Worst Employment Report in 35 Years 
                -- February 2013  --
     Unemployment Stays at 12.7% High

Unemployed people

The labor participation rate is at a 34 year low; not since May 1979 has it registered at 63.3%. The U3 unemployment rate stands officially at 7.6%, but arguably it is 12.7%, one in eight workers ---  a truer indication of labor market distress. (I updated this essay to April 2013, since last month.) Heidi Shierholz at EPI.org wrote that it could be 9.8% using a hypothetical participation rate estimated by the CBO. I think the CBO estimated rate is too low. The historical average labor participation rate over the 20 year period 1988 to 2008 looks like around 66.3%. If we use the 20 year average labor participation rate, then the U3 for today at that rate would be 11.7%, not 9.8%, not 7.6%. If today we had a participation rate of 67.1%, the rate of 1997, '98, '99, and 2000, then another 8.756 million workers would be participating, and all of them would be out of work, raising the unemployment rate from 7.6% to 12.7%, an increase of 5.1%.

In addition, the employment to population ratio has not hit such a low since 1983, 30 years ago.

Here's a graph from Ron Baiman at CPEG.org that arrived on May 8, 2013. The recent 2009 - 2013 drop has remained around negative 7% for the past 48 months. Heidi Shierholz at EPI.org/blog has posted a different story, noting the decline of participation from older workers, the baby boomers, consistent with Labor Department assessments. The L.D. claims that 63% of the drop in participation is related to older workers dropping out. I doubt that the precipitous drop is due to older workers suddenly deciding to hang up their tennies. It plays a part, but a minor part. 

"This graph which holds the employment/pop ratio fixed at the beginning of each post-war recession and compares this level of employment with actual employment (an expansion of the graph at end of the March job report: http://www.cpegonline.org/2013/04/09/commentary-on-the-march-2013-bls-jobs-report/) makes a similar point using different data:

The best report I've read on the April BLS announcement of the March 2013 unemployment rate of 7.6% can be read at Chicago Political Economy Group web page, written by Ron Baiman. His graphs tell a convincing story. Their solution to the economic crisis is a public employment policy financed by a stiff financial transaction tax. Roosevelt in 1933 to 1937 lowered unemployment from 25% to 9.6%, read all about it in an essay by Marshall Auerback. Government public job creation between 1939 and 1945 increased total employment by 40%, compared with the January 2000 to March 2011 increase of 0% (Zero Percent). This 11 year flop was equaled by the Zero Percent increase, January 2000 to November 2011, of private sector employment. The GDP during WWII grew by 75%, a compounded 10% per year growth rate (I'm drawing from Samuel Rosenberg's history American Economic Development Since 1945), and while enlarging employment by 40%  the unemployment rate dropped to 1.2%. This period effectively shifted the balance of wealth and income distribution for the next 30 years, 1946 - 1976, when all income levels experienced the same excellent growth rate, the opposite experience of the past 30 years.  (See this table and this graph). My Congressman repeatedly claims that "government does not create jobs." He is completely wrong. During times of financial crisis and extreme inequality government is the only source of employment growth. Look at the facts.  

The broader U6 rate arguably is higher than the official 13.8%. With the same participation rate as 1997 - 2000 the U6 would be 18.9%. Then add the number working full-time year-round for less than poverty level for a family of four, 11.5% of the work force, and one reaches 30.4% of the work force who are either with no job, not enough job, or not enough pay to break out of poverty. Or  looking further at the Social Security Administration report on wages and salaries for 2011, some 47.4% of all workers, over 71 million workers, earn less than $25,000 a year in wages. The median annual wage/salary income is $26,965 for 2011. These workers, most of them voluntary part-time and not seeking full-time work, are earning considerably less than the average wage income of $41,211, and considerably less than the overall personal income average (including all income sources) of around $80,000 a year per worker. The average contribution of all workers, even these part-timers and contingent workers, to the GDP is over $109,000 a year, according to the San Francisco Federal Reserve. Whether 30% of all workers or 47%, the number who are not participating in prosperity is enormous and pernicious. I used data from the National Jobs for All Coalition for the 11.5% working full-time year-round.  

Liquid Asset Poverty
And, to add insult to injury, if you would, consider the asset poverty rate of 26% and the liquid asset poverty rate of 44% available at CFED, the Corporation for Enterprise Development. Some 44% of U.S. families "lack the savings to cover basic expenses for three months . . . ". The IMF, International Monetary Fund, states that the per capita GDP of the U.S. exceeds $51,000 per year, yet 44% of U.S. families have less than $5,763 in liquid assets. Two other articles to review on liquid asset poverty, here and here. 

In addition, the employment to population ratio has not hit such a low since 1983, 30 years ago.

Other important findings in this article:
1) since 2008, the "working age population" increased by 11 million, the "not in labor force" -- that means "not participating" -- increased by almost 10 million, the labor force increased by 1.2 million -- meaning those who "participated" --, the number actually working decreased by 1.9 million. 
2) From January 2000 to November 2011, 11 years and 11 months, the net gain in private sector employment was 1,000 workers. During this almost 12 year period over 30 million people joined the "civilian noninstitutional population" sometimes called the "working age population." Only a net 1,000 jobs in private enterprise were created for the additional 30 million working age citizens. 

