Friday's Unemployment Report Shouldn't Disappoint Obama

The "Employment Situation" report released by the Bureau of Labor Statistics on Friday was terrible, but it was not disappointing. Disappointment requires surprise, and no one should be surprised by the bad employment numbers, least of all President Obama, whose economic policies caused them.

Car engines require air, fuel, and ignition to run. If you stuff a rag in your engine's air cleaner, fill your gas tank with water, and disconnect your spark plug wires, it is not reasonable for you to say that you are "disappointed" when your car won't start.

Similarly, economies require stable money, low tax rates (especially on savings and investment), and sane regulations in order to grow and create jobs.

Obama's economic policies include doubling down on George W. Bush's "weak dollar" policy, an upcoming "Taxmageddon" of marginal tax rate increases (including new taxes on savings and investment to fund Obamacare), and allowing the EPA to savage the U.S. energy industry in the name of fighting "climate change". With an economic program like this, it is more accurate to call weak GDP and jobs numbers "guaranteed" than "disappointing".

In his analysis of the BLS report, Alan Krueger, Obama's Council of Economic Advisers (COEA) chairman, noted, "...it is important not to read too much into any one monthly report..." Fair enough. Let's look at what happened to employment during the just-completed second calendar quarter of 2012.

From a jobs point of view, 2Q2012 was a disaster. Here are some highlights:

• While, at 8.2%, the BLS "headline" (U-3) unemployment rate was the same at the end of 2Q2012 as it was at the end of 1Q2012, the broader U-6 unemployment rate rose from 14.5% to 14.9%.

• The broader still "SGS Alternate" unemployment rate, compiled by Shadow Government Statistics, increased from 22.2% to 22.8% during the quarter.

• Adjusted to the labor force participation rate assumed for Obama's $842 billion "stimulus" program (65.8%), the unemployment rate at the end of 2Q2012 was 11.0%, unchanged from the prior quarter. The reported 8.2% unemployment rate is an artifact of the unprecedented drop in labor force participation under Obama.

To put this 11.0% unemployment number in perspective, Obama promised that if his stimulus program was passed, the unemployment rate would never exceed 8.0%, and that it would be down to 5.8% by June, 2012.

• Total employment (BLS Household Survey) increased by only 381,000, which just barely kept pace with the growth of the working age population. The total number of unemployed also rose during the quarter, by 76,000.

• The ultimate measure of whether the job situation is getting better or worse is our distance from full employment (defined as an employment to population ratio of 64.7%, which we achieved in April 2000). America moved only 25,000 jobs closer to full employment during 2Q2012. At this rate, it would take us 152 years to get everyone back to work.

The bottom line is that, from a jobs point of view, 2Q2012 looked far more like "recession" than "recovery". The economy has been essentially dead in the water for the past three months.

So, what are Obama's ideas for getting the economy moving again? What could we expect if he were to win another term? Again quoting Obama COEA chief Alan Kruger:

"President Obama has proposals to create jobs by ending tax breaks for companies to ship jobs overseas and supporting State and local governments to prevent layoffs and rehire hundreds of thousands of teachers."

In other words, Obama's plan is to raise taxes, borrow more money, and hire more government employees. That's it. That's all he's got. Intellectually, Obama has gone "all in" on Keynesian stimulus.

If you're not sure how Keynesian stimulus works, you can try it for yourself. Let's say that you have a car that gets 30 miles per gallon and has a 20-gallon gas tank, giving it a range of 600 miles. And let's say that you want to drive from New York to Chicago, which is 800 miles away. You can save money by using Keynesianism. Here's how.

Put 20 gallons of gasoline in your car and head west. When you get to Youngstown, Ohio, you will have gone about 400 miles and used 13.3 gallons of gas. Siphon the remaining 6.7 gallons of gasoline out of your tank. Now, pour it back in. Because you put 20 gallons of gas in your car in NYC and another 6.7 gallons in Youngstown, you should be able to make it to Chicago just fine.

While this example may seem funny, this is, in fact, exactly how Keynesian stimulus works. First the government sells bonds (thus siphoning money out of the economy), and then it spends the money it raised (thus pouring it back into the economy). This is what Obama did in his $862 billion stimulus program, and this what he is proposing to do more of to produce better jobs numbers in the future.

Unfortunately, Keynesianism isn't just farce. It has a tragic side as well.

House Minority Leader Nancy Pelosi has called extended unemployment benefits, which have been championed by Obama, "the best jobs program". This statement reflects Keynesian thinking: if you give unemployed people money, they will spend all of it, thus stimulating demand.

Perhaps, but if you pay people not to work, more of them will choose not to work. The average duration of unemployment moved up during 2Q2012, from 39.4 weeks to 39.9 weeks.

Obama is a progressive. Progressivism calls for "progressively" expanding the size and power of government, and "progressively" getting more and more people dependent upon the state.

The dark side of Obama's progressivism can be seen in the Social Security Disability Insurance program. While the economy created 80,000 payroll jobs in June, 85,000 people went on the disability rolls during the month. Over the three years of Obama's so-called "economic recovery", total employment increased by 2.4 million, but the number of people collecting Social Security disability insurance rose by 1.1 million. During June alone, almost 275,000 people submitted new applications for Social Security disability benefits.

It is clear that the incidence of true disability has not skyrocketed in recent years. What has exploded is the use of the Social Security disability program as a form of early retirement by workers that have given up on finding jobs. Unfortunately, the Social Security disability program acts like a "roach motel" - workers go in and they don't come out. Very few people that enter this program ever work again. Here is one place that the human and moral cost of Obama's Keynesian economics and "politics of dependency" is starkly visible.

"Insanity" is doing the same thing over and over again, expecting different results. President Obama seems determined to stick with his weak dollar policy, tax increases, and regulatory expansion, so he should not be disappointed on the first Friday of each month, when the BLS reports the disastrous impact of his policies on employment.