American Elephants

Spin, Spin, Spin! Our Painful Jobs Hole. by The Elephant's Child

The unemployment rate dropped to 8.6%. Wild celebration by Democrats — the recession is over, Obama will get reelected, all will be well.  I know, I know, but not so fast! There were only 140,000 jobs created in the private sector. The unemployment rate dropped from 9% to 8.6% because the number of people in the work force dropped by 487,000 people who quit looking.  The jobless rate declined but it wasn’t due to more people working, but fewer people looking for work.

Labor force participation rate has fallen by two percentage points since early 2009, which means that more than two million Americans have withdrawn from the workforce.  Normally as hiring picks up during a recovery more Americans get back into the jobs market.

Worker paychecks also aren’t growing.  The wage rate declined slightly as evidence that more low-paying jobs are returning.  About 50,000 of the new jobs were in retail, which may largely be temporary jobs for the Christmas season.

To get back to full employment —usually considered 5%— which was about the level when the recession began, with the pre-recessionary level of labor market participation— we would need 150.7 million jobs —10.2 million more  jobs than we have today.

The graph below shows the percent of job losses and the length of time it took for recovery in post World War II recessions.                                          (click to enlarge)

President Obama talks jobs, but his actions indicate either a monumental lack of understanding of how jobs are created, or sheer unconcern.  He placed a large amount of expectations on “green jobs” to be created by his efforts to finance, with taxpayer money, a switch of the economy from being based on low-cost fossil fuels, to an economy running on renewable electricity from wind farms and solar arrays. Extensive regulation is expected to force greater fuel efficiency.

There has been some confusion because it is the transportation sector that runs on fossil fuel; while the electric power industry lights and heats our homes and offices with natural gas, coal, nuclear energy and hydropower. Wind farms and solar arrays will not spare us a drop of foreign oil.

%d bloggers like this: