This Is Your Obama Recovery: A More Pessimistic Correction
By Mitch Berg
Yesterday, in my piece “This Is Your Obama Recovery“, I looked at the math behind the unemployment numbers. I concluded that when you subtract the unemployment numbers from the Bureau of Labor Statistics Labor Force Participation numbers, the number of Americans working is two percentage points lower than it was when Barack Obama was inaugurated, and only a fifth of a point better than the “low point” of the recession (in uemployment terms), in October of 2009.
I reached the numbers by subtracting the unemployment figure from the participation figure; for example, in October of 2009, I subtracted the 10% unemployment rate from the 65% participation rate to get an overall employment rate of 55%.
A commenter at Hot Air – where Allahpundit was kind enough to run my post in its entirety – pointed out that I did the math wrong. He was correct, of course; the unemployment rate is among those participating in the labor force, not the entire force. I needed to recalculate, multiplying the BLS Labor Force Participation Rate by the same month’s unemployment rate as supplied by the BLS.
It actually makes things worse for the Administration.
- January 2009: 7.8% unemployment among the 65.7% of people participating in the workforce meant 60.67% of the work force was working the day Barack Obama was inaugurated.
- October 2010 – lopping 10% unemployment from the 65% particpation rate leaves you 58.5% of the workforce at work on the month the unemployment rate supposedly bottomed.
- January 2012 – Three years after Obama took office, with the unemployment rate right about the point where Obama said that it’d peak with Porkulus? 8.3% unemployment among a 63.7% share of the workforce still in the workforce yields 58.41% of the labor force actually working.
So I was wrong. We actually have a lower percentage of the work force actually working now than at the “low point” of the recession”, and two and a quarter points lower than when Obama took office.
I regret the error.
I hope America feels the same.
February 21st, 2012 at 1:49 pm
M1 money is cash, travelers checks, checking accounts, i.e., liquid money. The nation’s M1 supply has increased dramatically since 2008 due to actions taken by the Fed to mitigate the fallout of the recession.
Velocity of money is a measure of how fast money changes hands. This is important in a market economy because it can be assumed that money only changes hands when both parties feel it is to their advantage to do so, e.g. they will profit on the transaction. During good times the velocity of money is high. During recessions it is low. It is literally a measure of how much and how often money is being spent in an economy.
The velocity of money dropped into the cellar in 2008 and shows little (if any) signs of recovery. The Fed has been increasing the M1 supply to make up for the low velocity of money.
The president and his economics team know this. They are hoping that the media will focus on the unemployment numbers (when they are good) and the fact that real GDP growth has been modestly positive since 2010. The underlying numbers are not good and they show why we have not experienced the strong growth that typically follows the end of a recession.
February 22nd, 2012 at 1:15 am
[…] Mitch Berg does some simple math to show us how the shrinking workforce affects the total number of people working. Basically, while […]