Friday, January 15, 2010

Notes on the Jobs Data

Someone noticed that the employment figure released recently by the Federal government was actually slightly less than the number they released ten years ago. I have looked for this comparison on the web, with no luck. I heard this report on PJTV, in the weekly discussion with Yaron Brook.

It is disturbing that employment is nearly the same as ten years ago. We are not talking about percentages here. It is the actual number of people employed. It means that the steady inflation that is suppose to make us prosperous didn’t work. Bernanke’s solution to all our problems hasn’t been a solution.

But two things come to mind, mine, anyway. One thought moderates the news, the other makes it worse.

The first thing that needs to be noticed is that an exactly ten-year comparison doesn’t really give you an honest read on what the figures mean. Given that we have been forced to live through two business cycles during that time, it would be a better comparison to go from peak to peak, or trough to trough. In this case the lowest employment during the earlier period of time as a basis of comparison to today. It might not look as bad. Of course, you might still argue that the growth in the population over the same period would tend to mean that the number of people employed today should still be higher today, even if this is a trough and the earlier number was mid-lower cycle. Okay, that’s true. (Note that this is the employment number, not the unemployment number, which has other problems.)

On the other hand, today’s number is bogus, and make the comparison to the earlier, ten-year old number, much worse. This is especially true if the government included in today’s figure any of the Obama, make-work “jobs”, that just soak up money.  There are more government "jobs".  There are also a lot of jobs in private enterprise that consist of doing stuff the government requires but don’t actually produce anything. These “jobs” don’t actually add anything to the economy either. All of these new jobs combined, new government jobs, Obama make-work jobs, and jobs created outside of government just to take care of government required reporting or compliance, mean that the actual number of productive jobs today are much fewer than ten years ago!

So, if you want to look at the level of prosperity-producing employment of today vs. 10 years ago, given the misleading, arbitrary choice of dates, you would have to conclude that the economy has lost a lot of jobs and that we are experiencing as prolonged decline in our living standards.

The resource that is most scarce in any economy is people. The more people you have, the more productive you can be (another point lost on the anti-immigration folks). We actually have lots of people but our government insists on forcing us to employ them in ways that tend to be less and less productive, or not employ them at all.  When will they notice that their whole thing is not working?  Do they care?  No, they don't.

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