Tag Archives: jobs

Some Data on the Obama Economic Recovery

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And on Democratic Party Presidential candidate Hillary Clinton’s policy impact on that recovery from the Panic of 2008, since Clinton has promised, proudly, to continue and extend President Barack Obama’s (D) economic policies.  These data are via Robert Barro’s (Harvard University economics professor and American Enterprise Institute visiting scholar) piece in The Wall Street Journal.  He and a colleague, Tao Jin, looked at

macroeconomic disasters in 42 countries, featuring 185 contractions in GDP per capita of 10% or more. These contractions are dominated by wartime devastation such as World War I (1914-18) and World War II (1939-45) and financial crises such as the Great Depression of the 1930s.

Among other things, they found that blaming the slow- to non-recovery on the Panic’s severity or on global financial crises, in their gentle phrase, “conflicts with the evidence.”

Among the specifics of their findings:

The growth rate of total nonfarm payrolls averaged 1.7% a year from February 2010 to July 2016, despite the drop in the labor-force participation rate. The post-2009 period is not a jobless recovery; it is a job-filled non-recovery.

And

[T]he drop in the unemployment rate—from 10% in October 2009 to 4.9% in July 2016—has been impressive, though overstated because of the decrease in labor-force participation.

Never mind that half the GDP lost during the contraction is typically recovered within two years of a recovery’s start.

So, what policies led to this failed recovery?  There have been lots, ranging from attacking hydrocarbon-based energy production and the destruction of jobs with the subset of the Democratic administration’s war on coal (and growing war on oil and natural gas), the Obama EPA regulations intruding onto private property (no cattle ponds on private ranches, recall), Labor Department’s and NLRB’s restrictions on non-union labor, and so on.  The primary policy, though, has been this administration’s increase in government transfer payments.

Federal social benefits to persons (things like Medicaid, Medicare, Social Security, and food stamps) as a fraction of GDP rose from 8.7% in 2007 to 10.9% in 2015.  That’s a 25% rise in the fraction of GDP that’s money taken out of the private economy, washed through a middleman government, and the remainder then passed along to others.  In real dollar terms, that’s an increase from a skosh over $1.3 trillion in 2007 to a skosh under $2 trillion in 2015, an increase of more than 50%.

That’s money not applied to actual economy-stimulating and job-creating activities: free trade, rolling back inefficient regulations, fiscal discipline, and, yes, public infrastructure such as highways and airports.  That’s money not applied to enhancing productivity.

The growth rate of GDP per worker from 2010-15 was 0.5% per year, compared with 1.5% from 1949 to 2009.

Instead, Clinton not only wants more of the same.  She was for the Pacific and Atlantic free trade deals on offer (and one soon to be before Congress) before she lately found it politically expedient to be against them.  She favors increasing regulation—evil Wall Street and political speech are her targets du jour—not reducing it.

Her idea of fiscal discipline is increased spending, partially paid for with higher taxes.  She wants “free” education, paid for with higher taxes; reduced borrower liability for student loans, paid for with higher taxes; free day care, paid for with higher taxes; free health care—single payer, yet (never mind that contradiction)—paid for with higher taxes; free family leave from employment, paid for with higher taxes and higher prices since the employer must pay, also, if only through reduced output and so reduced sales; and on and on.

And that infrastructure work?  She is for that—so long as it’s done by Government approved union labor, and not by the most cost efficient contractors.

Union Greed

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It isn’t enough that unions demand the “right” to raid honest citizens’ pocketbooks for union dues—demanding that non-union members pay up as a condition of being allowed to work.  Unions also are demanding the “right” to raid honest citizens’ pocketbooks for tax money with which to plus up union “pensions.”

See, for instance, the United Mine Workers of America and their pet Democratic Party Senator, Joe Manchin (whom we had thought was more honest than this).

The Miners Protection Act of 2015—sponsored by Senator Joe Manchin (D, WV) and co-sponsored by eight Republicans—would bail out the underfunded pension plan of the United Mine Workers of America (UMWA).

This potential for legalizing theft also has the unfortunate support of eight allegedly Republican Senators and the Senate Finance Committee Chairman, Orrin Hatch (R, UT), who most assuredly should know better.

