President Obama Is Running Out of Jobs Excuses

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Friday's Employment Report from the Bureau of Labor Statistics (BLS) was so bad that the Obama administration didn't even bother to tout the reported 0.1 percentage point decline in the "headline" (U-3) unemployment rate. They knew that to do so would just make them look completely out of touch.

How bad was it? The number of people with jobs (BLS Household Survey) declined for the second month in a row, falling by 169,000 in April after easing by 31,000 in March. This means that there were 200,000 fewer Americans with jobs in April than there were in February.

The exodus of discouraged Americans from the workforce, which is the big ongoing story of Obama's so-called economic recovery, continued in earnest during April. Labor force participation, which is the percentage of working-age adults who either have jobs or are looking for work, fell to 63.6%, which is the lowest level since December 1981.

A total of 342,000 American's gave up looking for jobs in April. Because our working-age population increased by 180,000 during the month, the ranks of discouraged workers increased by at least 463,000 during April. These numbers spell "recession", not "recovery".

April's 0.1 percentage-point decline in the unemployment rate, as well as the reported 8.1% unemployment rate itself, were pure illusion. Adjusted to the labor force participation rate when Bush 43 left office (65.8%), our unemployment rate actually increased by 0.2 percentage points in April, from 11.0% to 11.2%. Adjusted to the labor force participation rate when we last had full employment (67.3%, the level of April 2000), our unemployment rate increased from 13.0% in March to 13.2% in April.

April 2012 marks 12 years since we last had full employment. Since then, our working age population has increased by 30.8 million, but (on the margin) only 31% of these people have entered the labor force, and less than half of those that did have found a job. America ended April 15.2 million jobs short of full employment, 0.3 million more than just one month before.

April marked the 34th month of President Obama's so-called "economic recovery". During these 34 months, total employment increased by only 1.3%. When compared with the comparable point during our recovery from the 1981-1982 recession, this is pathetic. By 34 months into the Reagan recovery, total employment had increased by 8.6%. If the current economic recovery had been as good, there would be 10.2 million additional Americans working today.

The markets treated Friday's BLS report as a nasty surprise. The Dow Jones Industrial Average fell by more than 168 points. While the report was obviously a shock, it shouldn't have been. The employment numbers were consistent with the GDP report that came out on April 27.

During the first 10 calendar quarters of Obama's economic recovery, real GDP (RGDP) grew at an annual rate of 2.45%, while total employment grew at a 0.22% annual rate. This suggests that at the 2.2% RGDP growth rate reported for 1Q2012 by the Bureau of Economic Analysis (BEA), we should expect total employment to be stagnant. In this light, the 200,000 decline in total jobs over the past two months appears to represent a partial correction of the reported 428,000 job gain in February. If economic growth does not accelerate, we can expect total employment to fall further.

Errors in economic policy show up first and fastest in the total employment numbers. For example, it took the National Bureau of Economic Research until December 1, 2008 to conclude that the U.S. had entered a recession in January 2008. However, total employment peaked in November 2007, and, by January 2008, it was clear that the trend was downward.

Obamunism is failing, and its ongoing failure is reflected in the employment numbers. Obama's Keynesian mental model of how the economy works is simply wrong, so his remedies, which are based upon Keynesianism, aren't working.

Keynesians believe that economic growth is driven by spending, and that government borrowing and spending will increase total spending, and thereby boost RGDP. It isn't, and it won't, so it doesn't. Obama's signature remedy for our economic woes, "stimulus", was an $831 billion flop.

Keynesianism is a superstition, and no amount of real-world evidence can penetrate a mind in the grip of a superstition. When Obama's massive 2009 stimulus program had the same impact (i.e., none) as Bush 43's smaller programs in 2001 and 2008, Keynesians simply declared that, "It just wasn't big enough". Pop quiz: if your plan is to raise the water level in a pond by drawing out a bucket of water and pouring it back in again, how big a bucket would be "big enough"?

The reality is that investment drives economic growth. It is investment that creates productive capacity, and nothing can be purchased unless it is first produced. During the first 11 calendar quarters of the Reagan economic recovery, real nonresidential investment increased at a 9.4% annual rate, RGDP expanded at a 6.1% annual rate, and total employment grew at a 3.1% annual rate. The comparable numbers for Obama's (non) recovery are 6.0%, 2.4%, and 0.5%.

All of the major elements of Reaganomics, a strong dollar, marginal tax rate cuts, and reduced regulation, favor capital investment. Obamunism is the exact opposite of Reaganomics in these three areas, and it therefore discourages investment. When you discourage investment, you discourage employment. The result is the most discouraging jobs picture since the Great Depression.

But wait! There's more!

Right now, the economy is heading toward a "fiscal cliff", with massive tax increases scheduled for January 1, 2013. Could this be impacting capital investment now, and thereby RGDP and jobs?

Well, let's see. You climb in the back seat of Thelma and Louise's 1966 Thunderbird. Thelma floors it, and she begins racing for the cliff. How likely are you to say, "Hey, let's invest in a new carburetor"?

Uncertainty and fear about 2013 are impacting investment decisions. After growing by 15.7% during 3Q2011, nonresidential business investment slowed to a 5.2% growth rate in 4Q2011 and then fell at a 2.1% rate last quarter.

Capital investments not made are beginning to show up as jobs not created. Obama will have to put his excuse machine into high gear to deal with the jobs numbers that we can expect to see between now and the election.



Louis Woodhill (, an engineer and software entrepreneur, and a RealClearMarkets contributor.  


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