It Doesn't Have To Be This Way

Another month and another anemic jobs report.  

Unemployment is at 8.2% overall.

Unemployment for African Americans is 14.4%.

Unemployment for Hispanics is 11.0%.

Unemployment for teenagers is 23.7%.

Unemployment is 14.9% if you include "all persons marginally attached to the labor force, plus total employed part time for economic reasons."

The most interesting statistic in the jobs report is the fact that in June more people went on the disability  rolls with Social Security (85,000) than the number of new jobs created in the month (80,000).

This actually continues a trend that started three years ago where the disability ranks have consistently outpaced job growth throughout the so-called Obama recovery.  Recall that an $800 billion stimulus package was passed in February, 2009 that was supposed to reduce unemployment to 5.6% by this time.

This chart shows that since June, 2009, 3.1 million workers have signed up for disability benefits while only 2.6 million new jobs have been created in the U.S. economy.  Of course, none of these 3.1 million former workers are now considered unemployed and are not in the unemployment statistics.

Source: Investor's Business Daily

Why is this important?  As I have written before, the unemployment rate is a flawed number the way it is calculated today.  It only considers those persons who are actually seeking work.  It does not include those that are too discouraged to continue looking for work.  It does not include those who become discouraged and go back to school or seek retraining for a new occupation.  It does not include those who become discouraged and file for disability.

However, every American is a mouth to feed, clothe and shelter.  If there are fewer people pulling the wagon and more people in the wagon, we have a fundamental problem.  The money gets spread around in thinner and thinner increments.  That is just basic economics.

You can see the issue when you look at the employment-population ratio.  This compares those employed to the entire population 16 years and over.  It currently stands at 58.6%.  In 2000 it was close to 65% and it was about 63% before the recession began.

Source:  James Pethokoukis, American Enterprise Institute

A 4% change since 2008 may not seem huge.  However, the civilian noninstitutional population is 243 million.  4% of this number equates to almost 10 million more people not working compared to four years ago.

Let's be conservative and calculate that each of these people need at least $1,000 per month for food, shelter and clothing.  That is $120 billion per year that has to come from somewhere if they have no income from a job.  If they were working and each made $40,000 per year and were paying taxes (income, social security, sales, gas etc) at 25% overall, that would be an additional $100 billion of government revenue.   You have a swing of almost one-quarter trillion dollars.  

What is most amazing to me is that the polls continue to show that the Presidential race is a toss-up.  

Governor Romney said it well in his response to the jobs data on Friday.

"It doesn't have to be this way."

There are too many people who seem to believe that nothing can be done about our current situation.  They do not think that it matters who is elected.  How else do you explain the fact that African Americans, Hispanics and Young Americans were large voting blocs for Obama in 2008 and apparently most are going to continue to support President Obama reelection based on recent polling data.  

These groups are suffering the most under President Obama's economic policies.

Don't they realize that it doesn't have to be this way?