My Channel

Friday, September 6, 2013

Unemployment rate -- So things are getting moar awesome, right?

So the Unemployment rate went down and everything's awesome now. 

Well not exactly. I did a little digging recently. What was unemployment during the initial years of Reagan's presidency, our conservative icon and go-to-guy?

Source: Bureau of Labor Statistics

Now 80 was the last year of Carter's presidency. Reagan couldn't get a budget passed in 81 (maybe being shot had something to do with that) and so things really didn't take hold until 82. And unemployment went through the roof. So tax cuts bad, right?

Now let's take a look at Obama's last three years.

Source: Bureau of Labor Statistics

Hmm. Starts high, goes down. So everything he's been doing is good, right?

Well raw numbers don't tell the entire story, despite what media matters is telling you. There's this little thing called the labor participation rate. This is a measure of how many people are actually wanting to work.

U.S. Unemployment Down Slightly

Now isn't this interesting. Of the population, at its peak we had a little above 67% participation. Currently we have just above 63%. That's a full 4 percent lower. And hey look at that, the current participation rate is right there where it was in 1978. And let's take a look at the unemployment rates then:

Source: Bureau of Labor Statistics

Wow. Pretty awesome, right? We all remember the boom years of the late 70's? You don't? 

Let's break it down. To make the math easy let's say we have a country of 100 working age people. Let's say 10 are out of work. That's 10% unemployment, right? Now let's say 5 of those unemployed give up trying to work. Maybe they go on welfare, who knows. The labor statistics board would now say we have 95 working adults in the workforce and 5 are unemployed. That's an unemployment rate of 4.75%. Wow! Holy shit. It went down! 

Unfortunately for the economy and tax revenue, we now have a smaller workforce. Now let's say the economy gets better. More people are willing to work. There is a period of time it takes to get people working, for a myriad of reasons. But for our numbers lets say the workforce participation goes to 105 with 15 people looking for work. We've added those people we took away back in and because there seems to be more job openings, another 5 decide to start looking. That's a 14.28% unemployment rate. Yikes! Right? No, this is a good sign, as long as it's relatively short term or the participation rate continues to climb at the same rate. 

When unemployment goes down in bad times, it's a double whammy, because many of these people go on welfare, disability or various other government programs. So we have less people contributing taxes and more people taking benefits. Hello deficits! 

In 1982 the unemployment rate seemed to get worse before it got better. This was because Reagan lowered the tax burden and the pie began expanding. More jobs come from greater growth. And more revenue comes. Yes spending went up because congress saw more money! It wasn't a cause of growth, it was a benefit.

So when liberal economic morons tell how how great the economy is right now and regurgitate unemployment numbers, now you know why low unemployment doesn't always mean a good economy. 

No comments:

Post a Comment