Tuesday, September 3, 2013

Clueless media finally coming around on economy; what's changed?

Yesterday, CNN ran the following article: "Jobless rate is worse than you think." It was written by Heidi Shierholz, a labor market economist working at the Economic Policy Institute. The EPI is a liberal-leaning (to put it mildly) thinktank founded in 1986 by a group that included Robert Reich and Robert Kuttner (who also founded The American Prospect), among others. Here are some highlights from the article:
According to Congressional Budget Office estimates, if the labor market were healthy, the labor force would number about 159.2 million. But the actual labor force numbers just 155.8 million. That means about 3.4 million "missing workers" are out there -- jobless people who would be in the labor force if job opportunities were strong.  
Given the weak labor market, they're not actively looking for work and so aren't counted. If those missing workers were actively looking, the unemployment rate would be 9.4%
And:
We need 8.3 million jobs to get back to the prerecession unemployment rate, considering the 2 million jobs we are still down from the start of the Great Recession in December 2007 plus the 6.3 million jobs we should have added since just to keep up with normal growth in the potential labor force.  
Over the past three months, we've added 175,000 jobs a month. At this rate, it will take six years -- until the middle of 2019 -- to return to a healthy labor market.
Finally:
Our sustained high unemployment and weak job growth is also hurting wages: When workers have limited outside job opportunities, employers simply don't have to offer much in raises to get and keep the workers they need. The typical worker saw wages drop 2.6% between 2007 and 2012, and with unemployment expected to remain high, wages for most workers aren't expected to grow much -- if at all -- in the next few years.
Ms. Shierholz goes on to explain--wrongly--how this situation is a consequence of "aggregate demand" and how it could be solved by increasing government spending, along with upping the minimum wage. But her profound economic ignorance on these latter issues is not really the point, here. Instead, the issue is her recognition of the actual facts, with regard to the economy, and CNN's willingness to actually print this recognition.

The title claims the employment situation is "worse than you thought," but is it? Not if the "you" happens to be me, or people who have been reading this blog, ZeroHedge, or articles on the economy at the Cato institute (to name just a few places dealing in reality). For like me, people at such other places have been harping on the above issues for...well...years, since the current Administration--ably assisted by much of academia and the media--began claiming that the recession was over and a recovery was in full swing. For instance, here is a piece of mine--from back in June of 2012--that makes many of the same points as Shierholz's piece:
Thus, some amount of "job creation" is a given (again, assuming no recession or economic crisis) as a matter of course. So, if we figure this in to Obama's impressive number of 4.3 million jobs created (assuming it's accurate), what do we have? Estimates vary on this, but generally it is assumed that somewhere between 100,000 and 150,000 jobs are needed each month to keep pace with population growth. Thus, on the low end we have (for Obama's cited 27 months) 2.7 million of those jobs amounting to, well, nothing. On the high end? 4.1 million of the jobs serving only to keep pace with population growth. 
At best, Obama can tout some 1.6 million jobs that have had a meaningful impact on unemployment, that represent new growth. That works out to under 60,000 jobs per month. At worst, 200,000 jobs...or less than 7,500 per month. And remember, the baseline here is the bottom of the trough after the recession ended. To get the numbers back up to where they were prior to the recession is going to require quite a bit more "creation."
Note that I use a range of between 100,000 and 150,000 new jobs needed each month to keep pace with population growth. In Ms. Shierholz's figures, this rate is taken to be 112,500 jobs per month (6.3 million jobs divided by 56 months). Thus, the actual "jobs created by Obama" trend for Ms. Shierholz would be 62,500 jobs per month, predictably near my "best case" scenario. That's the absolute best picture--for the current Administration--that can now be painted. And it sucks.

But it sucked a year ago; nothing has changed. The other points Ms. Shierholz makes, like the actual unemployment rate being much higher than 7.4% because of the labor force participation rate (how many are sick of me saying that phrase?), are no different. The points could have been made--and were made by some of us--a year ago, or even earlier.

So what's different?

We all know the answer, don't we? There's no Presidential Election on the horizon. Obama won reelection, which means he no longer needs the economic realities of his failed polices covered up by his sycophants in the media and elsewhere. Now they are free to speak the truth. Kind of. For while Ms. Shierholz is correctly observing current realities--and CNN is putting the information out there--she's using those realities to push the same agenda that created them in the first place. But since she's not dealing with the reality of the past, only the reality of the present, I guess she gets to pretend those policies were never realized, either.

Still, I guess it's better to at least have some of the truth out there, even if the clowns who caused it are not willing to face up to their own failings. Because maybe more people will finally begin to see through their subterfuge.

Cheers, all.

2 comments:

  1. I've been saying for five years that the economy needs to add 250,000 jobs per month to have a strong recovery. Anything less than 200,000 will be lingering economic weakness.

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  2. Well, you're even more ahead of the curve David. :)

    And I think your numbers are spot on, fwiw.

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