The State of the Union: Peeling Back the Layers
President Obama will deliver his State of the Union address on Tuesday. According to the previews, it will be a scaled down version of last year’s. The President will talk about his great record on the economy but that there is much more work to do.
He’ll attack income inequality with small things like increasing the minimum wage. He’ll promise larger efforts such as leveling the bank balances of voters – taking from some, giving it to others. He’ll also threaten solo action via executive orders if Congress doesn’t go along and it won’t.
While the representations of politicians should never be taken as truth, Obama’s reputation for honesty is currently at its lowest point thus far. The repeated lies he told about Obamacare, alone, are more than enough reason to turn a deaf ear to his sweeping platitudes.
At the very least, any accomplishments he professes, problems he decries or solutions he suggests require careful examination. Since he always boasts about his jobs record, that one can be taken care of right now.
The U.S. is currently experiencing the slowest economic recovery in its history. One of the President’s stock comebacks is his record on jobs creation. The Administration’s latest claim is that Obama’s policies have added eight million jobs. Another stock response is that, while conceding the slow pace, the economy is steadily improving.
Not so anyone notices. In a Fox News poll taken this month, 74% of Americans believe that the country is still in the recession. One of the reasons is that the median household income in the U.S. has continued to fall since the proclaimed recession’s end in 2009. It is now lower in 2012 dollars than it was in 1989.
What about the jobs numbers? The Bureau of Labor Statistics reported an unemployment rate of 6.7% in December. But, that percentage, taken without context, paints a deceptively rosy picture. In fact, the current jobs recovery is the slowest since Harry Truman was in the White House. It is far slower than the recovery from the early 1980s recession.
One reason is the size of the labor force, which the government defines as the employed plus those unemployed who are actively looking for work. Today, it is a smaller percentage of the employment age population than at any time in the past thirty five years. There are also fewer people looking for jobs now than when the recession began.
Another bit of deflationary context is the government’s definition of unemployed used in the labor force equation. Those actively looking for work are people who are available and have searched for work within the four weeks preceding the BLS survey. It is the narrowest of the six definitions of ‘unemployed’ used by economists.
Excluded from the BLS calculation are two categories of people. First are those who neither have, nor want, a job. Second are those who want a job but have not looked in the past four weeks.
To put these omissions in context, the current size of the employment age population in the U.S. is 246,745,000. The number of employed is 144,586,000 or only 58.6% of those of employment age. The total number of unemployed is 102,159,000 or 41.4% of the employment age population. And those actively looking for work are a mere 10% of the total number of unemployed.
To add an international context, the BLS compares the U.S. jobs performance with those of nine other countries of its choosing. Of the ten total countries, only three are in worse shape than the U.S. Among the three are Italy and Sweden. Italy has an economy just a smidgen better than Greece. Sweden is now trying to recover from decades of socialism. The third is France, which speaks for itself.
Why is the jobs market so sluggish? In a December Gallup poll, a record 72% of Americans believe our big government is a greater threat than big business and big labor combined.
And for good reason. Big government casts a very long shadow over the economy in general and jobs in particular. For example, the added cost imposed on business operations by government regulations means that employees must be more productive to keep their jobs.
Obama’s minimum wage proposal is a case in point. Adding to the Obamacare employer penalty and current taxes, the proposal will increase the hourly cost of a full-time employee to $12.71.
Employers lose money if their employees generate less revenue. When that happens, some jobs are cut, others are reduced to part-time and hiring is frozen.
Not good news for the state of our jobs. Something to think about during Obama’s bromide-laden State of the Union speech.