Figures lie, and liars figure

A new unemployment number was released today, and, as usual, Matt Drudge nails it:

THEY BOTH CAN'T BE RIGHT: 

Reuters: Labor market slowed sharply after strong gains in winter, spelling trouble for Obama... 

AP: Stronger job creation could help Obama's re-election hopes...

In addition to the political spin, we have the intricacies of statistics to wade through. The new unemployment rate is 8.3 percent. That's up from 8.2 percent last month. That's the number that gets all the notice and noise. So it's up, and that's bad for Obama, unless the media can spin the heck out of it.

But let's look behind the number. First of all, according to the Labor Department, 163,000 new jobs were created in July. Economists had expected only 100,000 -- so that's good, right? Well, no -- it's going to take a lot more than that to get the unemployment rate down.

And that number of new jobs is completely artificial. The Labor Department always adjusts the number to reflect seasonal issues, such as teachers not teaching in the summer. So ... in reality, the actual number of Americans working dropped by 195,000, with the net job gain resulting primarily from seasonal adjustments. They do that so the number doesn't jump around wildly, like some people I know.

You have to real careful reading the newspaper, if any still exist.

At the top of page one of The Wall Street Journal today we had:

Economy Adds 163,000 Jobs 

U.S. payrolls increased by a seasonally adjusted 163,000 jobs last month, the Labor Department said Friday, but the unemployment rate ticked up one-tenth of a percent to 8.3%.

Then later in the morning it was changed to:

Hiring Climbs but Jobless Rate Ticks Up 

The U.S. economy added more jobs in July than in any month since February, but the unemployment rate ticked up, suggesting the U.S. recovery remains too weak to bring down high unemployment.

See what I mean? Would you take one of those "seasonally adjusted" jobs? I wonder if you get seasonally adjusted coffee breaks.

Some groups in the population are suffering even more. Unemployment for blacks fell from 14.4 percent to 14.1 percent, while the rate for Latinos slid from 11 percent to 10.3 percent. The unemployment rate for teenagers edged higher to 23.8 percent.

And the people I'm always concerned about, because I'm one of them, are those who are underemployed or who have just given up looking. A measure that takes into account those who have stopped looking for jobs as well as those working part-time for economic reasons has hovered well above the headline rate that only counts the unemployed actively looking for jobs. That more encompassing rate edged higher to 15.0 percent.

It's an important number, because if you just give up looking for work, you actually contribute to making the basic unemployment rate look better. 

Go figure.

Obamaman is doing okay

Here's your president's record.

The unemployment rate is now 8.1 percent. Obamaman trumpeted that yesterday. You'll hear him do that until election day, with some variation of "It's getting better, but we have a lot of work to do."

The reason the rate dropped is that so many people just gave up looking for work. You have to look for work to be counted as unemployed.

In fact, the number of people who left the labor force in April amounted to 522,000!

See if Ann Barnhardt explains it for you.

Once again, just making sure everyone understands the sickening farce that is the "unemployment figure." I said last year that the reported "unemployment number" would be UNDER EIGHT PERCENT no matter what in Q4 2012. Sure enough, it appears that I will be proven exactly right. Is this because unemployment is going down? HELLZ NO! Real unemployment is climbing consistently, and is probably north of 20%. 

The entire Obama regime propaganda on unemployment is driven by the fact that they keep REDUCING THE SIZE OF THE WORKFORCE. People can only collect unemployment benefits for 99 weeks. As soon as a person goes beyond 99 weeks, the Obama regime declares that person as NO LONGER IN THE WORKFORCE. 

There are people who have been unemployed for over two years who would work if they could find anything, but the rat bastards in the Obama regime and their propaganda arm, the media, just evaporate these people from existence, and they additionally reduce the size of the labor force arbitrarily, just so they can hit whatever predetermined number Valerie Jarret, David Axelrod, Timmy Geithner and Ben Bernanke decide it is going to be. 

