Obama likes to brag about how he saved the economy during his Presidency. After the official unemployment rate fell to it’s lowest rate since February 2008 in February of this year, he stated that “The United States of America right now has the strongest, most durable economy in the world. I know that’s still inconvenient for Republican stump speeches as their doom and despair tour plays in New Hampshire. I guess you cannot please everybody.”
So is he right? Technically, it is true that the unemployment rate is now lower then when he took office, but that doesn’t tell us the full picture. When it comes to economics, we always have to ask ourselves what we’re coming something to. If we compare his recovery to all other economic recoveries, we find that his is the slowest since the sixties.
And it’s worse than that! The unemployment rate is hardly a perfect measure. It’s calculated by looking at the total labor force, which is composed of the employed and the unemployed. To be included in the labor force you must be at least sixteen years of age and looking for work. So when the economy has been in the dumps under Obama, many have simply given up looking for work, and are no longer officially counted as “unemployed.” The unemployment rate decreases as a result – but people still aren’t working.
* People who went on disability make up 20.0% of those who left the labor force. It’s never been easier to receive disability payments, and as a result the number of people receiving payouts from the government has skyrocketed.
* People who retired make up 40.4% of those who left the labor force. The huge baby boomer generation, born after World War II, has reached retirement age. They’re moving into the expensive government entitlement programs by the millions, putting the budget under considerable strain now and for years to come.
* People aged 16 to 64 with no disability make up 39.6% of those who left the labor force. This is perhaps the most alarming number. Able bodied, working aged people had been the life blood of the economy. But now they are becoming more and more likely to drop out of the work force altogether, leaving fewer taxpayers to shoulder the burden of an ever-expanding government. A lack of well paying middle class jobs, new laws making it easier to get healthcare without employment, higher wage floors that make it increasingly difficult for low skilled labor to find jobs, and ready access to cheap college loans have all played a role in keeping people out of the job market.
The bottom line is that fewer people are working today than at any point in at least a generation. This lower labor force participation rate presents a challenge for underfunded programs like social security, which rely on new workers to pay into it so that retiring baby boomers can receive their promised benefits, and hinders economic growth. Policies incentivizing work and job creation, such as lower taxes and fewer regulations, will be crucial in reversing the trend.
So is there a way to measure the unemployment rate that includes all those that left the labor force? There exists such a measurement, that’s known as the “U-6” unemployment rate (while the one Obama cites is the traditional “U-3” unemployment rate). Here’s what that looks like:
In other words, the true unemployment rate has been far above 10% for the overwhelming majority of Obama’s presidency, and now stands at 9.7%.
Recovery? What recovery?
H/T Unbiased America
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