We need JOBS. This economy is about jobs. It is about wages that equal consumer spending. When will our government begin to face facts?
Last week's job numbers included a report on private sector jobs for February. It looks as though we have added 295,000 jobs. Most hailed this as good news, particularly since the unemployment rate dropped to 5.5 percent. This is about as close to full employment as you can get and should be good news - assuming all the numbers are accurate and the economy is thriving. But the deception is this. 102 million people aren't working, including about 9 million who are officially counted as unemployed and the 93 million who've given up. Is that accurate (http://www.bls.gov/web/empsit/cpseea38.htm)? 93 million adults are not in the labor force. That is up from about 79 million from when we began to head into recession seven years ago. But the BLS only considers 250,000,000 as population because they only consider those over 16 (convenient for the administration). If they would use the real population of America and not just those over 16 the real number of our population that is not working is over 170 million not 100 million. Government spending, tax revenues and GDP growth need to keep up with 170 million. So, you decide what is a true representation of our economy (http://www.census.gov/popclock/).
If we have a 5.5 percent unemployment rate, it is unlike any other 5.5 percent unemployment rate in the history of any recovery. Many on the "left" are quick to remind us that at one point during the peak of the recession, we had a 10 percent unemployment rate. I would like to remind them that this was back when we had a strong labor participation rate. If we step away from 1978 labor participation rates for a moment, use our current participation, and use the real population numbers; we have over a 30 percent unemployment rate. These are not my numbers - this is using what is in plain sight from the BLS (Bureau of Labor Statistics) and the Census Bureau.
In a true 5.5 percent unemployment environment, it would be almost impossible to keep wages from climbing. The fact that wages are not rising now further confirms the reported numbers are not even close to reality. Wages will go up and the standard of living will improve when the labor market is truly tightening and workers have opportunity to move from job to job for higher wages. In other words when employers are having more and more difficulty finding workers. However, that doesn't describe today's environment. We have no wage growth because the reported tight labor market is nothing more than a government-created illusion.
One of the big deceptions stems from the demographics. We hear claims that more and more people are retiring - many baby boomers are finally sitting on the beach or playing golf for the rest of their lives. Really? And what about younger generations? According to numbers coming from the BLS just last week, there has been a sharp decline in younger workers, ages 16 to 24. Prime age working adults (25 to 54) have also continued a sharp downward path. Historically high levels of older workers (those baby boomers who should be on the beach or on the golf course) continue working, according to Patrick O'Keefe, Director of Economic Research at Cohn Reznick, an accounting advisory firm.
A close examination of fourth quarter BLS numbers shows the labor participation rate for younger workers was only 55.5 percent. This is down from an average rate of 66 percent from 1998 to 2000. Participation from the 25 to 54 age group remained unchanged at 80.8 percent after peaking at 84.4 percent in early 2000. However, participation among those approaching retirement had slipped only slightly from the mid-2010 postwar record rate of 65.3 percent to 64.3 percent.
It is also worth noting that a record number of young people are living at home - 21.6 million millennials born from 1981 to 1996 were living with their parents in 2012. That is up from 18.5 percent in 2007. According to a 2013 report compiled by Pew Research Center, of all the young people living at home, at least one-third, and perhaps as many as one-half, were estimated to be college students. One reason given for this is that many of the baby boomer generation are continuing to hold on to their jobs a little longer than normal. (I would suggest that most corporations would rather have the experience and work ethic of the baby boomer, although the research has not shown that.)
If we truly have 5.5 percent unemployment, how can we explain this? Food stamp usage has doubled since 2007. Forty-nine percent of all Americans benefit from at least one government program a month. And 75 percent of Americans say they are living paycheck to paycheck.
A Thriving Economy?
Here is the other major line of deception: we are now a thriving economy and should be rejoicing in what we have. The fact is that we are at 1978 labor rates. Think about this. Millions of illegals coming into the countryshould be added to the labor participation rate but seem to be just disappearing from it . . . and we have a record number of underemployed and part-time workers. We can accept the lie that we are in a major economic recovery only if we are satisfied with leaving our children a 1978 economy - since this is the only productivity level we could apparently reach.
I find it difficult to rejoice over an economy that is as strong as a few years after I got out of the military. I remember what the economy was like. I remember getting a job as we were coming out of the industrial revolution and heading into the technology revolution. Although that was good for then, we now live in 2015. The idea that we are sitting back, content with a 1978 economy, is lunacy. Yes, things are more automated, more streamlined, and more computerized with robotics and technology. Considering that, we could end up at 1988 or 1989 levels, but we would still be far behind where we were in 2007 and even further behind 2000 levels.
The idea that we are seeing wage growth would be comical (if it were not so sad) when we factor in inflation and count things like food and energy. Energy rates are down and have been for a year or so, but let's look at the last 10 years. Much of that time, including the last two years of the Bush Administration, gasoline was $4.11 a gallon. When we factor in inflation over the past 10 or 15 years, we have had no wage growth.
Rising Markets and a Strong Economy
This mindset is the biggest problem and largest deception of all: because the market is going up, the fundamentals of the economy have to be strong. They do not have to be strong. The proof? Low interest rates, cheap money, and the flow of trillions of dollars into the markets because of quantitative easing from Central Banks around the world have driven up the values of stocks. Stocks have not been driven up because people are buying more stuff or because people are using more services. Stocks are going up because of some balance sheet engineering that has been going on for the past five years, thanks to the good old Federal Reserve.
Worse yet, investors and businesses alike have watched the false positive for so long that they are starting to believe the deception and making business and investment decisions based on it. That is a recipe for monumental failure. I remind you to look at my article "The Real State of the Union." GDP growth has outpaced debt - hard to believe in a "growing and stronger economy."
At some point, government leaders and people throughout the country will have to admit that multitudes of Americans between the ages of 16 and 54 are not working. An enormous number of Americans are working only part time. No matter how much we raise taxes to try to generate revenues, it will all come back to this: we need JOBS. This economy is about jobs. It is about wages that equal consumer spending. But rather than face facts, the current Administration and Congress are likely to continue manipulating and distorting the truth.