Jobs Illusions – Unemployment Rate Drops as Work Force Shrinks
The number of people working is at a low not seen since 1981. The recently released Congressional Budget Office (CBO) report on the economy showed that if the workers that have left the rolls were counted the unemployment rate would be 10%. The jubilation of the Obama campaign press over a miniscule drop in the rate is great for campaign speeches but the reality is much grimmer.
By Michael Whipple, Editor usACTIONnews.com
As more workers stop filing or run out of benefits they are no longer counted as “unemployed” for the unemployment rate. So as the economy worsens we are actually seeing the rate drop a few tenths of a point which is heralded with great delight in the Obama campaign.
Some are retiring early or signing up for disability benefits. Some just work for cash or struggle in home based enterprises to make ends meet.
Heidi Shierholz of the Economic Policy Institute in her analysis of the BLS jobs report January 6th 2012:
“Two years ago, in December 2009, the unemployment rate was 9.9 percent, and it is now 8.5 percent. How much improvement does that drop actually represent? Given weak job prospects, many would-be workers dropped out of (or never entered) the labor force over this period, a trend that reduces the measured unemployment rate but does not represent real improvement in employment. If the workers who comprise the drop in the labor force participation rate (from 64.6 percent to 64.0 percent) over the last two years were counted as unemployed, the unemployment rate would be 9.5 percent now instead of 8.5 percent.” [emphasis added]
The number of people working is at a low not seen since 1981. The recently released Congressional Budget Office (CBO) report on the economy showed that if the workers that have left the rolls were counted the unemployment rate would be 10%. The jubilation of the Obama campaign press over a miniscule drop in the rate is great for campaign speeches but the reality is much grimmer as the report points out:
Participation in the Labor Force. The unemployment rate would be even higher than it is now had participation in the labor force not declined as much as it has over the past few years. The rate of participation in the labor force fell from 66 percent in 2007 to an average of 64 percent in the second half of 2011, an unusually large decline over so short a time.
Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent. [emphasis added]
Thus the “real” unemployment rate is almost 10%. The report also shows that increased taxes in 2013 that are already law will have a further negative impact noted as a “dampening effect”:
By CBO’s estimates, the rate of labor force participation will fall to slightly above 63 percent by 2017. The dampening effects of the increase in tax rates in 2013 scheduled under current law and additional retirements by baby boomers are projected to more than offset the strengthening effects of growing demand for labor as the economy recovers further.
CNBC’s Rick Santelli came to basically the same conclusion:
No wonder fears of an economic collapse top a survey of what Americans worry about:
Maybe that is also why so many fear four more years of Obama:
U.S. News reports on Synovate eNation Internet poll conducted December 29-January 2 that shows 33% of Americans fear four more years of Obama. Only 16% are afraid of Obama losing in 2012.
“in results backed up by other polls, older Americans and those earning $75,000 or more are especially worried about the president getting a second term, according to the poll done by Synovate eNation.
Nearly half of Americans 65 and older said Obama’s reelection was their top fear, 39 percent of those making $75,000 or more agreed.”
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