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When It Comes to Economic Reports, Beware the Trojan Horse

Many news and media channels are embracing and heralding the latest monthly economic report released by the Bureau of Labor and Statistics as a light at the end of the tunnel… or so it appears there is.

On the surface, it has a nice shine to it.

Having increased nonfarm payroll employment 236,000 jobs is something to note.

But there is a number that is being ignored and, though it is almost always a small number, it has a big impact due to what it represents.

The number not in the labor force‘, that is, the number that have dropped out of the labor force for one reason or another, increased last month by 296,000.

The total for that number now stands at 89.3 million people — for any country, this is a substantial pool of resources that is not be utilized.

This number is also traced by the U-6 economic indicator, which is not without flaw but far more accurate than the U-3 everyone is getting all excited about.

To compensate for this, 296,000 jobs need to be created just for this group alone, in addition to the 236,000 that were already created, or a total of 532,000 jobs created.

But one month alone doesn’t constitute a need to be concerned.


However, the history of this number has not been very good since 2008…

U6_1994-2013_portalseven

img credit : portalseven.com

Even if a country does not add one job to their economy, they can still see their unemployment percentage slide just by having fewer workers in the job market each month.

The equation for calculating the unemployment rate says this is so…

Unemployment Rate = Unemployed Workers / Total Labor Force

A trojan horse indeed — eventually, and at the pace the U.S. is going, there will not be a competitive workforce, for both an internal as well as global market.
Looking at the different categories of the unemployed, and taking the current rate of new jobs being created, we can calculate how long it will take to recover fully from this present economy (it is understood that there will never be a 100% employed nation)…

  • 4.8 million unemployed longer than a year : 20 months
  • 12.7 million total unemployed : 54 months (4.5 years)
  • 3.6 million discouraged : 15 months
  • 89.3 million not in the labor force : 378 months (31 years)

To sustain a sound economy, the businesses of a country have to be creating a minimum of 25% more jobs than the number who going unemployed.

Being a free enterprise, as well as a republic with a democratic process, we can’t control consumer and business purchases, so sustaining a sound economy is almost never attained for long periods of time, 10-12 years

seems about the longest (government controlled economies have a tendency to fare even worse).

Every country has new entries into the job market, and the U.S. is no exception.

However, the U.S. is already experiencing a drop in the number of new entries to the job market for two reasons…

  • the expectation of employers is higher for new entries due to a higher level of technology used, requiring skills not yet gained
  • many companies are not replacing those that have exited their workforce due to restraints on capital and research, mostly resulting from government taxation and costly government regulation

With the current economic situation, to recover before 2016 (the next Presidential election), the economy needs to see at least 1,500,000 new jobs every month, continuously.

At that pace, there will be 66 million new jobs and a U-6 of nearly 5%…

The U.S. did have a U-6 of 20% in 1982 in the first 2 years of the Reagan administration but this was quickly stemmed with the Reagonomics, returning to levels of 5% by 1988.

President Clinton faced the same dragon in 1992, seeing the U-6 go to 15% by his second year and then taking both his terms in office to reduce it to 5%.

President Bush also faced the same dragon with the U-6 hitting 12% in his first two years of office as well, and like his two predecessors, was able to

bring the U-6 back down to 5%.

Since President Obama has been in office, the rate at which the U-6 increases equals the rate experienced during 1930 when it hit 40% (while the U-3 was 25%) — and , unlike his predecessors, it never stopped increasing during his first term in office, and is still going strong with the first quarter of his second term.

It remains to be seen if the U-6 will level off, never mind start declining.

Given the government and economic policies in place today, there is much doubt this will be the case as the policies that lead to the turn-around of the U-6 by prior Presidencies are policies abandoned by the Obama administration.

There are other reasons to be concerned…

  • Money supply too high : the economy is flooded with paper money and the history of such a policy is the same. Hyperinflation will result if the amoung of currency in an economy is too high. There is not one country that has escaped this principle. And the longer a government took to do something about their supply of currency, the deeper the damage and the longer the turn-around.
  • stagnation : Prices are increasing and the economy is stagnant. This is particularly true for staple prices — food, electricity, oil, gas, water. All have increased dramatically in the last 4 years. This was the downfall for Jimmy Carter inspite of his ability to produce jobs in the private sector.
  • cost of goods and services increasing dramatically in the last 4 years : the result of increased prices of staple items means everything goes up, period.

Conclusion

What has been learned is to question what is being heralded as good news, and to question a President and Congress with an economic history such as this that says they are for American business — least we fall for the arrival of yet another Trojan Horse.

What Are Your Thoughts??

  What is America’s top economic challenge?

  Is it a good thing that nearly 40% of Americans are off the tax rolls?

  More than 20 Nations have Flat Tax systems, why shouldn’t America do the same?

Please share your thoughts with our audience in the comments section below!

More on This Topic




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Garrett O'Brien

Garrett is the Chairman for the Executive and Advisory Boards for The HRIS World Research Network


With 20+ years in roles as a client executive sponsor, project manager as well as functional / technical lead, Garrett is sought for his expertise globally.

He has an extensive background in implementing multi-product, multi-line HRIS environments using a systematic and needs-focused approach that provides a smoother transition from legacy to new systems.

Garrett’s previous clients include ADP, Case New Holland, Cushman & Wakefield, Honeywell International, Lubrizol, MAHLE, Sodexho USA, and many others ranging from SMB’s to the Fortune 50.

Currently, Garrett works from his home office near São Paulo, Brazil as the publisher and editor for The HRIS World Research Network. Also, he contributes articles for various other IT, Cloud, and HRIS blogs.

Garrett’s current roles…

♦ Publisher, editor, writer, and owner of 6 leading HRIS system and career blogs which are read by 45,000+ monthly visitors monthly in 90+ countries, 40%+ the audience being decision-makers in their organization (and about half of that being C-levels!).

♦ Serves on the HR.com Advisory Board for the CoreHR Community

♦ Is the CEO for CGServices USA, focusing on multi-provider, multi-line system for HRIS systems

♦ Is a Council and Education Member of Gerson Lehrman Group Council, helping institutions of the world leaders meet, engage and manage experts across a wide range of sectors and disciplines.


In the news…
HR and the Cloud

Isabella Chan of HR Matters talks to Garrett O’Brien about the growth of cloud computing and building a technology strategy around HR.


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