Over the past year President Obama and liberal Democrats in general have been taking a pounding on the issue of unemployment and their prescription to solve this problem via Keynesian pump priming. They went so far as to issue the now infamous graphic showing their projection of what would happen if they didn’t do anything versus spending money we didn’t have via Stimulus Spending. In two years time, the hype about creating or saving three million jobs has pretty much been dropped by the Obama Administration. Having VP Joe Biden continually and somewhat comically demonstrate the lack of credibility of such a measureless assertion created more cynicism among the voters than confidence. The elections of November 2010 put an end to this silly meritless assertion since the voters seeing 9+% unemployment demonstrated they weren’t buying what was being foisted.
The wild annual trillion dollar deficit spending by a prolificate Congress with little to show for it frightened the voters enough that change was deemed necessary. Now that Barack Obama is looking to get re-elected in 2012, it seems the metrics need to be changed in his favor. Perversely, part of this change was the faulty definition of unemployment. By the definition a person is only considered unemployed if their period of joblessness is less than a year. To be fair, this definition was in place long before Obama became president. Under normal recessions this definition never truly impacted the math determining the unemployment rate. However, this is no normal recession and it is not unusual for a person to be unemployed for greater than a year in high unemployment areas, which brings us to some needed context.
In 2006, prior to the congressional elections the price of gasoline and diesel fuel increased rapidly placing a squeeze on personal disposable income. The Democrat Party promised among many things to lower the price of fuel. Democrats sensed they had a winning campaign strategy in the anti-war movement along with numerous campaigns promises. It was during this campaign season that Barack Obama was elected to the US Senate in Illinois and Democrats swept the House and Senate, placing Nancy Pelosi in charge of the House and Harry Reid in charge of the Senate. When they officially took office in January of 2007, the unemployment rate began its slow steady march upward. Nancy Pelosi, Barack Obama and Harry Reid reneged on their promise to lower the price of fuel but instead blamed the oil companies, engaged in theater by holding hearings and then refused to lift the drilling bans on coastal off shore drilling. Not only did they refuse off shore drilling, they refused to allow new drilling in Alaska and they intensified the ban to many land areas. On top of suppressing energy resource extraction, they enacted Ethanol legislation wasting billions of taxpayer dollars, and they literally doubled the Federal deficit for FY2008 with a veto proof majority in the House. The high-energy prices had the effect of mass layoffs, which then triggered the mortgage debacle. No job meant no ability to pay the mortgage. If you review past recessions back to the 1970s, the trigger for virtually every one of them was an increase in the cost of fuel. Thus the POR economy was born. Tom Blumer at Bizzyblog.com quite deftly put his finger on the source of our economic woes created by the meddling of Congress in things they had very little understanding.
To show the progress of the liberal Democrats failed policies I have provided some figures below which are strictly based on the Bureau of Labor Statistics raw data, NOT SEASONALLY ADJUSTED. First we see that from the recession in 2003 the number of people actually working (Average Annual Employment) increased by over seven million people until the peak of 2007. From 2008 to presently, the number of people actually working dropped by over seven million people. In two years all the gains from 2003 were wiped out. The assertions that three million jobs were created or saved by Keynesian pump priming policies are conclusively shown here to be a total wrong. Furthermore, since employment in the US is seasonal with January being typically the lowest month of employment, and June and November being the highest months of employment, for illustration purposes I have included the figures showing the period of 2001 to current. These three figures clearly show that total employment is down consistently for all cyclical months. The facts are clear, the trillions of dollars of deficit spending not only had zero effect in creating or saving jobs, they actually cost jobs.
If we have lost jobs, then how can the Administration claim we created jobs? Below is a chart showing the total number of employed people during the 12 months of 2010. Please note this is a typical profile of employment from January to December, where in January thousands of people are laid off after the Christmas holiday shopping season. During June typically thousands of people are hired for the summer vacation season then laid off and in November the hiring season picks up again for the holidays. Obviously, if you start low with mass layoffs and end high in mass hiring you will always show an increase in the number of jobs even though you might have less people working the next year on an average basis.
