Jan 09 2010
[Note: All graphs can be clicked to access a larger version]
Of all the green-eye-shade economic statistics, nothing touches the mood of the electorate like the unemployment numbers. After 3 decades of generally improving economic conditions, which started with Ronald Reagan and his across the board tax cuts, many people have lost touch with the political power of the unemployment rate.
But more importantly, many of us (myself included) only had a cursory understanding of the various government statistics that capture the breadth of unemployment pain running through the economy. This Great Recession has been a sad lesson on the real numbers that probably the most politically potent.
Let me quote James Pethokoukis of Reuters, who framed this post perfectly for me as I was gathering data for it:
On the political front, the December jobs numbers were terrible news for the White House and congressional Democrats in a midterm election year. Hereâ€™s how it plays out:
1. Remember this simple formula: Unemployment drives presidential approval numbers, and presidential approval numbers drive midterm election results.
4. Then will come the second-take stories that will notice the shrinking labor force, which dropped by nearly 700,000 from November.Â Had it stayed stable from last month, the jobless rate would have been 10.4 percent. Had it stayed stable since August, the jobless rate would be 11 percent!
Emphasis in original article. I was working with some new numbers on the Department of Labor website and planned on adding this disturbing chart, which goes to the crux of this point:
It shows a significant number of people (nearly 5%) have moved out of the work force in some manner. This is pretty much unprecedented since 1999, which is as far back as this measure goes. As Mr. Pethokoukis notes,Â this decline in the workforce is artificially suppressing the unemployment rate, which measures the unemployed as a fraction of the workforce – not the population. I like visuals, so to see what Mr. PethokoukisÂ was getting at I charted what the unemployment would have looked like if the workforce had stayed steady since August:
It is the difference between a leveling off in the unemployment rate versus a continued rise to new heights of national suffering. Mr. Pethokoukis goes on to note some other hard truths:
5. But wait, thereâ€™s more! The U-6 rate rate which combines the basic jobless rate, discouraged workers, part-timers-who-would-rather-be-full-tim ers climbed to 17.3 percent. And the average duration of unemployment rose to a record high 29.1 weeks.
Interestingly enough, as the U3 rate has leveled off, the U6 rate is starting to tick slightly higher again. At any event, neither metric looks like it will be dropping back down anytime soon – which underscores the political damage this is having on the Democrats. Damage they well deserve given their failed stimulus bill (more on that in a bit).
But that is not the worst of it either. I have been tracking a little noticed metric which is only reported in the weekly unemployment reports – the number of people on the Emergency Unemployment Compensation (EUC) benefit. The EUC is the last vestige of the unemployment safety net, and its rolls skyrocketed in December:
So while the unemployment rate was the same, the number of people who have been without work so long they have run through the traditional unemployment benefits and the extended unemployment benefits keeps growing. The recession has been going on so long that the waves hitting the EUC just dwarfs the job numbers each month.
The administration wanted to note that in November the economy gained 4,000 jobs, even though it lost 85,000 in December. Well I would like the country to know that in September 208,421 people joined the EUC roles. In October 272,185 people joined, and in November 604.209 joined! That is 150 times the number of jobs created.
December’s reporting is not even complete (1 week left to go), yet a stunning 917,110 Americans joined the EUC rolls last month. It will easily hit a million by next week’s DOL report on unemployment. This number represents well over 10 times the number of jobs lost in December.
Since the liberal stimulus bill was passed in FebruaryÂ 3,674,743 Americans have blown through all the other unemployment benefits the government has to offer and are now on EUC. That is a 250% increase!
We are nowhere near reversing the job situation when we cannot even reduce the rising tide of Americans hitting the EUC. So why are these employment indicators not reacting to the stimulus bill? Because the stimulus bill’s ‘shovel ready’ jobs programs were nowhere near ‘ready’.
The federal government has a byzantine process for moving congressional money to verified projects (the process of ‘obligating’ the money), and then another whole suite of processes to get the money on contracts to the private sector – the point when the money is actually ‘spent’. These rules, reviews and documentation requirements mean it takes over a year to get money flowing to the private sector. Which is why the so called ‘stimulus’ bill was anything but stimulating for job creation. The money spent so far was on unemployment benefits while the job creation has yet to show up.
I have been tracking 6 government entities on their progress in spending stimulus money meant for job creating programs. I am happy to announce that as of Christmas Day they have collectively been able to spend 10% of the money allocated to them in the stimulus bill on make-work projects.
This first graph shows the amount of funds allocates to each organization (far left columns), how much they have been able to get through the obligation process (mid left columns), how much they have been able to actually spend (mid right columns) and the amount left unspent (far right columns).
This second graph shows the amounts obligated, spent and unspent as a percentage of their total money allocated.
Of the $105 billion allocated to these 6 groups they have spent, over the last 10 months, only $10.5 billion (as of 12/12/09 reporting at recovery.gov). Â This is pathetic and the reason why the economy has not been rebounding.
Instead of using the tried, true and broad stimulus of personal and corporate tax cuts which impact the economy immediately, the liberals went with the fantasy of government white knights coming to the rescue. Sadly for them they forgot how sluggish the Â bloated federal bureaucracy is (or just never cared).
Which brings us back to Mr. Pethokoukis:
8. Combine a weak labor market â€“ which may appear to be getting worse to voters â€“ with the moribund housing market and rising gas prices, and you have a toxic triple threat that will be poisonous to Democratic incumbents and further drain Obamaâ€™s political capital.
As I said, the liberals in Congress and Obama administration have earned the wrath of the American people. Americans need jobs first and foremost. They need good paying jobs.
The liberals were so hell bent on not being Bush they wasted an entire year pretending the mythical government white knight was going to ride to the rescue. That white knight is overweight and lethargic and not capable of helping us.
The answer was always with the American people and their own motivation, drive and determination. By unleashing that power through tax cuts the economy could have been turned around by now.
Instead we have record debt and deficits as far as the eye can see along with the lousy job situation. This is the result when liberal fantasies hit reality. The voters know it and plan to demonstrate their ire at the polls – like they did in the VA and NJ Governor races in 2009. And the Dems absolutely deserve the shellacking they are about to get.