More On US Jobs

Cal Morton over at A Fistful Of Euros suggested me another good link [five-page pdf] on recent developments in the US jobs market. What is worth a mention here is at the beginning:

Household Survey -- The unemployment rate edged down to 5.4% in August from 5.5% in July. The decline ... reflects a contraction in the labor force (-152,000) and a small increase in employment (+21,000)...

The nation's unemployment rate overstates the strength in the labor market. In August, the participation rate (civilian labor force as a percent of the civilian noninstitutional population) dropped to 66.0% from 66.2%. The unemployment rate does not capture the steady decline in the participation since the 2001 recession and the expansion thereafter. Typically, the participation rate increases as the economy recovers. By contrast, in the current expansion, the participation rate has shown a net decline in the entire expansion period...

In other words, more long-term jobless (who didn't find a job while their jobless benefits lasted) and housewifes fall out of the statistic (especially if the availability of jobless benefits is curbed), and the jobless number is deceiving.

This kind of decrease in the jobless number is "practised" all across the world, with varied brazenness and facing varied public awareness. I think it would be wise to keep the jobless number only for budgetary reasons (to estimate how much the State or local communities will spend on this type of social help), and adopt the number of employed people as percentage of the total population (or at least the total adult working-age population) as the measure of the jobs situation.

It would make much more sense. As I have argued several times, the supposed economic danger of an ageing population as parents have few children and healthcare improves is one of the greatest social-economic myths of our times. The reality is that one has to look at the working population as supporting all the non-working population - whether by caring for children, by paying taxes that fund jobless benefits, or paying into retirement funds that pay out pension to the elderly. Any talk about fewer young people paying for more seniors forgets that retirement age doesn't have to and indeed isn't fixed over decades. It in fact is often lowered rather than raised in most of the Western world, because employers often prefer to 'rationalise' by sending older people into early retirement, or don't take older people as they have the choice when there are more jobless people than jobs on offer.

That is, the neoliberal argument that exploding sums of money to be paid into retirement funds per employee prevents more jobs is a ridiculously wrong one: if you decrease these payments by raising the retirement age, you will have to pay more taxes on jobless benefits; if you increase immigration, similarly; if you get parents to have more children, you will have to pay more so they can raise those children and on more unemployment benefits when they grow up.

To recap, arguments about the 'demographic effect' are at best wrong and repeated without much thinking, at worst a cop-out to hide an agenda, while the real big economic fact of our time is that developed nations suffer a continuing job cruch only abetted by the expansion of low-wage jobs; and proposed cures to the wrong problem will only increase the real problem, and by creating the newly wide, newly poor 'service class', ultimately (when it will again be earnings- rather than credit-based globally) cut away at one pillar of modern capitalist economy, consumption.

Bush may have got the US economy to temporarily test the edges of such a situation, at least so implies the report I started with:

...earnings increased 5 cents to $15.77, taking the year-to-year increase to 2.3%. This is the largest increase since September 2003. However, hourly earnings are falling short of the current pace of inflation (see chart 5). A decelerating trend of real earnings is a negative implication for consumer spending.