000 decline the preceding month. Half of the new jobs created are in temporary help agencies, as firms resist hiring full-time workers.

Which brings us to a real unemployment number of a staggering 16 percent:

... Include those others and the real number is a nasty 16 percent. The 16 percent includes 8.5 million part-timers who want to work full time (which is double the historical norm) and those who have applied for a job within the last six months, including many of the long-term unemployed. And this 16 percent does not take into account the discouraged workers who have left the labor force. The fact is that the longer duration of six months is the more relevant testing period since the mean duration of unemployment is now 39.7 weeks, an increase from 37.1 weeks in February.

... Clearly, the Great American Job Machine is breaking down, and roadside assistance is not on the horizon. In the second half of this year (and thereafter?), we will be without the monetary and fiscal steroids. Nor does anyone know what will happen to long-term interest rates when the Federal Reserve ends its $600 billion quantitative easing support of the capital markets. Inventory levels are at their highest since September 2006; new order bookings are at the lowest levels since September 2009. Since home equity has long been the largest asset on the balance sheet of the average American family, all home­owners are suffering from housing prices that have, on average, declined 33 percent (compare that to the Great Depression drop of 31 percent).

But as bad as all this sounds, it's actually even worse. The simple truth is that the Obama administration's Bureau of Labor Statistics has simply been 'making stuff up':

... But hang on. Even to come up with the 54,000 new jobs, the Bureau of Labor Statistics assumed that 206,000 jobs were created by newly formed companies that its analysts believe -- but can't prove -- were, in effect, born in May under the so-called birth/death model, which relies primarily on historical extrapolations.

Take the time to read it all.

Posted by Richard at June 21, 2011 7:02 AM

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• Zuckerman: The Jobs Situation Is Worse Than It Looks (Much Worse Than the Administration Claims) - Jun 21, 2011