The monthly employment/unemployment data from the US Department of Labor has become an important touchstone for every segment of our population. The following numbers were released on September 9; 96,000 jobs were added in August, down from 142,000 in July. Unemployment fell slightly from 8.3% to 8.1%. In a speech, President Obama mentioned that although the jobs report was disappointing, the unemployment percentage had declined.
Critics were quick to point out that in order to achieve the lower percentage of unemployment, 368,000 workers quit looking for jobs; almost four times the number of jobs created for the month. The federal government added 3,000 jobs while other employment segments didn’t hire or shed workers.
How could 368,000 people subsist yet quit looking for work? The answer is that many live on government sources such as disability benefits, unemployment benefits, the Supplemental Nutritional Assistance Program (SNAP) and payments from other welfare programs. Interest and dividend income has supplemented ‘earned income’ for those who have investments.
Mortimer Zuckerman, chairman and editor of U.S. News and World Report cites the eight million who are employed only part time and the ‘underemployed’ that create an overall unemployment rate of 19%.
There are important ripple effects that create unintended consequences. Older citizens have returned to work, estimated to be about 3.9 million, in order to shore up their retirement that has been deflated by the reduced value of their net worth. The birthrate has hit a 25-year low of 1.87% because young couples fear that they won’t be able to support an additional family member. Young workers, with high unemployment rates and low wages are moving in with parents and other family members; many are working multiple jobs to make ends meet.
Annual wage increases have dropped to a 30-year low of 1.6%. GDP advanced a feeble 1.7% (annualized) and compensation, at 55% of 2nd quarter GDP was close to the 60-year low. Consumer spending spiked to 68.7% of total spending in the 2nd quarter in spite of reduced incomes. This ratio suggests that people are spending more and saving less. Many seniors heading for retirement will need to hustle to replace the financial resources they had to dispose of during the downturn.
Small business owners that had planned on selling their companies and retiring are stuck with depreciated assets that are hard to sell at any price. Company values diminish at a rate of up to 150% of reduced sales. One owner reported an offer of $250,000 for a business with an asking price of $2 million.
We are enduring 43 consecutive months of unemployment above 8%. Average joblessness is 39 weeks, compared with 15 to 20 weeks between 1984 and 2008. With the uncertainty of increasing regulations and the cost of the Affordable Care Act plus apprehension regarding higher taxes, the outlook for increased employment is bleak.
Food stamp (SNAP) participation continues to rise at the rate of 400,000 per month and about half of the nearly 11 million people collecting disability checks signed on during the Obama presidency.
The national debt is above $16 trillion and growing. Moody’s has threatened a downgrade of US debt unless provisions are made for deficit reduction. The administration speaks in ebullient optimism and makes promises reminiscent of 2008.
Have you noticed newspaper articles and radio and TV announcements that the President is reducing staff? Have you read about reductions in federal employees? Have you heard about the voluntary pay cuts the Congress and all departments of federal government are taking?
Neither have I. Apparently the federal government is not participating in the recession.
In one man’s humble opinion, it’s time to hang out the sign that says, “Under New Management.”
by Dick Baynton