This bill would raid a mine reclamation fund to the tune of $490 million for the sole purpose of feeding the union maw.  Never mind that the unreclaimed mines would remain uncleaned up (which, by the way, Democrats, having successfully defunded mine reclamation, will rend and wail about those same unreclaimed mines for their personal political gain).

Manchin is disingenuously arguing that the Federal government has an obligation to bail out the union and its funds.  It’s a familiar refrain: Government has to do this, Government has to bail that out, because private enterprise—of which the UMWA is one, make no mistake about that—cannot be trusted to see to its own affairs.

Manchin is disingenuous in another way: as Diana Furchtgott-Roth (lately Labor Department Chief Economist and currently a Senior Fellow at the Manhattan Institute) pointed out in her piece at the above link,

UMWA knows how to fund a pension plan.

The UNWA needs no government help in this.

And

Required filings with the Labor Department show that the pension plan for the officers of the UMWA—the president, vice presidents and treasurer—is solvent.

UMWA leadership has been careful to take care of themselves.  It’s on them—not honest American citizens—to take care of their membership, too.  Again, no government involvement is needed or appropriate here.

No, this whole sordid affair is just another Progressive effort to take money from honest Americans and redistribute it to their cronies.

Employment and Interest Rates

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The US economy added 151,000 net new jobs in August, below consensus expectations for 180,000. Meanwhile, the labor force participation rate remained stable at 62.8%, as did the jobless rate at 4.9%, though it was expected to tick slightly lower to 4.8% for the month. The closely-watched U6 rate, or “underemployment” rate, which measures unemployed workers and those working part time for economic reasons, remained stuck at 9.7%.

The unemployment rate and the jobs numbers are misleading when taken out of context.  The context of importance here is the historically low labor force participation rate, from folks having given up looking for work, even though they’re perfectly viable potential employees rather than boomers who’ve retired (a number of whom actually have retired earlier than they wanted to and still would work, were there jobs).

Then there’s this, from Dan North, of Euler Hermes North America:

The most important part [of the report] is the weakness in hours and wages. That slammed the door on September [rate-hike chances].

I’ve said it before, and here I am saying it again: if the Fed wants 2% inflation, then it needs to stop chasing the market; it needs to stop focusing on jobs numbers, per se; and it needs to stop holding out for 2% inflation before it moves.  It needs to set its benchmark interest rates at levels historically consistent with 2% inflation and then sit down and watch.  Watch the economy recover, watch folks who’ve given up come back into the labor force, watch wage growth reappear, watch the labor participation rate, from that, recover to more normal levels; and watch the unemployment rate, still low, actually mean something.

And watch prosperity and productivity resume growing.

Some Labor Day Questions

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First published in 2015, I’ve updated it for today.  In an ideal world, I’ll be able to update it again next year, with a more optimistic tone.

The Wall Street Journal asked some questions on Labor Day 2012, and supplied some answers.  Here are some of those questions and answers, which remain as valid this Labor Day.

  • Q: How are America’s workers doing? Not good. Over the past decade, over the ups and downs of the economy, taking inflation into account, the compensation of the typical worker — wages and benefits—basically haven’t risen at all. … The Labor Department recently said that 6.1 million workers in 2009-2011 have lost jobs that they’d had for at least three years. Of those, 45% hadn’t found work as of January 2012. … Federal Reserve Chairman Ben Bernanke said Friday that unemployment is still two percentage points higher than normal….
  • Q: Things ARE getting better, though. The US economy is creating jobs, right? Back in December 2007 when the recession began, there were about two jobless workers for every job opening.  When the economy touched bottom in mid-2009, there were more than six unemployed for every job.  At last count, the BLS says there were 3.4 jobless for every opening.
  • Q: How much of this elevated unemployment is because the unemployed just don’t have the skills that employers are looking for right now?  …the bulk of the evidence is a lot of the unemployment really is the old-fashioned kind: the kind that would go away if the economy was growing at a stronger pace. Mr. Bernanke said as much at the [2012] Jackson Hole conference….

The Democratic Party President has taken a bad situation and done little to improve it, even though he’s had four more years in which to do so.  He has, though, actively attacked businesses—the hirers—demonizing them, (over)regulating them, demanding to raise taxes on them.

At least as importantly, the current Democratic Party Presidential candidate has vowed to continue these Democratic policies, and to extend them.  Even with nearly eight years of empirical data demonstrating the bankruptcy of these policies.

Happy Labor Day.