Robert Pollin, author of Back to Full Employment, talks about his book on C-Span TV, a February 13, 2013 talk lasting an hour and 19 minutes. It's an hour well spent. This book has a scholarly discussion web page with articles on the topic by 31 academic contributors.  

   The Labor Participation Rate graph from the BLS
This BLS graph shows the labor participation rate since 1948. It hit 63.5% in August 2012, and before that not since June 1979. Before November 1978 the rate had never exceeded 63.5%. Click here to make your own graph from BLS data. 

One Year in Perspective    
In the last year, February 2012 to February 2013, according to the CPS report (page 4), the "working age population" increased by 2.4 million. Only 29% of that increase "participated" in the labor force, 71% were "not in labor force". From 1988 to 2008 the normal rate of participation was 66%.  This 29% participation rate decreased the overall participation rate since February 2012 from 63.9% to 63.5% in 12 months. If 2012 had been a normal year with  66% participation rate, then the unemployment rate would still be 8.3%, the same as February 2012. The U3 unemployment rate officially dropped to 7.7% because the participation growth rate was below par, that is, employers are not drawing the "working age population" into employment.  Only about half the normal expected job growth rate occurred. The employment to population ratio was unchanged for the year at 58.6%, and has been close to  this level since November 2009, meaning job growth has exactly matched population growth and no more over the past 3 years. The present employment to population ratio is at a 30 year low, not since 1983 has it registered below 58.7%. Since year 2000 it has dropped 6%, and if it drops another 2% it will be at the 1948 level. In January 2000 the employment-population ratio was 64.6%, and if it were at that level today an additional 14 million workers would be employed, raising the employment number from 144 million to 158 million. In the past 12 months employment grew by 1.473 million (123,000 a month, using the CPS data), a 1% increase, the same percentage as population growth. The number not in labor force grew by 1.9% or 1.7 million (141,000 per month). Here's the Bureau of Labor Statistics source for these figures.

The BLS releases two reports monthly, the establishment and the population. The establishment, called the Current Employment Statistics, CES, "is a survey of [557,000] employers that provides a measure of the number of payroll jobs in nonfarm industries." (See page 4 of this report for more details.) The population report, the Current Population Survey, CPS, "is a survey of [60,000] households that provides a measure of employed people ages 16 years and older in the civilian noninstitutional population." In the latest reports of March 2013 the CES reported a gain of 236,000 jobs, and the CPS reported a gain of 170,000 jobs. The CES is the report most commonly cited by media, it surveys "about 557,000 business establishments covering approximately one-third of total nonfarm employment." The CPS is a monthly "sample survey of approximately 60,000 households," and it includes "unincorporated self employed, unpaid family workers, agriculture and related workers, private household workers, and workers absent without pay." Each month the BLS publishes a report comparing the two reports, and the latest March 8, 2013 comparison report is available here.  This article draws on the CPS, not the CES.

Declining Participation is the Reason for the Decline in the  Unemployment Rate
From 2008 to 2013, the last 5 years, the labor force has increased at a slower rate than normal.  Eleven percent of the "working age population" has entered the workforce, or has "participated". The normal rate for almost 20 years (1989 - 2008) was 66%.

The "working age population" (today at 244.828 million) increased by 11.040 million in 5 years since 2008, or 2.208 million per year. The labor force though increased by only 1.2 million, a growth of 247,000 per year for 5 years. If 247,000 a year join the labor force, and the population increases by 2.208 million a year, that means only 11% entered the workforce, not the normal 20 year average increase of 66%.

One can look at the BLS graphs and adjust them to include all the past years to see the trends of participation, the employment to population ratios, and the growth of labor force. Or one can search the Internet with these words: data bls employment to population ratio, and so on.

Today's employment to population rate of 58.6% contrasts with 64.4% of 2000, its historical peak since 1948. If today we had that rate, an additional 12.9 million would be working. That is an additional 8.3% of today's labor force. The creation of 12.9 million jobs would more than eliminate the 7.7% unemployment rate, it would require an additional 0.6% to join the workforce. Then the unemployment rate would be ZERO. Is the ratio of employed to population of 64.4%, that of 2000, really impossible? Should 64.4% be the accepted benchmark?


A further indication of the discrepancies of the CPS monthly report shows that last month 130,000 dropped out of the labor force, and 170,000 workers found employment (using the CPS data page). And there were 300,000 fewer unemployed workers than the month before. Therefore 43% of the "improvement" was due to workers dropping out.

A Five Year Perspective
The final number in the column, 89.304 million indicates an almost 10 million increase since 2008 in those who are "not in the labor force". Therefore, since 2008, the "working age population" increased by 11 million, the "not in labor force" increased by almost 10 million, the labor force increased by 1.2 million, the number working decreased by 1.9 million.

Taking it all into consideration, it may be the worst report in 35 years.
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A Twelve Year Perspective
Private employers provide about 80% of the nation's employment, and for the past 12 years, 2000 to 2012, there has been an absolute collapse in hiring. From January 2000 to November 2011, 11 years and 11 months, the net gain in private sector employment was 1,000 workers. (See the bls data) The "working age population" had increased by almost 31,000,000. (See the data at the bls and data here.)