This is what they are doing on every single unemployment report. It is all as fake as a Thai Rolex. Eventually, the Obama regime will go full-Marxist stupid, drop the labor force to 52 million and declare that Great Leader Obama has delivered a FULL EMPLOYMENT ECONOMY. And anyone who dares disagree will be shot in the back of the head with one of those 450 million rounds of .40 cal that the Obama regime just ordered.

Wish I had one of them Thai rolexes.

Here's your recovery

(Greg Mankiw via Maggie's Farm)

The amazing decline in employment

From Transparency Revolution:

The rise and fall of employment in America, 1948-2012. (Source: Bureau of labor Statistics.) The trend line is the civilian employment to population ratio. Our current doldrums appear to be a kind of bouncing around at the bottom after a fairly steady 10-year decline. The drop is precipitous with the onset of our current troubles, but things have looked pretty bleak since the late 90′s, mitigated by a few years of partial recovery. How do we turn this line back the right way?

Here’s a close-up. The past four years start with one of the longest and steepest drops in the past 50.

Especially in an election year, it’s easy to make this all about the current occupant of the Oval Office or his predecessor and current compatriots in Congress, depending on your leanings. But maybe that’s too easy.

There could be other reasons to account for the drop. (More thoughts on that here.)

On Facebook, Wayne Radinsky comments: “It will be interesting to see what happens when the robotics revolution really takes off.” If that’s not what we’re already seeing, we’re in a lot of trouble.

Don't believe everything you read

So the unemployment rate has dropped to 8.3 percent, so everything is getting better, right?

Wrong.

The unemployment rate is a mathematical calculation using: the number of people in the labor force and the number of people in the labor force who don't have a job. Reduce the size of the labor force -- as happens when people just give up looking for work -- and the unemployment rate automatically goes down.

So now you have those who are "officially" unemployed -- plus those who would like to be employed but have given up looking.

And you've got another group, too -- those who are "underemployed." They found a part-time job at Wal-Mart, but they'd rather be working full time. Probably their whole cost structure -- mortgage, food, gasoline, etc. -- was developed when they were employed full time, so they're in trouble.

Peter Ferrara writes in Forbes:

In the latest, much celebrated, unemployment report, the labor force participation rate had plummeted to 63.7%, the most rapid decline in U.S. history. That means that under President Obama nearly 5 million Americans have fled the workforce in hopeless despair. 

The trick is that when those 5 million are not counted as in the work force, they are not counted as unemployed either. They may desperately need and want jobs. They may be in poverty, as many undoubtedly are, with America suffering today more people in poverty than in the entire half century the Census Bureau has been counting poverty. But they are not even counted in that 8.3% unemployment rate that Obama and his media cheerleaders were so tirelessly celebrating last week.

If they were counted, the unemployment rate today would be a far more realistic 11%, better reflecting the suffering in the real economy under Obamanomics.

Some additional facts highlight how misleading the reported unemployment rate, and the political rhetoric around it, can be.

One year ago, 99 million Americans were unemployed or otherwise not working, and the unemployment rate was 9.1%. Today, while the reported unemployment rate is 8.3%, over 100 million Americans are unemployed or otherwise not working.

Figures lie, and liars figure.

Some spooky economic numbers

Some conversation fodder for your merry Christmas party:

• If the number of Americans that "wanted jobs" was the same today as it was back in 2007, the "official" unemployment rate put out by the U.S. government would be up to 11 percent.

• The average amount of time that a worker stays unemployed in the United States is now over 40 weeks.

• One recent survey found that 77 percent of all U.S. small businesses do not plan to hire any more workers.

• There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.

• Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.

• A Gallup poll from earlier this year found that approximately one out of every five Americans that do have a job consider themselves to be underemployed.

• Back in 1969, 95 percent of all men between the ages of 25 and 54 had a job. In July, only 81.2 percent of men in that age group had a job.

• One recent survey found that one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.

Don't quit your day job

The latest government numbers show the unemployment rate dropping from 8.9 percent in February to 8.8 percent in March. Whoop de do.

