American Elephants

Is The Economy Getting Better? Where Is The Evidence? by The Elephant's Child

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James Pethokoukis, writing at AEI, points out that there is concern about the quality of the U.S. jobs recovery:

While the economy has generated 2.369 million jobs over the past year, a major concern remains the quality of these jobs. Of these jobs, 388,000 were in administrative and waste services (which include temporary help services); 317,000 in retail; and 311,000 in food and beverage establishments – all low-wage sectors. Key higher-paying sectors, such as manufacturing, government and financial services contributed very little to this annual growth.

Employment growth in the construction and manufacturing industries continues to lag other major sectors. About a quarter of May’s job growth came from the professional and business services sector, with about half of this from professional and technical services and the other half from administrative services. The healthcare sector generated another 33,600 jobs, but a majority of these can be traced to the social assistance category, and are therefore neither high-paying nor indicative of future employment growth. These two sectors underscore the importance of services in driving solid economic growth.

We’re back at the point when the recession began in 2oo7. The economy has recaptured all the jobs that were lost during the recession and is now beginning to show incremental employment growth from over six years ago.

On the other hand, the percentage of American civilians 16 years of age or older who do not have a job and are not actively seeking one remains at a 36 year high in May, according to the Bureau of Labor Statistics (BLS). In December, April and now May, the labor force participation rate has been 62.8 percent. Last there in February 1978 under Carter. There are 92,oo9, 000 people who are of working age and not disabled that do not have jobs.

What the chart above says to me is that the ObamaCare regulation that all businesses must pay for health insurance for employees who work 30 hours or more, means that thousands of businesses who employ low wage people have cut back on their hours, and hired more part-time people to work less than 30 hours. But economists don’t mention that at all.

A McKinsey analysis from 2011 says that globally competitive companies have made relentless efforts to improve efficiency. In classic cyclical recessions, companies sacrificed some productivity and profitability until demand returned. Today, they respond to downturns primarily by reducing employment. 65% of the businesses they surveyed have made operational changes to improve productivity and reduce employment. More job losses are expected to be permanent, and new jobs will emerge in different industries.

Economists occasionally mention regulation, but every time we hear of a new regulation, there’s a disturbing estimate of how many jobs will be lost because of it. And the Obama administration cannot stop spewing out new regulations, the latest is Obama’s effort at cap-and-trade accomplished by executive order and agency regulation. The extent to which human workers are being replaced by machines also doesn’t enter into the discussions. We have a lot of quiet inflation to which businesses are responding in ways that they hope we won’t notice.

The statistics seem less meaningful, and the economist’s responses don’t satisfy. Business practices change rapidly in response to events. But I’m not sure anyone is really keeping track of that. I don’t think I understand  anything.

Government cannot create wealth, jobs or income. Because government has to take money from somebody before it can spend it, there is no economic gain from anything the government does.

Might send that one to Mr. Obama.


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