A reasonable prediction in January 2000 would predict that by January 2012 an additional 16 million private sector jobs would be created. For the actual result, one has to compare the data from both the CES reports and the CPS reports, and they report different numbers. The CES reports that total employment increased by 1,940,000 -- that broke down into an increase in private sector employment by 573,000, and in government employment by 1,367,000, for a total of 1,940,000. The CPS shows a greater increase in total employment, 5,578,000 over 12 years, of which private sector would contribute 4,211,000. Either 573,000, 1,019,000, or 4,211,000 additional private sector jobs in 12 years, the output was well below expectations. Of the 16,213,000 private sector jobs, either 3.5%, or 6.3%, or 26% were created, depending on which figures ones draws from. In any case, either 96.5% or 93.7% or 74% of the expected private sector jobs were not created.

This dramatic fall-off in hiring marks the most foreboding decline of the U.S. economy since 1930. Total private sector employment, using the CES data set, increased by less than 1%, 0.9% to be exact, a gain from 111,776,000 in Dec.2000 to 112,796,000 in Dec. 2012 -- a total increase of 1,019,000. (See here.) The "working age population" increased by 14.4%.

With the predicted participation rate of 66%, and with the actual addition over the 2000 to 2012 period of  30,707,000 to the working age population, 20,266,000 would "participate" in the labor force. 15% would find government employment and 5% would be unemployed, and 80% would be employed in private enterprise. 80% of 20,266,000 is 16,213,000 private sector jobs we might expect, but only 573,000 jobs materialized -- only 3.5% of the expected number of jobs, while 96.5% of expected jobs did not materialize. For 19 years, 1989 to 2008, the labor participation rate had been over 66%, peaking for 4 years between 1997 and 2000 at 67.1%. Today the rate is 63.5% the lowest in 35 years.

The labor participation rate should be called more aptly the "employer labor demand rate". At least participation is conditioned by demand. Between the years 1939 and 1945 the number of people working in the formal economy increased by 40% -- in contrast to the 1% increase 2000 to 2012. Direct government employment during wartime created the demand. And even with the 40% increase in workers, by 1944 the unemployment rate measured at 1.2% (see the data). Participation arguably is a reflection of demand, not of voluntary participation in the normal sense of the word.

Full Employment and Direct Government Job Creation
During the World War II period the national GDP increased by 75%, a 10% per year rate compounded for 6 years. This contrasts with the 17% GDP increase over the 10 year period 2000 to 2010, the worst performance since the 1930s. The efficacy of direct government employment is the reason many economists have been advocating for it as a way out of our present malaise. These economists include Robert Pollin, Dean Baker, Nouriel Roubini, Daniel Alpert, Robert Hockett, L. Randall Wray, Lawrence Mishel, Andrew Fieldhouse, Jack Rasmus, Ron Baiman, Philip Harvey, Pavlina Tcherneva. And the Congressional Progressive Caucus including Representatives Conyer and Schakowsky have been advocating for it for years. Their Budget for All proposal specifies a direct government employment program.

        Good News?
The good news is this report by Andrew Fieldhouse at the Economic Policy Institute,
"Forget Spending Cuts, the U.S. Economy Really Needs a $2 Trillion Stimulus".
The best shortest read for the most info is found here: the November 2012 budget proposal from the Economic Policy Institute. And more is accessible here. The Progressive Caucus frames its position from these proposals. It ties a lot of economics and policy together very briefly.
A $2.2 trillion stimulus over three years -- Great sounding. Also you might view Dr. Heiner Flassbeck at The Real News Network discussing needed reforms. Flassbeck is a professor of macroeconomics and served at UNCTAD, the United Nations Conference on Trade and Development, for 13 years.
Too much of society's surplus has gone to a tiny minority; therefore all economic activity has been cut back (the economy is performing below potential by 5.9% -- about $1 trillion per year -- says Fieldhouse and the CBO), as consumers en masse have less to spend and there is less activity and more unemployment-- it's that  simple. The government has to take up the slack. No one else will, we are in a liquidity trap, which is also an inequality trap. Read this essay. And as always, try out  TooMuchonline.org -- a weekly newsletter about inequality.

The Enormity of the Recession 
                 and the Closing of a Local Nursing Home
Here are two letters I wrote recently, the first a letter-comment at an article by William Black who wrote about the financial collapse and control fraud, published at EconoMonitor. The second I sent to my local newspaper, the Mariposa Gazette, about the closing of a nursing home wing at the local hospital.
But my best articles are the three previous ones.
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First, see a video about U.S. wealth distribution, a new video here.
Too Much, a weekly newsletter, on March 4, 2013, featured this video. In the same week's edition it shows a graph from a study by Edward Wolff showing the change in net worth from 1983 to 2010. I have used the E. Wolff study below in this report. To read the full Wolff report click here, "The Asset Price Meltdown and the Wealth of the Middle Class."
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William Black's article at EconoMonitor argues that the major banks knowingly bought and sold bad  mortgages, they colluded in the origination and sale of bad mortgage that were based on mis-appraisal of property value and contained lies about borrowers' income and assets, and criminality -- the looting of their own firms -- was at the heart of the financial system's meltdown. Here I examine a part of the damage caused by the collapse. I left this comment to the article.