This magic number is political now that we're in the 2012 election cycle. President Obama cheers the progress. You have to look deeper, however, to know what's really going on. The BBC does this for us;

Like all developed economies the United States has arrived at its method of counting the people who aren't working over many years and via some controversial choices. As a consequence the new and distinctly improved headline unemployment rate of 8.8% is in fact rather a narrow measure. To be counted among the 8.8% you have to be out of work and have actively looked for a job in the past four weeks.

What that means is that many people who have simply given up looking for work in a jobs markets worse than even their grandparents can remember, are not actually being counted as "unemployed".

Don't worry, they are still captured in the government statistics, they just get labelled as weird things like "marginally attached" or "discouraged" workers. So if you're "discouraged" as well as being out of work you don't get counted among the unemployed. And if you take the widest such measure of "labor underutilisation", which basically counts everyone who doesn't have a full time job, and blames that on economic reasons (as opposed to being sick or in training) then, currently you get a rate of 15.7%.

 Nearly one in six of the people in America who may want to work full time can't find a job. The political calculation:

The president will be acutely aware of the fact that since Franklin Roosevelt was in the White House, the highest unemployment rate that a president has presided over and managed to get re-elected to a second term in office is 7.2%. That was in 1984 when Ronald Reagan won a second term in the White House.

Gallup  does its own survey of unemployment. It's latest number is 10.2 percent in mid-March. Gallup doesn't make seasonal adjustments, as the government does. The government adjusts the numbers to reflect things like weather and Christmas hiring that occur each year. Gallup's take:

Contrary to the federal government's recent job reports, Gallup's unemployment and underemployment measures suggest that recent job increases have not been sufficient to significantly improve the jobs situation so far in 2011. Although both of Gallup's measures were marginally better in March, they remain higher now than they were in January.

When will things get better? Catherine Rampell writes in The New York Times:

The Great Recession dug the country’s job market into a very deep hole. As I mentioned in an earlier post, the economy today still has 5.3 percent fewer nonfarm payroll jobs than it had when the recession began in December 2007. If payroll growth continues apace with the gains experienced in March, it will take nearly three years for the economy to recover the jobs lost during the recession.

Don't quit your day job.

Some commentary on the latest job report

From Capitalist Preservation, who rounds up some reaction:

.........................................
David Rosenberg. via Zero Hedge
"A couple of behind-the-scene facts: from October to February, an epic 700k people have left the work force. If you actually adjust for the fact that the labour force participation rate has plunged this cycle to a 27-year low the unemployment would be sitting at 12% today. Moreover the employment-to-population ratio — the so-called “employment rate” — stagnated in February at 58.4% and is actually lower now than it was last fall when “double dip” was the flavour du jour." 
..........................................
From The Foundry
Today, the Labor Department released its monthly jobs report showing that the U.S. economy added 192,000 jobs in February and unemployment fell to 8.9 percent. While it is always great news that more Americans are finding jobs, the reality is that the economy could be doing much better. Since the Obama recovery began 20 months ago, the national unemployment rate has fallen only half a point, from 9.4 percent in July 2009 to 8.9 percent today. Contrast those anemic results with the robust job growth that occurred during the Reagan recovery in the ’80s. By the 20-month mark of the Reagan recovery, unemployment had dropped from 10.8 percent to 7.5 percent – a 3.3-point drop. [..]
...........................................
From The Market Ticker
No joy here.

Summary: The report did not show any material amount of acceleration; it is, for all intents and purposes, flat. The Household Survey showed some people going back to work, but in terms of percentage of the working-age population the needle did not move to any material degree. The problem continues to be people we don't count as unemployed but in fact are, and as such the  statistical gerrymandering of the results will give both the left and right something to spin, but in point of fact there's no evidence of an economy that is recovering it's ability to generate both private income and tax revenues.
..........................................
Updated to include:
from Calculated Risk
This wasn't a great report. Heck, it wasn't a "good" report. But it was a little better than most recent reports.

