It’s become fairly routine now, what I call the jobs hoax. Each month, the U.S. Department of Labor reports employment changes, and despite persistent failure to meet projections, the results are touted as another hopeful sign that the U.S. economy is recovering. But the data reported masks the underlying weakness of a “recovery” that is both narrow and hollow. Seeking to spread hope, the pundits sow confusion instead.
For an illustration, turn to the Business Section of Aug. 8. In two facing stories, The Advocate expressed the view that underachievement is good (“U.S. economy adds 215,000 jobs”); but overachievement is bad (“U.S. stocks drop after solid jobs report suggests higher rates”). The first story found hope in the fact that the actual employment figures fell short of projections by “only” 4.5 percent. The second fretted that a return to economic health may cause the Fed to reverse its (ill-conceived) zero-interest policies. Both stories missed the key point.
The best measure of resource utilization is not the unemployment rate (which is illogical by construction and dishonest by design) but the labor force participation rate, which has been declining for more than a decade. Since the year 2000, the Fed’s balance sheet has soared ninefold from $500 million to $4.5 trillion, as the working population grew almost 18 percent, from 212 million to 250 million. Despite all this “stimulus,” the prime-age labor force participation rate fell by 10 percentage points. In terms of aggregate productivity, this negative trend would not be so worrisome if the number of hours worked (as opposed to persons engaged) had increased. But that has not happened. Statistics show virtually no gain in labor hours utilized by the private business economy, an especially disturbing fact when one considers that the BLS counts a four-hour, window-washing job the same way it does a 40-hour-a-week gig in a steel mill.
When apples-to-apples comparisons are made accurately and honestly, they show that labor utilization in the U.S. has been going nowhere. That’s the 500-pound gorilla in the room no one in Washington wants to acknowledge. Politicians would rather demagogue the issue of income inequality, despite little to no understanding of its essential nature or its root causes. Wall Street may have fully recovered, but Main Street has not.