The severity of the Great Recession has not been well reported. Immense damage was done to ordinary household budgets and savings.
A look at Edward Wolff's report of August 2012, "The Asset Price Meltdown and the Wealth of the Middle Class" states that median household net worth dropped, 2007 to 2010, from $107,800 to $57,000, a 47% drop in 3 years. The Wolff report, page 55, also reports that the median household's net worth sank below the 1969 level, a loss of about 40 years of savings. The ratio of median net worth to mean average net worth exploded from 1 to 3.7 in 1969 to 1 to 8.1 in 2010. Inequality was writ large. (In 1962, according to Wolff, the median household savings was $51,900 and the mean average household savings was $194,000. This is a ratio of 1 to 3.7. In 2010 the ratio was 1 to 8.1, median was $57,000 and average was $463,800.) The Congressional Research Service reports that half the U.S. households own 1.1% of all household net worth, the other half own 98.9%. Again, inequality writ very large. (see: http://www.epi.org/blog/confirming-redistribution-wealth-upward/)

The Federal Reserve's Survey of Consumer Finances, 2012, reports (on page 17) a median household net worth drop of 39% between 2007 - 2010 from $126,400 to $77,300, a regression to 1992 levels. The mean average household net worth declined by 15%, in comparison. As I've reported before, the lower-saving half of U.S. households own approximately $11,000 on average, while the average for all households is $498,000.

The Assets and Opportunities Scorecard states that 44% of the nation are poor:
"For the second year in a row, the Assets & Opportunity Scorecard, finds that nearly half (43.9%) of households—equivalent to 132.1 million people—do not have a basic personal safety net to prepare for emergencies or future needs, such as a child’s college education or homeownership. These families are considered “liquid asset poor,” meaning they lack the savings to cover basic expenses for three months if unemployment, a medical emergency or other crisis leads to a loss of stable income." 

The Statistical Abstract states that the total U.S. household net worth declined by $12.9 trillion ($64,179 trillion to $51,309) in one year, 2007-2008, a 20% drop in household net worth.

In January economist Jack Rasmus on his radio broadcast claimed that 13.7 million home owners (mortgage payers) have lost their homes since 2006 through foreclosures or short sales. This is about 26% of all home owners.

Economist Sylvia Allegretto stated in The State of Working America's Wealth that home owner equity in U.S. homes had dropped from about 60% to below 40%, the first time that banks owned a majority of home owner equity.

State of Working America, 2012, the book from the Economic Policy Institute, states on page 376,  "The median household had 22.0 percent less wealth in 2010 than it did in 1983, with median household wealth dropping from $73,000 to $57,000 over those 27 years. In 2010, more than 1 in 5 households (22.5 percent) had either zero or negative wealth."

This was a debt driven crisis and recession.

The Bureau of Economic Analysis (Department of Commerce) supplies the disposable income figure, and the savings rate figure, the Federal Reserve's Flow of Funds report supplies the aggregate household debt figure.

In Rasmus' book Epic Recession, page 232, he reports, "According to the business research firm, Thompson Reuters, between 2000 and 2007, more than $17 trillion in mortgages were bought by the shadow banks, half of which were sold off to foreign buyers." On the previous page he quotes a WSJ article, "Between 2004 and 2007, Lehman securitized more than $700 billion in assets, according to its annual filings. About 85% of these, or about $600 billion, were residential mortgages."


Without home-owners' withdrawing equity from their houses, how much growth would have the  U.S. economy achieved in the 2000s? Here's a graph from Calculated Risk, as reported in Barry Ritholtz' book Bailout Nation (page 97): Click graph for a clearer view. In 2004 GDP growth was 4.2% including  mortgage equity withdrawal (MEW) -- and without MEW extraction it would have been 0.8%. Why did not regulators at the Federal Reserve catch this?  MEW was averaging an unprecedented 3% of GDP for 4 years, 2002 to 2006, as the article at Calculated Risk shows in another graph.

At this article by Dean Baker, March 2013, where he argues that Obama is to blame for the federal budget "sequester", Baker explains the effects of the decline of consumption, a $1 trillion decrease in spending. He states that when residential construction collapsed in 2007 the economy lost "$600 billion in annual demand"; and when the price of houses fell another $500 billion of annual consumption was lost. The gap between actual GDP and potential, a gap of $1.040 trillion, is reported at 6.5% by the Congressional Budget Office and the Bureau of Economic Analysis. Baker concludes, "The stimulus, which boosted demand by $300 billion a year in 2009 and 2010, helped to fill part of this gap, but it was nowhere near big enough."  See this article and this article.

Between 1998 to 2008 financial corporate debt (bank debt) more than doubled, increasing by 130%, while the GDP per capita grew by 16%. The debt of financial corporations increased at 8 times the rate of growth, 1998-2008.
On Rasmus' page 220 he includes a table "Total Debt, U.S. 1978 - 2008", drawn from the Fed's Flow of Funds report, Table D.3, June11, 2009. It shows that between 1998 and 2008 "Financial Business" debt tripled, moving from $6,328 trillion to $19,486 trillion. Adjusted for inflation it increased by 130%. Total Domestic debt adjusted for inflation increased by 72%, in nominal terms from $22 trillion to $50 trillion. Total domestic debt therefore hit a record high of 74% of all household net worth. In the eleven years 1998 to 2008 the GDP per capita increased by 16% using the calculator at  http://www.measuringworth.com/

While the GDP/capita increased, 1998 - 2008, by 16%, the financial corporate debt increased by 130% which is 8 times the increase of GDP/capita.
Were bankers simply ignorant of the extent of their loan exposure? Why would a financial system increase debt 8 times faster than economic growth over a ten year period? The end result was self-destruction and taxpayer bailout and enrichment of top banking executives. The reason according to William Black: control fraud.