If we average the last two months together, the 63,000 payroll jobs added in January and the 192,000 payroll jobs in February, that gives 127,500 payroll jobs per month. And that is a barely enough to keep up with the growth in the labor force. Private payrolls were a little better at an average of 145,000 per month, as state and local governments continued to lay off workers (something we expect all year). 

The real unemployment numbers

I've just spent some time reading about the various measures of unemployment, and it's a bit confusing. The government has its numbers, the Gallup polling organization has its, and the payroll company ADP chimes in as well.

The news this week from the government was that the unemployment rate has dropped! To 9 percent from 9.4 percent! In fact, the unemployment rate has declined more in the last two months than in any two months since 1958.

Nobody can figure it out, since the same government report has it that only 36,000 jobs were created. So something's wrong with the way we measure.

The Gallup organization reports at the same time that the unemployment rate was 9.8% at the end of January -- up from 9.6% at the end of December. Gallup doesn't seasonally adjust its numbers, as the government does, meaning the government smoothed out the job losses of retail workers after Christmas.

My feeling is that we should watch the underemployment rate, which measures the number of people seeking full time work who can't get it. That, Gallup says, improved slightly in January.

Underemployment -- the combination of part-time workers wanting full-time work and Gallup's U.S. unemployment rate -- was 18.9% in January, essentially the same as the 19.0% of December. Underemployment now stands one percentage point below the 19.9% of a year ago.

The journalist Don Surber points to another key number, the labor force participation rate.

But the participation rate in the labor force — the percentage of people working or seeking work, fell to 64.2% from 64.3% a month earlier. While the pool of adults grows, the number of people in the labor force shrinks. That’s the story.

At 64.2%, the labor force participation rate (as a percentage of the total civilian noninstitutional population) is now at a fresh 26 year low, the lowest since March 1984, and is the only reason why the unemployment rate dropped to 9%, one observer adds.

The numbers will be part of the 2012 election campaigns, already underway. The number most well-known and reported is the unemployment rate.

It doesn't tell the whole story.

Bob Herbert, a New York Times columnist with whom I don't often agree, nails it this time, I think.

What data zealots need to do is leave their hermetically sealed rooms and step outside, take a walk among the millions of Americans who are hurting to the bone. They should talk with families that are suffering, losing their homes, doubling up, checking into homeless shelters.

The numbers are just tools, abstractions to help guide us, orient us. They aren’t the be-all and end-all. They don’t tell us squat about the flesh-and-blood reality of the mom or dad lying awake in the dark of night, worrying about the repo man coming for the family van or the foreclosure notice that’s sure to materialize any day now. 

One in five of us is un- or underemployed. Either means they don't go out to eat at the family-owned restaurant or hire the mason to fix up the stoop, as they've been needing to do, and then those folks have less as well. It's a spiral.

An outlook on jobs

Thomas J. Donohue, President and CEO of U.S. Chamber of Commerce, has this forecast:

We believe the economy will expand by 3.2 percent in 2011 and create 2.4 to 2.6 million net new jobs by the end of the year.

Unemployment has exceeded 9 percent for 20 consecutive months. That hasn’t happened since the 1930s. Some 27 million Americans are either unemployed, underemployed, or have given up looking for work.

Let’s suppose we do create about 2 ½ million net new jobs this year. As welcome as this would be, it would only drive the unemployment rate down by about one percent.

In fact, we must create 1.2 million jobs a year just to absorb the new entrants into our workforce. On our current course, it could take years to get back to where we were before the recession and the financial crisis hit.

The number one problem in creating new jobs is the government, he says.

For example, the new health care law creates 159 new agencies, commissions, panels, and other bodies. It grants extraordinary powers to the Department of Health and Human Services to redefine health care as we know it.

The regulatory tsunami is also about to wash over our capital markets. Dodd-Frank contains 259 mandated rulemakings, another 188 suggested rulemakings, 63 reports, and 59 studies. My grandchildren will be old and retired before it is all implemented.

