Obama's Lofty Rhetoric Is Mugged By a Grim Jobs Reality
On Thursday night, President Obama gave the nation some soaring rhetoric about his plans for jobs and the economy. On Friday morning, the Bureau of Labor Statistics (BLS) delivered a grim dose of reality.
Ignore the reported 0.2 percentage point decline in the "headline" unemployment rate, from 8.3% to 8.1%. This reflected a huge number of Americans applying for disability, or otherwise dropping out of the labor force. The real unemployment rate, adjusted to the labor force participation rate when Bush 43 left office, rose from 11.2% to 11.3%.
Friday's BLS report was economic reality laughing at Obama's Thursday night plea to voters to "stay the course". The numbers were ugly. Total employment (BLS Household Survey) in August declined by 119,000, after falling by 195,000 in July. Average weekly wages fell.
In August, the impact of declining total employment on the headline unemployment rate was more than offset by a shrinking labor force. On the margin, none of August's 212,000 new working age adults sought employment, and 368,000 Americans that had been looking for work during July gave up.
Obama has presided over a massive exodus from the workforce. Since he took office, the labor force participation rate has declined by 2.3 percentage points. This is equivalent to 5.6 million Americans giving up the hope of finding a job. To find a lower labor force participation number than August's 63.5%, you have to go back to May 1978.
The nation moved 256,000 jobs further from full employment during August. Full employment is now 5.1 million jobs more distant than it was at the beginning of Obama's so-called "economic recovery".
The American people hired Barack Obama as a "turnaround CEO". His predecessor, George W. Bush, had trashed the economy, and new management was desperately needed.
Turnaround situations are common in the business world, and there is a body of knowledge regarding them. So, let's look at Obama's performance as a turnaround CEO.
If Obama had been hired by a troubled private company, the Board of Directors would have fired him long ago. This is because Obama's assignment was to fix the economy, but he made enacting Obamacare his highest priority.
Imagine if Research in Motion (RIM), the company that makes the BlackBerry smart phone, hired a new CEO named Barry. The RIM Board would be expecting Barry to find a way to stop their loss of market share to Apple's iPhone. Now, imagine if Barry told the Board that his first order of business was going to be to start a home building division.
Right. Bye-bye, Barry.
A Board of Directors typically gives a turnaround CEO one year to develop a plan, implement it, and start to produce results consistent with his plan.
Obama did, in fact, develop a plan for economic recovery. It was called, "The American Recovery and Reinvestment Plan". Obama borrowed and spent $862 billion to implement it. And, it was a spectacular flop.
Obama put his faith in Keynesian stimulus. His plan promised that America's unemployment rate would never exceed 8%, and that it would be down to 5.6% by now. In fact, adjusted to the labor force participation assumed by Obama's plan, our unemployment rate peaked at 11.6%. It is 11.3% today-twice as high as promised. And, it has been rising for the past two months.
No Board of Directors would tolerate a performance like Obama's for more than a year; much less renew his contract another four years. However, on Thursday night, Obama asked the American people for another chance, so let's look at what he is proposing for his second economic turnaround plan.
It is possible to divine the outline of Obama's economic plan from his acceptance speech at the Democratic National Convention. Here are the high points:
• Raise marginal tax rates on investors and high-income individuals.
• Spend more federal money on education, infrastructure, and aid to state and local governments.
• Expand subsidies for uneconomic energy sources, including wind, solar, clean coal, and biofuels.
• Have federal government central planners decide where investment dollars should go (e.g., developing cars that average 54.5 MPG, manufacturing, college educations).
• Expand federal control of, well, just about everything.
• Remain utterly clueless about monetary policy.
So, what can the 169 million members of America's Board of Directors expect from Obama's new economic turnaround plan?
We don't have to re-elect Obama to see what his plan would produce. We are seeing it now. America's true unemployment rate is rising as businesses and investors adapt to the mere threat of four more years of Obamunism.
On Friday, the financial markets gave us a reading on both Obama's performance and his plan.
The Real Dow, which is the Dow Jones Industrial Average divided by the price of gold, fell by 1.85% on the day. This is equivalent to the Dow declining by 246 points, if gold prices had remained constant. (The nominal Dow went up by 15 points on Friday, but gold prices rose sharply.)
Since Bush 43 left office, the Real Dow has fallen by 23%. It is down by 16% since Obama's economic recovery began. And, the Real Dow is down by 81% since Bill Clinton left office.
If you want to know why the Democrats were fawning over Bill Clinton in Charlotte last week, it is because his policies, including a strong dollar, a capital gains tax cut, spending cuts, and no major new regulatory initiatives, actually worked.
Clinton presided over 3.9% real average annual economic growth, an increase in total employment of 18.6 million, and a 302% increase in the Real Dow. Thus far, Obama has delivered real growth of 0.6%, a net loss of 1.1 million jobs, and a 23% decline in the Real Dow. And, based upon this performance, Obama is asking for another four years.
The notion that Obama should be given a second term to finish what he has started is bizarre, to say the least. Americans have to live in the real world, and it's time that the nation had a CEO that knows the difference between progressive rhetoric and economic reality.