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May 4, 2012

Bad Economic News

The disappointing payroll numbers (115,000 new jobs were reported created last month, significantly below estimates) are not the big story in the labor statistics released this morning. The big story, and the bad news, is the continued shrinkage of the workforce.

Half a million Americans checked out of the economy last month: they stopped looking for work. A smaller percentage of the population is working or looking for work today than at any time since the first year of Ronald Reagan’s presidency: 1981.

The workforce shrinkage is if anything worse than these numbers show. Reports that both legal and illegal immigrants are leaving the country suggest that the workforce has declined by a bit more than the 522,000 people the official statistics report.

There are some healthy underlying trends. The private sector is growing faster than the public sector. But we need to do more: if the American middle class is going to be stable and prosperous, private sector demand for workers needs to grow. Small business and start ups will be the key to that. The central policy debate in this country needs to be over how we can create the most favorable possible conditions for the development of a wave of new business.

Posted in Economics & Business, Quick Takes
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  • justaguy

    Let me try to rationalize this: fewer jobs created last month than needed to keep up with population growth but because of dubious statistics, the official unemployment rate goes down? Currently the administrations has a net loss of total jobs since January 2009 although around election time that statistic will become 0. Growth several million, deficit from recession in 2008, million; this Obama non-recovery is just priceless.

  • Kenny

    ” … if the American middle class is going to be stable and prosperous, private sector demand for workers needs to grow. Small business and start ups will be the key to that.”

    And the key to doing that is to not only vote Obama out of office in November, but also as many Democrats as possible, too.

  • thibaud

    “private sector demand for workers needs to grow. Small business and start ups will be the key to that.”

    Not really. The vast majority of jobs, including new jobs, are still with huge enterprises, which pay far better and provide far more security than small businesses.

    “The central policy debate in this country needs to be over how we can create the most favorable possible conditions for the development of a wave of new business.”

    The biggest drag on hiring, and one of the biggest obstacles to new business formation, is the health insurance monkey on the back of US businesses. Remove this burden and hiring will soar. The way to remove it is of course single payer, achieved by reforming the tax code.

  • thibaud

    To be more precise, small employers create lots of jobs, but nearly all of those jobs vanish within a year or two. In other words, on a NET BASIS, they don’t create many jobs at all.

    On top of that, about 90% of the jobs in this country are with firms that have more than 10 employees. You can draw the line for “small business” wherever you prefer – <10, <20, <50 employees; it doesn't matter. Small businesses in the aggregate are providers of secure employment only to their owners, and often not even to them.

    They're good and necessary for communities the way, say, small dairy farmers or suppliers of fresh produce are good and necessary to the nation's health.

    But you can't base a robust, growing economy on small businesses or small business growth. These are overwhelmingly here-today, gone-tomorrow jobs that pay poorly and usually offer no benefits.

  • Fred

    In the BBC TV series “I Claudius,” the decrepit, cranky, and mean-spirited emporer Tiberius decides to name Caligula as his successor, knowing full well that Caligula is a perverted, mass-murdering lunatic who would be a disaster for Rome. In one of the best lines of the show, Tiberius embraces Caligula and says, “Rome deserves you.” Caligula, of course, completely misses the irony. That’s exactly how I’ll feel about America if Obama is re-elected. America will deserve him.

  • Jbird

    one should also take note of the increases in the number of people applying for disability benefits. If that trend continues we’ll be England in short order.

  • http://facingzionwards.blogspot.com/ Luke Lea

    “The central policy debate in this country needs to be over how we can create the most favorable possible conditions for the development of a wave of new business.”

    I’d settle for an expansion of already existing businesses. Coming out of a recession isn’t that the norm?

    Trade and immigration.