Broken Labor Markets and Shattered Progress

President Joe Biden delivers the State of the Union address to a joint session of Congress as Vice President Kamala Harris and House Speaker Kevin McCarthy (R-Calif.) listen in the House Chamber of the U.S. Capitol on Feb. 7, 2023. Jacquelyn Martin/Pool/Getty Images

Commentary

Please forgive me for not watching the State of the Union address. There’s only so much phony baloney I can stand, and I knew in advance that it would be a lot of blather about how great the economy is based on the unemployment rate.

The thing is that the usefulness of this number—which has been a go-to proxy for economic health since the 1930s—is utterly useless.

What must it be like for the average person working two or three gig jobs, perhaps married with a young kid for whom child care isn’t available at an affordable price—so, therefore, mom can’t hold a job—to listen to the U.S. president go on about how great that he’s making life for everyone? I suppose at this late date, hardly anyone with a brain believes anything they see on the TV, so there’s that.

In any case, it’s next-level rotten when you can’t even trust the statisticians at the Department of Labor. For some years now, really ever since Joe Biden became president, their press releases have been thoroughly politicized. In order to discover the actual truth, you have to do deep dives into the data and do granular breakdowns. That’s because the so-called unemployment rate only measures those on the active job market who have found work—never mind how many jobs they have to work and never mind all those who have completely dropped out.

The truth is that there’s a two-level meltdown that has occurred ever since the lockdowns began. Full-time work is flat at 132 million and has been since March of 2022. Businesses have been unable to recruit people out of leisure for a very long time, so the job-growth trends of the previous decade have utterly stopped. Once having just replaced lockdown losses, full-time work froze into place.

Meanwhile, the worker–population ratio has yet to recover. Having reached a high of 64.5 percent at the turn of the millennium, we’ve seen a decline since then and never more than since lockdowns. It now sits at 60 percent. All of that is undeniable in the data, and yet the Biden administration continues to crow about its great jobs achievements.

Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker

The current trends are for part-time jobs to be rising even as full-time jobs are falling, which is a pretty solid sign of ill health. Employers are reluctant to commit to the high-paying full-time spots that everyone with a credential had come to expect would rain down like manna from heaven. Those days are gone. There’s plenty of work, provided one is willing to actually work. But that’s not Zoom jobs, which are becoming ever fewer.

Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker

One of the few serious economists to understand these labor markets is David Stockman. He has a fix on what’s happening.

“Since last March, the BLS [Bureau of Labor Statistics] models have generated +3.6 million new jobs, but the actual household survey has found that the number of full-time, breadwinner employees in January was actually 10,000 lower than had been the case 10 months earlier! That’s right. The January total for full-time employment was 132.577 million, which was virtually identical to the March 2022 figure. ... By contrast, the headline jobs count (blue line) according to the establishment survey rose from 151.424 million to 155.073 million during the same period.

“According to the math, therefore, there are well more than 20 million part-time jobs in the US economy, many of them held by multiple job-holders. That is to say, in the face of soaring inflation households are scrambling to make ends meet by scooping up an increasing number of low-pay, part-time gigs as they become available.”

Test this observation against what you see all around you. Does it not fit better with your intuition than Biden’s rah-rah jobs claims? What’s remarkable is that the Democrats have, for years, put down job gains under Republican administrations as mere “burger flippers,” rather than real professional positions that provide income and stability. Now, you have the Democrats completely ignoring how full-time jobs have been converted to gig jobs, such that one person is working 90 hours per week at three jobs of 30 hours each and they have nothing to say at all.

“There is a huge gap between the earnings value of full-time jobs in core sectors of the economy and part-time gigs of 20 hours per week paying the minimum wage,“ Stockman said. ”For instance, a full-time manufacturing job is worth about $55,000 annually versus $23,000 for a part-time gig flipping hamburgers.

“Of course, the latter is where most of the net new jobs have been coming from for many years now, not just the last 10 months. That proposition is validated by the sharp longer-term deceleration in the growth rate of full-time jobs. The latter grew at a 1.9 percent annual rate between 1971 and 2000, but since the pre-crisis peak in November 2007, the growth rate has dropped by more than two-thirds to just 0.56 percent per annum.

“Not surprisingly, therefore, when it comes to full-time, full-pay jobs in the goods-producing sectors (manufacturing, energy, mining, and utilities), the story is even worse. To wit, the index of hours worked in January 2022 was actually 18 percent below the level posted way back in March 1979. That’s 44 years of shrinkage!”

As for the BLS data, he lays out the truth:

“The overwhelming share of born-again jobs being added back to the BLS jobs count is in the low end of the market—especially bars, restaurants, hotels, and the rest of the Leisure and Hospitality (L&H) complex,“ Stockman said. ”Consequently, the average wage gain for the total workforce is being diluted as robustly expanding $18 per hour L&H jobs are averaged into static $29 per hour goods-producing jobs.”

Meanwhile, household finance is in meltdown, with falling real income, rising debt, and plummeting savings. Truly, there’s no way this is in any way compatible with improved economic conditions for average people. There wasn’t one word of this disaster in the State of the Union speech. And if there’s no awareness of the problem, there’s no chance that it will be fixed.

Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker

Please forgive me for harping on the worker participation rate, but there’s truly something spooky going on here. It stands today at exactly the rate it was in 1977, an effective wipeout of nearly a half-century of gains in commercial participation of the working-age population. The population grew steadily and then stopped with the lockdowns. And there are ever more people left out of the system entirely because of welfare, disability, dependency on family, or some other factor. Lockdowns dramatically exacerbated that problem, but it’s truly awful to look at the big trends.

Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker

As for personal income in real terms, just think about what might have been. We now see more than $5,000 per capita per year lost in income, due just to the aftereffects of lockdowns. We seem to have shifted in a major way from rising prosperity to rising impoverishment while struggling but failing to get ahead.

Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker

We’re all getting a lesson in propaganda these days. I used to think it consisted of lies that trick the population. The truth is more complicated: actual lies that everyone knows are just that but they leave nothing to fill the gap except demoralization and cynicism. I’m pretty sure that’s where most people are today. They know that what Biden is claiming is likely baloney, but they don’t know the truth.

I’ve never wanted truth coming from political leaders more than I do today. What a refreshing relief that would be.