Job creators are also facing unprecedented regulatory activity and case law changes in the Department of Labor, the National Labor Relations Board, and similar agencies. Over 100 such efforts are underway covering compensation, contracting, leave, ergonomics, workplace safety, hiring and firing, and union organizing.

While EPA is starting with the largest emitters, it could eventually regulate 6 million entities—including small businesses, hotels, warehouses, and even churches. Beyond greenhouse gases, EPA’s regulatory agenda lists 342 rulemakings in various stages of development and completion. Of these, 30 are deemed “economically significant”—each with a cost to our economy of $100 million or more.

Business has to follow the rules, but what small business can now even know what the rules are?

The anatomy of unemployment

It was amusing to watch President Obama spin the latest unemployment numbers, and he'll get away with it people don't take a minute to study the figures. Even if you're employed, you're going to be affected by the unemployed.

The numbers Obama liked: 103,000 new jobs were created last month and the unemployment rate dropped to 9.4 percent, its lowest level in 19 months, the Labor Department said.

What he forgot to mention: the job growth fell short of expectations and the drop in unemployment was mainly because people stopped looking for work.

The Gallup organization looks at the problem: the worsening in the percentage of part-time workers wanting full-time work combined to raise underemployment to 19.0% in December from 18.5% in mid-December and 17.2% at the end of November.

What does it mean when one out of five Americans are either unemployed, underemployed or have given up looking?

People can't pay their taxes: The IRS filed more than 1 million liens in federal fiscal year 2010, the highest in nearly two decades and a spike from the nearly 684,000 filed in the year ahead of the recession's December 2007 start.

People can't pay their mortgages: The number of foreclosures is expected by many to increase in 2011 as more troubled mortgages work their way through the pipeline.

People are clinging to jobs: With retirement accounts decimated, many older workers have stayed in the workforce during this recession, freeing up fewer jobs for younger, less experienced workers.

And here's something else churning beneath the surface among the unemployed: unemployment benefits are running out. The compromise that continued extended benefits didn't extend them beyond 99 weeks.

Ninety-nine weeks is just shy of two years. Given that the recession began exactly three years ago, and that some people live in states that don’t even qualify for all 99 weeks of unemployment, it should be no surprise that some Americans have already exhausted their benefits.

Two years from early 2009 is early 2011. With job creation still sluggish and the long-term unemployed most likely becoming  less attractive candidates to employers, perhaps we should start preparing for a flood of jobless workers newly without safety nets.

Here's a picture of this.

If you are still employed, you'll shoulder more of the load. If your neighbor can't pay his mortgage, the value of your home will be threatened. If your neighbor can't pay his taxes, who will?

We're a hopeful people, but we need to prepare for a less than hopeful future:

The pace of job creation is now only barely fast enough to keep up with population growth. Over the last three months, the economy has added an average of 130,000 jobs a month. If that pace picked up to 200,000 jobs a month, almost 10 years would have to pass before the unemployment rate fell below 6 percent. If the pace picked up to 250,000 a month — roughly what it was in the late 1990s (controlling for population size) — five more years would have to pass.

"The Great Recession may be over," Don Peck writes in The Atlantic. "But this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come."

Hang on.

What it will take to fix unemployment

Writing in The Atlantic, Don Peck has a sobering answer.

The economy now sits in a hole more than 10 million jobs deep—that’s the number required to get back to 5 percent unemployment, the rate we had before the recession started, and one that’s been more or less typical for a generation. And because the population is growing and new people are continually coming onto the job market, we need to produce roughly 1.5 million new jobs a year—about 125,000 a month—just to keep from sinking deeper.

Even if the economy were to immediately begin producing 600,000 jobs a month—more than double the pace of the mid-to-late 1990s, when job growth was strong—it would take roughly two years to dig ourselves out of the hole we’re in. The economy could add jobs that fast, or even faster—job growth is theoretically limited only by labor supply, and a lot more labor is sitting idle today than usual. But the U.S. hasn’t seen that pace of sustained employment growth in more than 30 years. And given the particulars of this recession, matching idle workers with new jobs—even once economic growth picks up—seems likely to be a particularly slow and challenging process. 

