Thursday, August 6, 2015

Unemployment - The Big Lie

An interesting statistic from Gallup shows us the real state of employment in the United States.  While Washington and many of the nodding heads in the mainstream media are excited about the current 5.5 percent unemployment rate, stating that the nation's employment ills have been cured, there is still a significant issue for millions of Americans who want to work.

Gallup tracks the daily percentage of U.S. adults over the age of 18 who are underemployed (want full-time work but are employed part-time) and unemployed (available and looking for work and fall within the underemployed group) as a percent of the total workforce.  Gallup then calculates the payroll-to-population ratio or P2P, a measure of those Americans who are employed by an employer for at least 30 hours per week as a percentage of the total population.  P2P excludes the self-employed, those who are working part-time, those who are unemployed and those who are out of the workforce entirely.  Please note that these numbers may not correspond to the numbers used by the Bureau of Labor Statistics since they are not seasonally adjusted.

Here is a graphic showing the payroll-to-population ratio and the percent of Americans that are underemployed and unemployed from 2010 to the present:

Currently, the P2P ratio sits at 45.5 percent, the highest level in nearly three years; that said, it is interesting to note that the ratio has not improved since it hit 45.9 percent back in November 2012.  As well, the number of full-time jobs as defined by the payroll-to-population ratio is well below 50 percent, a level that is considered to be a sign of a relatively healthy job market.  This ratio shows us that there are a significant number of Americans who are not able to find at least 30 hours of work every week.  P2P will drop as Baby Boomers retire but will rise due to an influx of immigrants.  As the P2P rate drops, the tax base drops as a smaller percentage of Americans are working. 

How bad is the situation?  Here is a graphic from the Center on Budget and Policy Priorities showing job losses over the past four recessions with the Great Recession in red:

Between the start of the recession in 2007 and early 2010, 8.7 million jobs were lost.  These jobs were finally replaced nearly six and a half years after the start of the Great Recession.  This compares to just under four years for the 2001 recession, 2.5 years for the 1990 - 1991 recession and 2.3 years for the 1981 - 1982 recession.  

As we can see, the recovery in the job market has been very anemic and millions of American families would agree wholeheartedly.  According to an analysis by Dan Dimicco, in the 83rd month since the beginning of the latest recession, the jobs gap (the change in total non-farm jobs from the beginning of each recession) was 3.9 million higher than the 2001 recession, 10.9 million higher than the 1990 recession and 12 million higher than the 1981 recession.

Keeping in mind that the Federal Reserve has implemented a whole series of "heroic" monetary policies over the past six years to prod the economy back to life, we can see just how sad the United States employment picture has become.  In fact, the Federal Reserve's own U-6 data (total unemployed plus all marginally attached workers plus total employed part-time for economic reasons) still looks quite unhealthy as shown here, particularly when compared to the decade prior to the Great Recession:

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