Before we get into today's economic discussion, let’s review the top line economic problems this administration created or failed to address in the past six and half years, as we laid them out yesterday:
- Economic growth during his administration after the economy came out of recession status has been at historical lows relative to past recoveries.
- Historic annual economic growth in this country has been over 3% a year but this administration has yet to get even one year over 3%.
- The economic growth after this recession was half as robust as the recovery coming out of the Reagan administration recession.
- There are still about 45 million Americans receiving Federal government food assistance every month, about 50% higher than when Obama took office and years after the recession ended.
- The labor force participation rate is lower than it has been in decades despite the recession having ended five years or so ago.
- The true unemployment rate is much higher than the official unemployment rate as the drop off in labor force participation has caused millions of Americans to stop looking for work as they became too discouraged to even try.
- Wage growth during this recovery has been stagnant if not negative, depending on how it is measured.
- Job creation has been deceptive during this administration since many of the newly created jobs were lower paying, temporary, and part time, all factors which deceptively lowered the official unemployment rate.
- By the time this administration is over, it is likely that the national debt will have grown by 100% or a whopping $10 TRILLION. A debt burden that large has made the country weaker, not stronger, as he asserts in the interview.
- These anemic results have occurred despite a failed $800 billion economic stimulus package, trillions of fake dollars the Federal Reserve pumped into banks and other financial institutions, and an energy revolution that helped increase employment and put downward pressure on energy costs.
But let’s leave these top line disaster and dive down into some of the nitty gritty of his administration’s economic performance, as laid out in a recent article by Mr. Jim Clifton, President and CEO of the Gallup organization. Mr. Clifton does a fabulous job explaining that the economy we have been stuck with under Obama is fundamentally different, in a bad way, than the traditional measures of our economy’s strengths and weaknesses.
In other words, even though Obama’s supporters point to a much lower unemployment rate than when he came into office, it is really a false sense of accomplishment when you understand what is really going on within the economy, something that Obama and others in Washington either are too ignorant or lazy to understand:
- Mr. Jim Clifton starts his analysis with the following quote and then goes about explaining why our economy is nowhere near as strong as it may appear to be: “The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.”
- While the official unemployment rate is now down to about 5.4%, certainly an improvement over where it was, this is not the good news it may have been in the past.
- If anyone becomes unemployed and then gives up looking for job out of frustration and hopelessness, the Department of Labor doesn't count them as unemployed….even though they are unemployed.
- Given their methodology of computing the unemployment rate, you have to be unemployed AND still looking for a job. Otherwise, you do not exist in the eyes of the government.
- Consider a basic example. Assume there are 100 people in a population and ten are unemployed but looking for a job while the other ninety have a job. The unemployment rate in the traditional sense is then 10%, the number of unemployed (10) divided by the number of unemployed and employed (100). But assume one of those 10 gets so frustrated not finding a job that they drop out of the group of unemployed people looking for a job. The government now says the unemployment rate is the number of unemployed people still looking for a job (9) divided by the number of unemployed people still looking for a job plus those that have a job (99) yielding an unemployment rate of 9.1%. There are still 10 people without a job but according to the government’s official calculation of unemployment, the rate can go down even though no one found a job.
- That is how you get to a state where there may now be as many as 30 million Americans who either out of work or severely underemployed even though the official unemployment rate has been declining.
- Mr. Clifton gives another example of why a declining official unemployment rate is no longer a good barometer of the economy’s health. Assume a person is an out-of-work engineer or healthcare worker or construction worker or retail manager. According to the government’s calculation rules, if you perform a minimum of one hour of work in a week and are paid at least $20, say for shoveling the snow out of someone's driveway as an example, you are somehow not officially considered as unemployed even though you are earning far, far below what you would be earning if you had a real job.
- Consider another inane example from Mr. Clifton of how the government works and calculates unemployment. If you have a degree in chemistry, engineering, math, accounting, etc. but are working 10 hours a week part time because that is the only work available to you, making you severely underemployed, the government still considers you fully employed.
- This is why the official unemployment rate keeps coming down but wage levels stay stagnant. People are working at part time jobs or are underemployed relative to their skill set and in both situations are earning less than would have been expected in non-Obama recoveries.
- This leads Mr. Clifton's analysis to the following, depressing conclusion: “The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie.”
- Gallup has developed its own unemployment/employment barometer to get a fuller picture of the economy. It defines a “good job” as one that provides at least 30 hours of stable work a week for one company or organization that provides a steady paycheck.
- Under this definition, the Obama economic policies are delivering permanent jobs at a staggeringly low 44% rate, i.e. only 44 out 100 American adults are finding steady, full time work.
- According to Gallup, that rate has to be at least 50% and be on the road to developing 10 million incremental new jobs to restore America’s middle class.
The bigger question that we raised yesterday, is how quickly and how strongly we get out of a recession is the bigger challenge, a challenge in which this administration has failed miserably. Just ask the accountant who is shoveling snow or the engineer who is working only ten hours a week.
One final way to view the failed economic policies of the Obama administration. The following graph contains the twenty year view of the official unemployment rate (U3) and the more realistic rate (U6) which takes into account those unemployed Americans who have grown too frustrated to even look for a job. Three conclusions to draw from the graph:
- The more realistic unemployment rate is still about a whopping 11%, almost double what the official rate is.
- And remember from the above discussion, that 11% includes people that are shoveling snow for work or working at jobs that are not commensurate with their jobs and profession occupations, i.e. underemployed.
- And finally, by definition the U3 unemployment rate is always going to be lower than the U6 unemployment rate, the gap between the two has never been larger. Up until a few years ago, the U3 and U6 rates were always between about three and four percentage points different from each other. Under the Obama administration, the gap is rarely, if ever, less than five percentage points different. Thus, the Obama administration policies have negatively bucked the trend line, causing more and more people to drop out of the work force from frustration of not finding a job than ever before.
This graph is from the we site, http://www.macrotrends.net/1377/u6-unemployment-rate, where you can drag your mouse across the graph and see the difference between the U3 and U6 lines and where you will see that the gap has grown larger and larger over the past few years.
So we reach the same conclusion we did yesterday but with some deeper data analysis and math. Obama did not “save” the economy. And in fact his insistence on thousands and thousands of more government regulations, the onerous regulations and two dozen or so new taxes from Obama Care, the higher tax rates he has imposed on some Americans, and his crony capitalism has resulted in the worst economic recovery in a very long time.
That will be part of his legacy no matter how much he tries to convince and delude himself it is not reality.
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