It is about time the public wakes up to the criminality of this mess and finds the financial system guilty en masse, and then real reform will begin.
--- That last sentence is a so-so. Steve Keen's Debunking Economics has much the same conclusion, that credit over-reached and collapsed.

For William Black's article, click here.
http://www.economonitor.com/blog/2013/02/pervasive-fraud-by-our-most-reputable-banks/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+economonitor%2FOUen+%28EconoMonitor%29
The graph from Too Much,  March 3, 2013:


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My letter to the editor about the closing of the Ewing Wing, the Nursing Home Facility

Last week's Gazette article about the impending closure of the nursing home facility at J C Fremont Hospital, the Ewing Wing, I believe deserves additional background. Mariposa resides in California's 4th Congressional District and this district elected by a 61% majority a representative who is wholly in line with the proposals of Paul Ryan, former vice presidential candidate. McClintock, our Congressman, sits on the House Budget Committee with Ryan. Ryan has proposed to scrap current funding of Medicaid and replace it with block grant funding. Currently half of Medicaid's expenditures go to nursing homes that serve senior adults who have spent down their assets to below $2,000. The Ryan proposal, to quote from a report from the Center for Budget and Policy Priorities, "would add millions to the ranks of uninsured.  . . . would cause states to shrink the number of low-income people receiving health coverage through Medicaid by between 14 million and 27 million people by 2021, which would constitute an enrollment reduction of 23 percent to 46 percent (in addition to the 17 million people who would not gain Medicaid coverage due to the repeal of the ACA’s [often called ObamaCare's] Medicaid expansion)."

Approximately a quarter to half of the recipients of Medicaid care would have to go without. Where would they go? Federal funding of nursing homes across the nation would decline and many would be targeted in the crosshairs for closure.

The article mentioned 3 numbers: the daily expenses per patient at Ewing, the state's past per diem reimbursement and the state's future per diem reimbursement --- $395, $325, and $237, respectively. Converted to annual expenses per patient this equals $144,175, and $118,625, and $86,505. The state plans a 27% cut to its per diem reimbursement. Quite obviously nursing facility care is prohibitively  costly to an ordinary citizen. The median household savings in 2010 was $77,800 according to the Federal Reserve. In fact the nation's medical costs are famously expensive. We spent in 2011 an amount equal to 17.9% of the nation's total economic output, GDP, double the percentage of other advanced nations. The OECD nations in 2009 spent on average $3,233 per year per citizen on health expenses, the U.S. spent $7,960. We spend two and a half times more for medical care and our medical outcomes are arguably less positive. We have the shortest life expectancy at birth and the highest infant mortality rate, to name two important outcomes.
Here's the CBO graph showing the expected effects of rising medical costs on the federal budget. Click  here and read the entire article at the Incidental Economist site that explains well the run-away medical costs escalation. And James Kwak in 2010 used the graph in this articulate article. Kwak states, "If we don’t slow the growth of health care costs, there is no real solution to the deficit problem; the only way out from the budget perspective will be slashing Medicare, but that doesn’t solve the problem — it just shifts it onto individuals."



The Ryan Medicaid proposal would cut Medicaid funding and other federal health programs by 2050 by more than 75% according to the article at CBPP.org (see Ryan Medicaid Block Grant Would Cut Medicaid by One-Third by 2022"). The growing expenses of medical care in the U.S. are the sole reason for future federal budget deficits. The past drivers of the federal budget were the Great Recession, the unfunded wars in Iraq and Afghanistan, the unfunded Medicare Part D, and the Bush era tax cuts. Medical costs will be the main impetus for future deficits.  All citizens will have learn more about our economy, how we prioritize and organize our resources and expenditures. I have written an economics blog for five years; on the Internet search for  "Economics without Greed", or my name plus the word "economics".

Thank you, Ben Leet        

OECD data: http://www.oecd.org/unitedstates/49084355.pdf
CBPP quote: http://www.cbpp.org/cms/index.cfm?fa=view&id=3751

Robin Hood in Reverse -- the Ryan Plan
P.S.  --- March 20, 2013.  The founder of The Center on Budget and Policy Priorities, Robert Greenstein, wrote a commentary on the Ryan Budget on March 12, 2013. Here is the first paragraph:
When House Budget Committee Chairman Paul Ryan released his previous budget last year, I wrote that for most of the past half century, its extreme nature would have put it outside the bounds of mainstream discussion.  It was, I wrote, “Robin Hood in reverse — on steroids,” because it would have produced the largest redistribution of income from bottom to top in modern U.S. history.  Ryan’s new budget is just as extreme.  Its cuts in programs for low-income and vulnerable Americans appear as massive as in last year’s budget, and its tax cuts for the wealthiest Americans could be larger than in last year’s.