Should we extend unemployment benefits again?

Lining up to build Fords

It's a political issue, as everything else in Washington is. Democrats are for it, Republicans against it. The federal extension kicks in when state unemployment checks stop.

It's a philosophical issue, because nobody is sure what an extension will do for the economy. Greg Mankiw, an economics professor at Harvard, writes that, "I have yet to see a compelling quantitative analysis of the pros and cons that informs me about how generous the optimal system would be."

Conservative commentators say unemployment benefits discourage the unemployed from taking jobs that are available, and by that they mean a well-paid white collar worker should get himself hired at Starbucks. I've no doubt that a check from the government keeps some people from taking minimum-wage jobs. I've also no doubt that the commentators have never themselves been unemployed.

Here's the question I have for them. How can you square that belief with the fact that for every job opening there are five unemployed people? So four of the five are worthless bums living on the state?

And how do you reconcile that belief with stories of thousands of people lined up for the few jobs opening up? This summer, thousands of people lined up for the chance to build Explorer SUVs for Ford in Chicago. 

Same thing happened in Sacramento, where 1,500 people -- some arriving as early as 4 a.m. -- lined up to apply for 100 temporary jobs paying $15.82 to $17.13 an hour at Campbell Soup's cannery.

It's tough out there.

The unemployed life

Glimpses of what it's like:


Former Labor Secretary Robert Reich: Over 15 million Americans were jobless in November. This doesn't include those who are working part-time but would prefer to work full time. Nor does it include a record 1.3 million who are too discouraged even to look for work. Nor does it take account of the fact that most families are dependent on two breadwinners. So to figure out the true impact on most families, all these numbers have to be doubled.

More than two million jobless Americans are entering the holiday season seized with varying levels of foreboding, worry or even panic over what lies ahead as they cope with the expected cutoff of their unemployment benefits. By the end of December, more than two million are set to lose their extended benefits, according to estimates by theNational Employment Law Project, and about a million more by the end of January.

The legions of long-term unemployed will probably be idle for significantly longer than their counterparts in past recessions, reducing their chances of eventually finding a job even when the economy becomes more robust. New data from the Labor Department shows that people out of work fewer than five weeks are more than three times as likely to find a job in the coming month than people who have been out of work for over a year, with a re-employment rate of 30.7 percent versus 8.7 percent, respectively.

The rise of the desperate entrepreneur

1 in 300: The share of Americans starting a business each month, Mark Whitehouse reports in The Wall Street Journal.

In 2009, an average of 340 out of every 100,000 adults started a new business each month. That’s up 11% from 2007, and well above the average of 290 in the ten years leading up to the recession.

More people started businesses in places where unemployment was high. In places where the unemployment rate was relatively low — 4% to 5% — the monthly entrepreneurship rate was only 280 out of every 100,000 adults in 2009.

Here's a picture.

These nascent entrepreneurs are not starting the next Google, although more than half of the 2009 Fortune 500 companies started up during a recession or a bear market.

Most of the new businesses are nonemployer firms, such as one-person consultancies or E-bay businesses, which people set up because they can’t find jobs. Many likely don’t have revenues, or are independent contractors providing labor to other firms.

You can look at this in another way, through the "labor force participation rate," the percentage of the working age population in the labor force.

The collapse in the labor force participation rate has been one of the key stories of the great recession. As the economy slowly recovers, an important question is what will happen to the participation rate over the next few years? If the participation rate increases to 66% - from the current 64.5% - then the U.S. economy will need an additional 3.3 million jobs just to hold the unemployment rate steady (not counting population growth).

Here's a picture.

This graph shows the recent sharp decline in the participation rate (blue), and also the unemployment rate and the employment-population ratio. The participation rate had mostly been above 66% since the late '80s, and had been over 67% in the late '90s.

More jobless workers than jobs

There were five unemployed workers available for every job opening in the United States in September, according to a Labor Department report.

Here's what it looks like by industry.

