The New Underclass and Barack Obama
Drilling a bit deeper and moving beyond the 8.9 percent unemployment rate and 192,000 jobs created, here is what I found:
- The U.S. labor force remains as small as it has been in a generation
- More than 5 million Americans have disappeared from the job rolls
- If the labor force was currently at 2007 levels, the unemployment rate would be a whopping 12 percent – the worst since the Great Depression.
As it is, the broader unemployment rate, which includes those who are underemployed and discouraged workers, is still an agonizing 15.9 percent. What’s more, the Federal Reserve believes that the high number of people out of work for 27 weeks or longer is creating structural unemployment. (The longer you are out of work, the harder it is to get that next job.) No wonder the Fed now believes the economy’s natural rate of unemployment has increased from a bit under 5 percent to a bit more than 7 percent.
In short, you may have a much larger pool of the long-term unemployed than is historically typical in America, something more akin of what is seen in Old Europe.
This is why it is critical to deal comprehensively with the Axis of Economic Evil: Big deficits, high taxes and onerous regulation. America must get more competitive and productive. I find the below chart from McKinsey particularly scary since it shows how much job growth is happening in unproductive areas of the US economy.