The Ryan plan proposes no new tax revenues and falls $5.7 trillion short on revenues over a 10 year period. This is a serious proposal? See this CBPP.org article.
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Half Dome in Winter, Essay on Recovery

 

That's Half Dome in the snow. It snowed on December 12, 2012 when I walked the Mirror Lakes loop in Yosemite Valley. It was a peaceful day with light snow, the valley under a charmed spell.

My theme is about the stagnation of private sector employment, but I have added a reference to a  few videos and graphs first that I find compelling. But drop to the next section for details about how private employment fell off the cliff, so to speak.
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You'll find the video "Over 50 and Out of Work" very informative and emotionally gripping, showing the recession's impact on millions of normal older adult Americans.

I recommend 2 reports from Demos, Public Jobs for Economic Recovery, and Millions to the Middle: 14 Big Ideas to Build a Strong and Diverse Middle Class. These 2 reports hold the key to the nation's recovery of employment and a middle class, if widespread prosperity is to survive. And if you think the federal budget has a spending problem, as the Republican Party claims, you should see these two graphs at the Atlantic Monthly. Tax revenues in 2000 were above 20% of GDP, and in 2012 were at 15% of GDP. That looks like a tax deficit problem, and the spending increase is a response to the greatest economic downdraft since 1933. See the graph, and the one below it about discretionary spending levels. And for discretionary spending, a better graph is at the CBPP article here. And the one from Barry Ritholtz here, which is worth a 1000 words about the federal budget. So good I copied it, and placed it below.

Binyamin Appelbaum, New York Times

Source: J.P. Morgan
And what is driving the future deficits? 
This graph and article at the Center for Budget and Policy Priorities explains clearly: 

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Perhaps the quickest summary of the U.S. economy is found in the charts of Business Insider.
You have to click the colored print.
Take a few minutes and ask if you "should get mad as hell."
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71% of voters support putting unemployed workers back to work at government-funded public service jobs. See the report here and here (page 30).
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Private Sector Employment Collapses
Private Sector Employment increases by 0.9% (1,019,000) over a 12 year period, between 2000 and 2012, an increase of  7,076 per month. The increase of 1,019,000 increased total p.s.e. from 111,776,000 in Dec.2000 to 112,796,000 in Dec. 2012. (See here.)
The "Working Age Population" increases by 14.9% (31,773,000, from 212 million to 243 million) between 2000 and 2012, or over 220,000 a month, and only 3.2% found work in private enterprise. (See here.)

For 19 years, 1989 to 2008, the labor participation rate had been over 66%, implying that of the 31,773,000 addition to the working age population, 20,970,000 would be in the labor force. 15% would find government employment and 5% would be unemployed, and 80% would be employed in private enterprise. 80% of 20,970,000 is 16,776,000 private sector jobs we might expect but only 1,019,000 jobs materialized, only 6.0% of the expected number of jobs, 94.0% of expected jobs did not materialize.

The annual benchmark update from the BLS on February 1, 2013, has not changed the story significantly. Instead of the old 419,000 jobs of the past report, the new figure is 1,019,000 jobs. This indicates that only 6% of the expected 16,776,000 private jobs were created, and 94% did not materialize. In the 12 year period, December 2000 to December 2012, only a 0.9% increase in private sector employment, when we could have expected a 14.9% increase. What do the 15,757,000 job seekers do when confronted with a hiring freeze? They disappear from the official BLS statistics. Out of sight, out of mind. U3 unemployment may be at 13% using this set of 20 year rate of participation benchmarks for labor participation.

 --- January 2013's unemployment rate would be 12.7%, not 7.9%, if as in 2000 we had 64.4% employment to population ratio, because today only 143.3 million are employed, and the hypothetical labor force would be 163.9 million (157.6 million working and 6.3 million unemployed, 4% as in 2000), implying 20.6 million unemployed, or 12.7% unemployment rate. It is 13.2% if we keep the labor force at today's 155.6 million. The U3 Unemployment rate is 12.7% using a slightly different approach. For 4 years, 1997 to 2000 inclusive, the labor participation rate was 67.1%; today in January 2013 it is 63.6%, a drop of 3.5%, equivalent to 8.560,000 workers who have dropped out. Add them back and the labor force increases to 164.2 million, the unemployed reach a high of 20,892,000, U3 unemployment reaches 12.7%. Using today's labor force size the rate reaches 13.4%. 12.7% is the true unemployment rate. 18.6% is the U6 unemployment rate.  See National Jobs for All Coalition's monthly employment report for accurate reporting.

The employment to population ratio has dropped precipitously from 64.7% in April, 2000 to 58.6% of December 2012. A drop of 6.1% implies a loss of 14.9 million jobs. The ratio has dropped by 9.4%, meaning that in 2000 for every 11 workers employed now only 10 are employed. For the past 3 years the ratio has not changed from 58.6%, employment is growing exactly even with population growth. This is not recovery, it is stalled descent. 

