In the Wall Street Journal article, Labor Market Shows Signs of Progress, by Luca Di Leo and Sarah N. Lynch, (Jan 2, 2010), the authors claim “The number of people filing new claims for unemployment benefits in the U.S. fell in the latest week to its lowest level in nearly 18 months, a sign the labor market may be turning the corner.” They illustrate their claim with a graph showing a steady state initial jobless claim rate in 2007 of 300,000, a peak in the rate in early 2009 of 650,000, and a current rate of 460,000. They also stated that 4.8M people had been collecting jobless benefits for more than a week.
I am not a research analyst, just a guy trying to find a job and feed my family, so my research resources and time are limited. However, even a person like me, with a government (public) high school education, can do the math.
According to Wikipedia, the United States employs a total of 155M workers. According to news reports, 10% of the workforce is unemployed or 15.5M. Assume in the best of times, 5% unemployment is the norm and monthly initial claims are 300,000 (WSJ data). That means approximately 7.5M people need to be put to work. According to the WSJ data, 4.8M are drawing unemployment for at least a week, which means that 2.7M are long term unemployed who have given up looking, an assumption we will come back to later.
According to the Bureau of Labor Statistics over the last decade (1999 – 2008), JOB CREATION has averaged approximately 65,000 jobs per month. This means that at historical job creation rates AND at a stable initial claims rate (300,000), it will take 115 months to regain the 7.5M jobs that represent 5% unemployment. The truth is that initial claims rates are still at 450,000 per month (we are losing jobs but at a lesser rate), two-thirds of the jobs CREATED OR SAVED (I love that term ... another Obama sleight of hand) are GOVERNMENT (read OVERHEAD) jobs, AND there is no guarantee that the jobs even exist to be filled because companies may choose not to rehire because they have realized PRODUCTIVITY INCREASES THROUGH AUTOMATION over the past 10 years and the future in an Obama world is extremely risky from a regulatory and tax perspective.
For those political hacks that believe I chose my data to help George Bush, note that I did include 1999, a Clinton year (average 264,000 jobs per month) AND I did not include 2009, a bad year for Obama (-340,000 jobs per month). I know, I know, political ideologists would claim 2009 was Bush’s fault. My rebuttal to that is to get a meaningful mathematical result, one must treat the data between presidencies consistently. Therefore, perhaps a better way to treat the data is to assume that the market discounts the jobless rate by ANTICIPATING changes in policies between administrations so that an administration’s impact actually starts in the year preceding its actual election or re- election. Under this theory, 1999 (264,000 jobs per month) was really Bush’s first year and not Clinton’s last year and 2008 (-265,000 jobs per month) was Obama’s first year and not Bush’s last year. As a laymen statistician, I can find some support for this argument by noting the inverse correlation between Obama’s popularity in the polls, starting in the April – May 2008 timeframe, and the gains and losses in the stock market. Another interesting analysis might be to focus on who controls congress rather than who is president. Ahhh, this is an analysis for a different day. As they say, so little time and so little money!
Assuming you and I disagree on the preceding analysis, let’s examine what happens if we split the difference. In that case the average job creation rate across the Bush and Clinton Administrations AND eliminating 2009 as an anomalous year, results in an average monthly job creation rate of 82,000. If we agree on the other numbers and relax all my prior assumptions and constraints, then the best we can expect from the economy is recovery in 91 months, assuming 7.5M unemployed or 58 months if you assume 4.8M unemployed.
No matter how you cut it, the picture is not as rosy as the social progressives (Social Democrats) want you to believe. The only way to stimulate the economy is to reduce the size of the government and its need for taxes and let American innovation in the free market do the rest.
Those who think the government is going to fix this are relying on a false god.
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