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September 5, 2011

How the Jobs Report Explains the Rise of the Entitlement State

Deeper Look at the Employment Numbers Disturbing

A quick glance of the employment statistics over the past 12 months may show a sideways job market, but a deeper look shows something more disturbing, the rise of the entitlement state.

In January, the unemployment rate showed promise with a drop from 9.4% to 9%. Politicians and some economic pundits started to paint a positive picture of the jobs market for 2011. Even Common Sense Capitalism predicted an employment improvement in 2011 (even though we projected the unemployment rate going from 9.9% to 9.3% versus a start of 9.0%).

However, eight months later, unemployment is at 9.1%, the number of unemployed has gone from 13.9 million in January to 14 million in August, and the U-6 rate has gone back over 16% after it went down to 15.7% this summer. These indicators, combined with jobless claims steadily over 400,000 for most of the last five months, clearly indicate that the employment situation has weakened.

Higher unemployment means less income, which in turn means less consumer spending, which in turn means less economic growth. Current economic growth numbers were .4% in the first quarter and 1% in the second quarter. Healthy economic growth would be around 2.5%. But employment percentages do not show the full lag employment has on the economy. The labor force size and adult population shows exactly how many working Americans there are and the total number of adults they are supporting.

Month Labor Force (m) Adult Pop (m)

July 2010 153.56 237.89

Aug 2010 154.11 238.1

Sept 2010 154.16 238.32

Oct 2010 153.9 238.53

Nov 2010 153.95 238.72

Dec 2010 153.69 238.89

Jan 2011 153.19 238.7

Feb 2011 153.25 238.85

Mar 2011 153.41 239

Apr 2011 153.42 239.15

May 2011 153.69 239.31

June 2011 153.42 239.49

Jul 2011 153.23 239.67

Aug 2011 153.6 239.87

While the labor force in size has remained steady, the adult population in 13 months has grown by 2 million! These statistics don’t look past discouraged workers, former workers returning to college, and any other non-income functions like the unemployment rate does. These numbers tell us that a smaller portion of the population is supporting a growing adult population.

By taking the labor force and dividing it into the adult population, we get the participation percentage, or the percentage of the adult population that works or is able to work.

Participation Rate, Since July 2010

The decrease in the participation rate is the disturbing trend. We cannot have sustainable economic growth when the adult population is being supported by a decreasing size of workers. How do we reverse this disturbing trend? We simply must create jobs. Unlike President Obama, we aren’t going to wait until we get back from vacation to present our jobs plan, but we are going to wait until Wednesday!

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