Wage income as a percentage of GDP has dropped to a new low (from Business Insider):

What If We Went Back to 1970 Distribution? 
If wage income distribution were still at the 1970 level, an additional $1.47 trillion in wages would be paid out to all 151 million workers whose employers send W2 forms that make up the Wage Income report from the Social Security Administration. Each of the 151 million workers on average would increase his or her income by $9,734 annually. Such a windfall increase, nearly $10,000 a year, and $20,000 for many families, would double the annual income for 24.7% of  all workers (37.4 million workers) who receive less than $10,000 a year. It would end the recession/depression and bring the household debt to disposable income level down to 1970s level. Total Wage Income would increase from $6.02 trillion to $7.49 trillion. Using the average distribution of the 1980s and 1990s the amount would be less by half. In a previous essay I stated that if we had the same income distribution as 1979 then each household on average would see an increase in income of $11,000. See the CBO report. Just the front cover of the report should give you a clear picture of the shift needed. What would $11,000 more annual income do if all 118 million households received it? ?? I'm surprised this detail has NOT entered into the discussion. Increasing the minimum wage to $12.30 is a viable step, combining with an increase in the EITC, as proposed by scholars at Univ. of Massachusetts, see this essay.     Average household income is reported at $78,500 by the Federal Reserve's Survey of Household Income, page 8 (see the source). Yet median household income is far below the average at $45,800. And for average savings ($498,000) and median family savings ($77,300) see page 18.

For the first paragraphs of this essay I was looking at the "data bls, private sector employment" and at BLS historical data ---
Dec. 2000, 111,776,000 employed in private enterprise, and Dec. 2012, 112,795,000
a gain of 1,019,000 or an increase of less than 1% --- 0.9%. -- Updated on February 1, 2013.

Just a partial view of private sector jobs since 2007 from Econographia, September 2012:

For a thorough state by state analysis of private job creation since the Recession's trough, see the report by Seneca and Irving at Rutgers University. As of July 2012 almost 3/4s of the 8,833,000 loss in private sector employment has been regained. The private sector employment low point was in February, 2010, at 106,850,000. In January 2013 it was 6.1 million higher. They state that not until 2015 will the economy recover the total private sector job loss, but this does not factor in population growth. Nor does it include the drop in public sector employment. As the BLS data shows, the employment to population ratio has not moved in 3 years, total employment growth and population growth are exactly even, canceling out any ratio change. "Never, at this rate." is the answer to "When will we recover the employment to population ratio?"

I've written in this installment here about the "Employment story as of January 2013" or "Is It a Recovery When Half the Workers Have Less Income This Year?"  -- two titles for a difficult-to-read essay. Too many numbers. I try to simplify, but it doesn't sound right.

Workers' Median Wage Income Continues to Drop
The Social Security Administration report on wage incomes of 2011 was released in November 2012. Median wage income in 2011 for 151 million workers stood at $26,965, a drop of $230 or 1% from the 2010  level of (inflation adjusted) $27,195. For most workers, out of a total of 151.4 million, annual incomes are declining. Since 1990 median wage income has increased by 6% while the GDP/capita has increased by 33%. Since 2000 workers' median income has decreased by 3.8%, since 2007 it has decreased by 5.6%.

The best article at this blog is the next, most recent one, on Reflation, October 2012.  I recommend the most recent articles of 2012. It's mostly a rehash of old ideas I have followed forever. But the rehash says it more convincingly.
Someday I'll put in a Contents page, and someday I'll post some short comments. Not today though.
To glimpse what I believe would be the best medicine for the economy, look at Ron Baiman's article at Chicago Political Economy Group web page. I currently am reading James G. Speth's book America, The Possible, and also Marjorie Kelly's Owning Our Future.
______________________________________________________

            The Employment and Wages Story, 
                    as of January 2013 
Key Points:
1.) The realistic unemployment rate is around 12% to 13%.
2.) Private sector employment since 2000 has increased by less than 1% ---0.4% or 419,000 jobs while the  working age population increased by 15% (31,800,000).
3.) Three out of ten workers are either unemployed, under-utilized, or under-paid
4.) Basic family budgets are about double the median wage income, meaning half of all workers
need at least double or triple their income to support one family of four.
5.) Wages have not matched productivity or GDP growth between 1970 and 2010, productivity                                                                                                             growth is perhaps double wage growth. See graph:
   

6.) The economy must hire more workers and pay them higher wages.
Policies must be executed to achieve this goal. See next essay below.

This analysis is detailed with numbers and references, and it will not be a simple read for the casual reader with little interest. Fair warning.

EMPLOYMENT
Employment to Population Ratio: Three full years ago, Nov. 2009, the employment to population ratio was 58.6%, and it hasn't changed in December 2012, still 58.6%. Employment growth is keeping exactly even with population growth. Recovery is not the correct term when it's only stabilization. Recovery will be a ratio back to former 63% level or 64.4% in 2000.
Private sector employment has added 5.1 million jobs in 3 years, but relative to 12 years ago, Dec. 2000, it has added just 419,000. After 12 years the "working age population" has increased by 31.8 million (a 15% increase) of which only 1.3% have found private sector employment. The participation rate has dropped from 67.1% to 63.6%, the labor market is dropping-out and saying "There is no one hiring, why continue looking." From 1989 to 2008, 19 years, the participation rate had been 66% or higher, before dropping off to a 1979 level. If we had the same participation rate as 1989 to 2008 (66.0% and higher) and the same number of jobs as today, the U3 unemployment would be 11.1%. If we had the same participation rate as 1997 to 2000 (67.1%) and the same number of jobs as today, 143 million, U3 unemployment would be 12.3%. Some might argue that 12.3% is the true U3 unemployment for today, as the drop-outs from the labor market are not accounted for in the official statistics. If we had the same participation and unemployment rate as 2000 there would be 156,713,000 employed, 13.4 million more than today, leaving 6.5 million unemployed, for a total growth in participation at 20 million, which is about 66% of the growth of the "working age population"(31.8 million), the normal participation for the past 19 years. In short, private sector employment has fallen off dramatically, and is just keeping up with population growth. -- This was the comment I left today, January 5, 2013, but then I went on.

