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Posts Tagged ‘Labor Force Participation’

Let’s revisit the issues of Bidenomics.

Previous editions of this series have focused on Biden’s dismal record with regards to subsidies, inflation, protectionism, household income, fiscal policy, and red tape.

The assessment has not been positive, which shouldn’t be very surprising since Biden is basically a slow-motion version of Bernie Sanders.

Today, we’re going to look at Biden’s record on jobs…and that’s not going to improve the assessment.

The problem is employment rather than unemployment.

In a column for the Wall Street Journal, Nicholas Eberstadt writes about the millions of Americans who have disappeared from the labor force.

Never has work been so readily available in modern America; never have so many been uninterested in taking it. …For every unemployed person in the U.S. today, there are nearly two open jobs, and the labor shortage affects every region of the country. …Why the bizarre imbalance between the demand for work and the supply of it? One critical piece of the puzzle was the policy response to the pandemic. …Washington pulled out all the monetary and fiscal stops….created disincentives for work as never before. …In 2020 and 2021, a windfall of more than $2.5 trillion in extra savings was bestowed by Washington on private households through borrowed public funds. …With pre-Covid rates of workforce participation, almost three million more men and women would be in our labor force today.

To be fair, bad pandemic policies began with Trump.

But Biden promised changes yet has delivered more of the same.

Why does this matter?

It’s not just a numbers issue. When people drop out of the labor force, that translates into a weakening of America’s societal capital.

Mr. Eberstadt explains.

The signs that growing numbers of citizens are ambivalent about working shouldn’t be ignored. Success through work, no matter one’s station, is a key to self-esteem, independence and belonging. A can-do, pro-work ethos has served our nation well. America’s future will depend in no small part on how—and whether—her people choose to work.

Thanks to a stronger work ethic and spirit of self reliance, the United States historically has had an advantage over other nations.

But it’s increasingly difficult to feel optimistic about the long-run outlook for America’s societal capital.

Ironically, Joe Biden seemed to understand this in the not-too-distant past.

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I’m not a fan of Joe Biden’s economic policy, particularly his tax-and-spend agenda.

I also don’t approve when the Biden Administration uses phony numbers and phony arguments.

But what’s really baffling is the use of accurate numbers to make dumb arguments.

What do I mean by that? Well, here’s a tweet from the Democratic Congressional Campaign Committee celebrating a 2¢-per-gallon reduction in gas prices over a two-week period.

There’s only one problem with this tidbit of data.

If you look at what’s happened to gas prices during Biden’s time in office, the recent 2¢ reduction is swamped by $1 increase over the past year.

So how and why did the White House screw up?

Tim Carney of the Washington Examiner wrote about this strange episode.

The Democratic Congressional Campaign Committee has just produced and tweeted the worst chart of 2021. It is a line graph of gas prices with three data points covering a two-week time span. The absurd dishonesty comes when you look at the y-axis. Each horizontal line represents half of a cent. …Gas prices have nearly doubled over the past 18 months, and Biden’s allies are holding a parade for a less-than-1% drop over two weeks. Thanks, Joe Biden! …So, how did this horrible chart happen? It seems someone at the DCCC took seriously a joke made by liberal blogger Matt Yglesias. …Ron Klain, White House chief of staff (presumably not understanding the tweet was a joke), liked the tweet before the DCCC put it out sincerely.

This is the political equivalent of leading with your chin.

And it’s not the only example.

Here’s a retweet from the White House Chief of Staff, Ronald Klain, celebrating a very tiny improvement in the labor force participation rate.

In this case, there’s nothing disingenuous about the chart. We actually get to see several years of data.

But does this small uptick in the labor force participation rate actually mean that “America is back at work”?

Call me crazy, but it seems that the main takeaway from the chart is that the country is still way short of getting back to pre-pandemic levels of employment.

Which raises the obvious question of whether Biden’s redistribution agenda is making it easier for people to live off the government rather than be part of the workforce.

P.S. My criticisms of Biden are not driven by partisanship. I’m also not a fan when Republicans enact bad policy.

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For the past several years, on the issue of jobs, I’ve focused more on the employment-population ratio rather than the official unemployment rate.

Both figures are important, of course, but I think the employment-population ratio has more economic meaning since our prosperity ultimately is based on how many people are productively employed.

To put this in wonkish terms, our national economic output is a function of the efficient allocation of labor and capital.

The reason I bring this up is that many people think the job market is now in great shape because the unemployment rate has dropped to 5.6 percent.

To be sure, that’s good news when compared to the much higher rates of joblessness that plagued the nation a few years ago. But one of the reasons the unemployment rate has dropped is that many people have left the labor force.

Here’s a chart based on data from the Bureau of Labor Statistics showing how many people have jobs compared to the working-age population. As you can see, there’s been scant improvement in this important indicator.

The problem isn’t that the ratio plummeted during the downturn. That always happens.

What’s worrisome is the fact that there wasn’t a bounce back in the right direction after the economy started to improve.

Indeed, it’s become such a problem that the establishment media has started to notice.

Here’s some of what Reuters reported on Fridays good news/bad news jobs report.

…wages posted their biggest decline in at least eight years in a sign the tightening labor market has yet to give much of a boost to workers. …The jobless rate fell 0.2 percentage point to a 6-1/2-year low of 5.6 percent, but that was mainly because people left the labor force. The drop in labor participation and a surprise five-cent, or 0.2 percent, decrease in average hourly earnings…the labor force participation rate, the percentage of the working age population who either have a job or are looking for one, dropped back to the 36-year low of 62.7 percent reached in September.

The labor force participation rate, which is mentioned in the Reuters article, is another set of data that is rather similar to the employment-population rate.

Here’s a chart that’s been circulating on Twitter, based on data from the St. Louis Federal Reserve. You can see that the labor force participation rate jumped significantly between 1970 and 1990, in large part because more women were entering the job market. But in recent years, the trend has been in the wrong direction.

And if you parse the data, you can see that the big problem is among those without a college degree.

Now that we’ve cited lots of data, let’s speculate on why we have fewer and fewer people productively employed.

There are several possible answers, including the big increase in people scamming the disability system.

There’s also the jump in tax and regulatory burdens, though that presumably impacts all economic statistics.

Obamacare deserves its own special mention since it imposes a significant penalty on work.

And, until recently, the government had a policy of endless unemployment benefits that made work relatively less attractive.

So the bottom line, as you might expect, is that the problem is too much intervention and bloated government. Which means the answer is free markets and less government.

P.S. Some readers will have noticed that this piece cites both the employment-population ratio and the labor force participation rate. These two data series are sometimes used interchangeably, though I prefer the former for reasons explained in this article for the BLS’s Monthly Labor Review.

P.P.S. If you want a humorous take on labor economics, I recommend this Wizard-of-Id parody, as well as this Chuck Asay cartoon and this Robert Gorrell cartoon.

P.P.P.S. To end on a glum note, Obama wants to increase the minimum wage. You don’t need to be a rocket scientist to know whether that’s going to help or hurt the job market.

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