When Good News is Bad: The Jobs Edition

Yesterday’s jobs report (for September) was the most depressing I’ve seen yet since 2008.

Unemployment fell to a pre-recession low (5.9%). New jobs were added to both the BLS numbers and the ADP Payroll report. That has to be great news, right? Not really, when you consider that our new low unemployment rate was a result of 100,000 workers who stopped looking for a job because they couldn’t find work.

It gets more depressing when considering the “natural” unemployment rate. Call this the “base line” rate of unemployment (blue line in the chart below). This is the rate of unemployment that is not the result of economic conditions, and therefore is the rate in which we are considered at “full employment.” It currently stands at 5.2%. So look how close that red line (official unemployment) is to the blue line of “natural” unemployment – or “full” employment levels. When the unemployment rate hits 5.2%, the economy will officially be declared healthy by the economic gods at the Fed, and life will be great. Except it won’t, because there will be close to 5 million people without a job who would otherwise have one if life (and markets) were fair & equal. Those people are considered the “missing,” of “shadow” labor force.

And the rate of underemployment is still a going concern (purple line), and still significantly above pre-recession levels.


Yet the people on both Wall Street and K Street will insist that everything is fine. It’s a constant denial that refuses to go away. Just like the inflationistas that have been insisting since 2008 that we will need wheelbarrows full of cash to buy a loaf of bread, the Wall & K street people have been insisting that the economy is just fine; after all, look at the stock market! Except those people refuse to see that the reproduction of capital is happening without the benefit of labor – something that is supposed to be theoretically impossible.

My favorite “denial” point from Wall Street is that 100,000 workers dropped out of the labor force because of baby boomers retiring; except they’re not, because people are retiring later from the economy. Also, more than 12 MILLION people in the form of recent college graduates have been hitting the labor market since the summer.

Then there is the great disparity in the labor market itself: where you have a 50% chance of not finding a job within 9 months (up to June 2014 data), and if you don’t find a job within 9 months, then you’re likely to never find one.


So the great news is very depressing from the standpoint of constant denial from policy & market makers, those nearly 5 million people who really wanted to work, but just gave up, and the idea that we’re near full employment while 93 Million people would either like a job, or like more hours because they’re part time. That’s 67% of the 62% of the labor force. With that many people unemployed or underemployed, someone is going to have to give out free Champaign to celebrate, since so many people can’t afford to celebrate.

This entry was posted in Economics, Labor, Macroeconomics, Political Economy, Statistics. Bookmark the permalink.

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