Compounding this misperception of actual employment and unemployment is the faulty definition of unemployment where people over one year of unemployment fall into the Not In Labor Force classification. You will hear the MSM usually refer to these people as having given up looking for jobs as though this was their fault by choice. No, they haven’t given up, and in many cases it is not their fault. It is a faulty definition that is being conveniently used by those attempting to cover up a failed policy by a group of people who are so ideologically rigid in their point of view they refuse to accept reality. We normally call such rigid thinking people ideologues.
The last two figures below show the Labor Force and Not In Labor Force trends for the past ten years. As you can see since 2008 the Labor Force has leveled off. The Not In Labor Force trends has increased sharply to triple it’s normal rate. By my estimate some three million people fell out of the Unemployment classification into the Not In Labor Force category by means of a faulty definition. Instead of there being 14 million people unemployed, there are actually 17 million people unemployed. This is not even counting the millions of people who are under employed in part time jobs. Where did all these people come from beyond the seven million people who lost their jobs since 2007? Every year between the four million young adults who enter the labor force and some 1.5 million people who retire or die, approximately 2.5 million net additional people are available for work. Since 2007, when unemployment began to increase, some 7.5 million people entered the labor force. Because of the normal turn over in employment many of these people got a job, lost a job, and began being counted in the unemployment figures.
The Obama Administration has decided to double down on their rigid ideological thinking by unleashing the EPA upon businesses. Instead of learning from their mistakes and economic history, the Obama Administration has embarked on a disastrous policy of regulating Carbon Dioxide emissions that will drive up the cost of energy. Now that the price of gasoline is above $3 per gallon, any weak economic recovery we might have experienced will be choked off. The EPA actions on top of the recent spike in energy prices will cause the feared double dip recession. Barack Obama himself admitted that his policies of necessity would cause the price of electricity to skyrocket, those were his words. Now if high-energy costs slow, and cause a recession, why would anyone engage in a policy to raise the cost of energy, especially at a time of economic weakness? Clearly, Obama himself realizes the effect of the EPA’s action will increase the cost of energy. This is on top of a recent court ruling holding the Department of Interior in Contempt of Court for illegally proceeding with a drilling ban in the Gulf of Mexico by stonewalling permits. An ideologue ignores the consequences of reality.
At this point Congress has to step up to the plate to introduce legislation to ban the EPA from regulating Carbon Dioxide as a pollutant. It is possible for Democrats to vote with Republicans on this issue. During the four years Democrats ran Congress they tried unsuccessfully to pass Global Warming legislation even though they, via a party line vote, could have rammed through such a bill. The fact they didn’t means there were plenty of Democrats who weren’t prepared to commit political suicide as many did over ObamaCare. In the House, just via a party line vote, the GOP can pass this legislation and with an additional 51 Democrats can override a veto. In the Senate, a GOP party line vote plus 19 Democrat Senators would be needed to help override any veto attempt by Obama. These numbers are within the realm of possibility given enough fear by Democrats of being blamed for a double dip recession.
While you’re holding your breath for Congress to get things done quickly, don’t leave your fate in their hands. As of December, the latest figures available, there are 14 metro areas in the US with unemployment rates under 5%. Most of these areas are in the Midwest with a few in the Northeast. Look up your closest metro area in the reference section to determine the local unemployment rate. If you have been unemployed for some time consider relocating to one of these areas. Be an American, vote with your feet like your forefathers and don’t let some politician entice you to stay in their sphere of influence just because they offer you a stipend called unemployment insurance. Note that California has some of the worst unemployment in the country due to their anti-business behavior, their best ranked metro area Santa Barbara (9.5%) is number 242 out of 372. Why should you accept the consequences of other people’s poor choices?
References:
- Welcome to the POR (Pelosi-Obama-Reid) Economy: A Washington-Driven Recession or Downturn May Have Begun
- Has the POR (Pelosi-Obama-Reid) Economy Bottomed Out?
- Table B-1. Employees on nonfarm payrolls by industry sector and selected industry detail
- A-1. Employment status of the civilian noninstitutional population 16 years and over, 1976 to date
- Obama: I’ll make energy prices “skyrocket”
- Cost of the Drilling Ban
- Cause and Effect
- Obama’s Non Sequitur
- Primer on the Economy
- Economics Shotgun Style
- Unemployment Rates for Metropolitan Areas