Data drawn from this site, among others:
http://www.bls.gov/web/empsit/cpseea01.htm

Under-Employment + Unemployment = 16.6%
The National Jobs for All Coalition's (NJFAC.org) monthly employment report, Jan. 2013, states that officially 12.2 million are unemployed, 7.9 million are "Working part-time because can't find a full-time job", and 6.8 million are "not looking so are not counted in official statistics".
Total: 26.9 million (16.6% of the labor force), one in six.

My analysis speculates, posits a hypothesis, that if we had the same participation rate as 2000 or 2008, then the actual employment rate of today would yield much higher unemployment rates. The Jobs for All Coalition figures state that 7.9 million are part-time workers looking for full-time work. These 7.9 million would be 4.8% of my hypothetical work force of 163.243 million, the size of the workforce if we had the same participation rates as 1997 to 2000. The U6 unemployment rate would then rise to 17.5%, hypothetically. This is higher than the JFAC rate of 16.6%. Therefore 28.567 million are looking or would accept full-time employment, which is 1.667 million higher than the Jobs for All Coalition figure.

To quote, the NJFAC continues, "In addition, millions more were working full-time, year-round, yet earned less than the official poverty level for a family of four. In 2011, the latest year available, that number was 17.9 million, 17.6 percent of full-time, full-year workers (estimated from Current Population Survey, Bur. of the Census, 9/20/12). [hyper-linked]  .  . . In October 2012, the latest month available, the number of job openings was 3.7 million . . . Thus there are now more than 7 job-wanters for each available job." 

The un-employed, under-employed, and under-paid = 30% of all workers
Finally, let's take the 17.9 million working full-time and year-round for less than poverty wages, add it to my "not working" hypothetical figure, 28.567 million. This would yield 46.467 million workers or would-be workers in a current workforce of 155 million, and would total 30% of the workforce. Three out of ten adults are either 1) not working, 2) working too little and want more work, 3) have stopped looking but in better hiring climate would be looking, 4) are working 40 hour weeks year-round for wages that are below $11.30 an hour. The poverty level for a four-person family is $23,050 a year (see here),  Several basic family budget calculators place the basic budget for a four person family at over $40,000 a year.

BASIC FAMILY BUDGETS
The Economic Policy Institute's Basic Family Budget Calculator is a source that calculates budgets for different localities and family sizes. For Indianapolis, Indiana the basic budget is $44,984 for a 2 parent, 2 child family.
Or see the National Center for Children in Poverty web page to calculate a family's basic budget. In Indianapolis, Indiana, for a 2 parent family, both working full-time, with 2 children, one 3 years-old the other 6, the basic budget was $46,338 a year in 2011.

WAGE DEPRESSION
Three of every ten working or would-be-working adults are under-utilized or are grossly under-paid.  Actually, with half the workers annually receiving less than $26,965, the median wage income figure from the SSA for 2011, I claim that wage depression is a market driven injustice to society with pernicious effects. As many have shown, if wages had equalled productivity gains 1980 to 2010, wages would be about double today.


 See the graph here.
See another graph here.
Productivity and Wages–the Big Disconnect

Over the 38 year period, 1973 to 2011, median hourly compensation (including benefits) increased by 0.27% a year, or 10.26% total over 38 years. (See the State of Working America table here.
Productivity increased by 1.56% per year or 59.28%.
Or from Table 4.1, productivity, 1973 to 2010, increased by 80%, average wages, not the median wage but the average wage, grew by 29%.
The GDP per capita increased by 84% owing to rapid increase from capital income sources. (see http://www.measuringworth.com/datasets/usgdp/result.php).
The graphs and tables at State of Working America, and its text pages too, are the easiest access to the most complete data on this topic.

Simple Conclusion
Unless wage income increases and more workers participate, the economy will continue to decline in all measures.

Final CONCLUSION
            Private sector employment has stalled, and that's a major problem.
            In 12 years the growth of private sector employment has been just above zero, about 0.4%.
            The employment to population ratio, 58.6%, has not moved in 3 years.
            The unemployment figures do not count the actual drop-outs, the shrinkage of participation, so the more realistic hypothetical figures give a truer picture:  Unemployment is realistically around 12% to 13%.
            As I stated at the beginning:
             6.) The economy must hire more workers and pay them higher wages.
            Policies must be executed to achieve this goal.
                            The last part of the next essay, about Full Employment, deals with this, as do many essays here, including this one and this one and this one.  The Economic Policy Institute proposes "Putting America Back to Work" and Phillip Harvey proposes "Back to Work."

Mirror Lake

Author, Half Dome in background

Bridge over Tenaya Creek