Home > The Economy > Behind the unemployment headlines in the US (4 charts)

Behind the unemployment headlines in the US (4 charts)

David Ruccio

I often explain to students, when I’m teaching economic models, they have to look at what’s happening behind the blackboard—all the implicit mechanisms that allow the models to work as they do.

By the same token, we have to ask, what’s going on behind the unemployment headlines?

The headlines today all trumpet the number of new jobs added in September (248,000), such that the official unemployment rate fell for the first time since August 2008 to below 6 percent (5.9 percent, to be exact).

That’s good news. Employment is picking up. But, of course, that’s not the end of the story. And Tyler Durden helps us see why.

quality of jobs

First, most of the new jobs (4 of the top 5 categories) were in retail trade, leisure and hospitality, education and health, and temp help.

So yes, America added a whole lot of minimum wage waiters, store clerks, groundskeepers and temps: truly the stuff New Normal “recoveries” are made of.

participation rate sept 2014

Second, the labor force participation rate dropped once again—from an already three decade low in August—to 62.7 percent. In other words, as against the 232,000 people who found jobs, the number of people not in the labor force rose to a new record high, increasing by 315,000 to 92.6 million!

average hourly earnings sept 2014

And finally, even while new jobs are being created, hourly earnings are not moving at all (in fact, to be accurate, they actually declined by a penny from the $24.54 in August). In other words, real wages—accounting for inflation—continue to decline.

So, that’s what’s happening behind the triumphant unemployment headlines: the continued creation of lousy, low-paying jobs; the continued exit of hundreds of thousands of workers from the labor force; and the continued decline in real wages.

Anyone want to talk about the reserve army of labor?

  1. Garrett Connelly
    October 5, 2014 at 8:54 pm

    Okay. We repeatedly see this eloquent national scale testimony to a well-managed, centrally planned economy.

    Now this old economist with roots in sociology and entertained delight with physics wonders when regular economists will begin describing real physical relationships between humanity and Earth in ways that will inform distributed intelligence of a rational economy toward which to evolve.

    Reality may be censored in Texas, Colorado and Arizona. Forget them until they once again seek admittance to the halls of modern science. Yes, the coke brothers, bayer or monsanto may cut of your department endowment. Just get busy and teach reality. Talk with your physics department. Ask if distributed intelligence is a trait of cosmic powered biology. Then decide how those driving humanity to disaster can be side tracked, surely and swiftly.

  2. Macrocompassion
    October 7, 2014 at 2:14 pm

    I find it surprising and disappointing that the author and your policy-making departments, have both neglected to cover the most basic reason for unemployment and poverty.

    The reason is due to the way that natural resources, particularly the land are managed. As your economic teams are surely aware, production involves the use of 3 factors Land, Labor and durable Capital goods (Adam Smith originally explained this IN 1776).

    When any one of them is in short supply, the cost of production rises due to the comparatively high returns necessarily paid by the production managers for their use. With the resulting greater cost of the product, there is a reduction in the demand for it, and (unless there is an alternative cheaper kind of substitute product which is often not the case, due to the leveling effect of competition, or alternatively due the monopoly of the means to production) the resulting level of living standards will decrease. Thus low rates of supply and demand are due to the same cause, high production costs.

    Now in practice, it is not due to a shortage of labor nor capital that creates this problem of high cost. Were the bigger firms to have sole control of the labor and/or capital, then surely entrepreneurs would step in and be able to produce the goods instead (all-be-it at a greater cost). So clearly the cause of the unemployment that is associated with the low demand is due to the high cost of the available land and other natural resources.

    When land is held out of use, the cost of its use (the basic ground-rent) raises due to the competition of the amount of it that remains available for use. Land speculators and/or land monopolists are therefore able to (and actually do) generally cause the produce to be highly priced due to the resulting rise in ground rents.

    Consequently the answer to unemployment and poverty is for government legislation to eliminate land speculation and its monopoly, with the effect of lowering of land prices and ground-rents. The best way to achieve this is by so-called taxation of land value and if this were to replace income tax the effect would be not only to reduce production costs but to allow the consumer greater sums for his purchases.

    There is a moral aspect too. The value of the land is due to the population density and the amount of associated investment by public funds put into its infrastructure, such as roads, railways, hospitals, schools, electrical networks, gas supply, sewage and refuse disposal areas or processing plants etc. Surely the benefit from this investment is a public right and not one that the land occupier can hold (with or without its proper use) without having to pay for this privilege. Thus the land value tax is more correctly a return on public investment or a revenue for services available or an opportunity cost. Were this revenue to be collected and used to relieve the harmful effects of production-related taxes, then the standards of living would rise and unemployment become outmoded, indeed there would be a greater demand for labour that would meet its full availability.

    May I ask and request: When will RWER begin to give serious publicity to this theory of poverty? which (of course) was Henry George’s original claim after he previously described the “Great Enigma of Our Times” (over 130 years ago, in his classic book Progress and Poverty) when the then huge advance in technology had resulted in little or no improvement in the condition of the poor.

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