Where has the vanishing labor force gone? Now we have a clue.

November 11, 2015

http://www.pnas.org/content/early/2015/10/29/1518393112.full.pdf

Each month I criticize the Bureau of Labor Statistics (BLS) report on employment for using the “mysterious vanishing labor force” trick to keep the government’s official unemployment rate artificially low.  Since Obama took office in January, 2008, the U.S. population has grown by 19 million.  Yet, according to the BLS, the labor force has grown by only 3 million, an employment-to-population ratio of only 16% while the same ratio for the overall population is 46%.  It seems that some six million workers have gone missing.  These are the long-term unemployed that the BLS explains away as having “given up looking for work.”

So where have they gone?  How are they supporting themselves?  Well, the above linked study published by Princeton last week gives us an inkling about what’s become of them.  They’re living in despair.  And they’re dying.  As the study found, the mortality and morbidity among middle-aged whites in America has taken a very dramatic turn for the worse since 1998.

This may be the first concrete evidence that the theory I proposed in Five Short Blasts – that the worsening unemployment driven by a rising population density and by trade with overpopulated nations will increase poverty and, ultimately, will begin to drive up death rates.

Your first reaction may be similar to mine – that when you hear of increased mortality among Americans, obesity and all of its related problems are probably the leading cause.  Americans are paying the price for living the good life.  However, this study found that that’s not the case at all.  Worsening obesity contributed only a small fraction to the death rates among this group.  The increase in the death rate is heavily driven by suicides, drug overdoses and alcoholism.  These are the afflictions of people whose dreams have been destroyed and who have lost hope.  So dramatic is the increase in mortality, that the study compares it the AIDs epidemic:

“If it (the death rate) had continued to decline at its previous (1979-1998) rate, half a million deaths would have been avoided in the period 1999-2013, comparable to lives lost in the US AIDS epidemic through mid-2015.”

Why hasn’t this trend shown up in any of the mortality data published by the Center for Disease Control (CDC)?  As the study points out, this data is lost in the “disaggregation” done by age and race in the CDC reports.

The study discusses possible causes for this trend:

“Although the epidemic of pain, suicide, and drug overdoses preceded the financial crisis, ties to economic insecurity are possible.  After the productivity slowdown in the early 1970s, and with widening income inequality, many of the baby-boom generation are the first to find, in midlife, that they will not be better off than were their parents. Growth in real median earnings has been slow for this group, especially those with only a high school education. However, the productivity slowdown is common to many rich countries, some of which have seen even slower growth in median earnings than the United States, yet none have had the same mortality experience.  The United States has moved primarily to defined-contribution pension plans with associated stock market risk, whereas, in Europe, defined-benefit pensions are still the norm. Future financial insecurity may weigh more heavily on US workers, if they perceive stock market risk harder to manage than earnings risk, or if they have contributed inadequately to defined-contribution plans (31).

So why did this begin in 1998 or soon after?  In 2000 the U.S. granted “Most Favored Nation” trading status to China, opening the door to a flood of imports that has decimated what remained of American manufacturing.

President Obama took office in 2008 on a promise of “hope and change,” and on a promise to fix the trade policies that were wreaking havoc on the middle class.  He broke that promise and even exacerbated the trade problem.  Well, it seems that for many Americans, that “hope” that he promised was their last hope.  Americans are literally paying with their lives for America’s idiotic trade policies.


October Employment Report Belies a Stalled Economy

November 6, 2015

This morning’s release of the October employment report by the Bureau of Labor Statistics (BLS) blew away expectations.  According to the BLS, the economy added 271,000 jobs in October vs. expectations for an increase of 190,000.  It even handily beat the top end of the range of expectations – 240,000.  And unemployment fell by one tenth to 5.0%.  The economy must really be on a roll!

Well, maybe not.  A little perspective is in order.  First of all, unemployment didn’t really fall.  In September it was 5.051%.  In October it fell to 5.036% – a decline of only 0.015%.  Rounding the number to two significant digits makes it look like it fell from 5.1% to 5.0%.  Secondly, at the beginning of the report, the BLS observes that:

Over the past 12 months, the unemployment rate and the number of unemployed persons were down by 0.7 percentage point and 1.1 million, respectively.

While technically true, the BLS arrived at these numbers through heavy use of its favorite employment-enhancing trick – claiming that people have dropped out of the labor force.  A true accounting reduces these numbers to 0.3% and 410,000 respectively.  And a true accounting of unemployment puts the number at 8.8%.  The BLS admits in the report that the employment to population ratio is unchanged in the past year.  That’s true.  Take a look at this chart:  Per Capita Employment.  Per capita employment has risen five times in the past twelve months and dropped seven times, for a net loss of 0.03%.  October’s rise was barely a blip.

And the number of unemployed Americans is actually worse than it was ten months ago.  Here’s the chart:  Unemployed Americans.  Again, October’s decline is a barely-noticeable blip in the longer trend.

Earlier this week, Donald Trump took heat for claiming that the Federal Reserve helped the Obama administration with low interest rates and three rounds of quantitative easing.  The implication was that the Federal Reserve did some sort of political favor.  Probably not true, but the end result is the same – it definitely helped Obama with the economy.

A couple of days ago, Janet Yellen, chairperson of the Fed, made clear that an interest rate rise was definitely in the cards in December, leaving analysts scratching their heads over why.  Most of the economic data has been pointing to a slowing economy.  But, I believe, the Federal Reserve is getting desperate to get back in the game, since some are beginning to question its relevance in affecting the economy.  Interest rates at zero and $4.5 trillion of monetary easing have yielded nothing but the weakest economic recovery of the post-war era.  Is the October employment report a quirk, or does Trump have it backwards in this case and perhaps the BLS just threw the Federal Reserve a bone to help it justify its case?