Unemployment: how is your state doing?

Eleven states now have double digit unemployment rates. A number of other states are close. Nevada now has the highest state unemployment rate.

(Calculated Risk)

This recession compared to others

Catherine Rampell explains in The New York Times: The chart above shows job changes in the most recent recession compared with previous ones, with the black line representing the current downturn. The line has risen since last year, but still has a long way to go before the job market fully recovers to its pre-recession level. Since the downturn began in December 2007, the economy has shed, on net, about 5.6 percent of its nonfarm payroll jobs. And that doesn’t even account for the fact that the working-age population has continued to grow, meaning that if the economy were healthy we should have more jobs today than we had before the recession.

It's the underemployment too

Gallup has new numbers on unemployment and underemployment.

Unemployment, as measured by Gallup without seasonal adjustment, increased to 10.1% in September -- up sharply from 9.3% in August and 8.9% in July. Much of this increase came during the second half of the month -- the unemployment rate was 9.4% in mid-September -- and therefore is unlikely to be picked up in the government's unemployment report on Friday.

Underemployment -- the percentage of people working part-time but wanting full-time work -- shows a more modest increase to 18.8% in September from 18.6% in August, though it is up from 18.4% in July. Underemployment peaked at 20.4% in April and has yet to fall below 18.3% this year.

Some explanation from Annie Lowrey at The Washington Independent:

The broad unemployment rate rose 0.4 percentage points. The unemployment rate remained at 9.6 percent in September, but the U-6 rate, a broader measure of unemployment and underemployment, jumped to 17.1 percent. That is the highest rate since April, and only 0.3 percentage points off of the 2009 high of 17.4 percent. The U-6 measure counts unemployed workers, people working part-time who want to work full-time, and discouraged workers who have given up looking for a job but still want one. And the change in the rate is due to a huge increase in workers with part-time jobs who want full-time jobs. From August to September, that number climbed from 8.73 million to 9.34 million. A year ago, it was 8.13 million.

"The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in."

-- Economist Joseph Schumpeter

Remember Pan Am? Digital Equipment? Remember buggy whips?

In the death of companies and entire industries lies our future. Our work and prosperity depends on what replaces them. This is the nature of capitalism.

A company founded today has an 80 percent chance of disappearing over the next quarter-century, report Dane Stangler and Paul Kedrosky of the Kauffman Foundation. 

Robert J. Samuelson examines this in an important piece in The Washington Post.

In any given year, employment may reflect the ups and downs of the business cycle. But over longer periods, almost all job growth comes from new businesses. The reason: high failure rates among existing firms. Even successful firms succumb to threats: new competition, products or technologies; mature markets; family feuds and the deaths of founders; shifting consumer tastes; poor management and unprofitability.

He makes a point I had not appreciated: The debate over whether small or big firms create more jobs is misleading. The real distinction is between new and old. 

American workers are roughly split between firms with fewer or more than 500 employees. In healthy times, older companies of all sizes do create lots of jobs. But they also lose jobs, as some businesses shrink or vanish. On balance, job creation and destruction cancel each other. All the net job increases occur among start-ups, finds a study of the 1992-2005 period by economists John Haltiwanger of the University of Maryland and Ron Jarmin and Javier Miranda of the Census Bureau. Because most start-ups are necessarily small, this gives a statistical edge to tinier firms in job creation. But, the study says, the effect entirely reflects the impact of new businesses. 

Samuelson concludes by discussing several myths about startups, including: It's necessary to keep tax rates low, so entrepreneurs can reap huge rewards for their time, sweat and money.

Well, this may be true, but it misses a parallel truth: government disincentives to entrepreneurship. Panner, a registered Democrat, criticizes complex accounting, employment, and health-care regulations imposed by federal and state agencies that consume scarce investment funds and time. The fragmented system of business oversight imposes a bureaucratic bias, perhaps unintended, on start-ups. Any one rule or tax may seem justifiable, but the collective effect can be crushing. 

Little wonder we aren't creating new jobs.