A Good Explanation Why Obama's Job Report Today is So Bad...forget 8.1%...it's really 14.5%!

Sickly Job Growth Sets Up Unhappy Choice for Obama


By Chris Stirewalt Power Play Published May 04, 2012


“14.5 percent”

-- U.S. unemployment rate in April including those who have given up looking for work, according to the Bureau of Labor Statistics.

The U.S. economy added a sickly 115,000 jobs in April, but as discouraged workers continued to leave the labor force, the benchmark unemployment rate nudged down from 8.2 percent to 8.1 percent.

The more important number, the size of the potential labor force that is not employed, remained at a crushing 14.5 percent. Economists are alarmed not only at the puny jobs number in April but at the fact that the difference between the two figures, 6.4 percent, stands near an all-time high.

If Obama is forced to make a broader policy prescription it will be a very bad. He can hardly call for another deficit-fueled stimulus given the low estimation in which voters hold his 2009 one. But neither can he move right and suddenly embrace tax cuts and austerity.

Having 6.4 percent of the nation’s employable adults out of economic circulation is big trouble. For older adults in that category, they may never be able to return to work. For younger adults, it means a lifetime of lower wages and slower advancement if they eventually get back in the hunt and find a job.

In April, about 522,000 Americans left the labor force, making the addition of 115,000 jobs look all the more alarming. In 2011, about 2.7 million Americans left the work force while only 945,000 came in.

This is similar to what Europe, which has alternated between recession and stagnation for a decade, has experienced. Long-term unemployment begets permanent unemployment. Permanent unemployment begets lower economic output, higher welfare costs and eliminates hopes for more rapid growth.

Liberals and conservatives disagree sharply about how to solve this downward cycle, but both advocate forms of economic defibrillation for a patient in cardiac arrest. The left is calling for big stimulus spending – a round of borrowing and government spending to jolt the economy back to life. Conservatives want tax cuts and deep government spending cuts to spur investments and rein in massive federal debts.

The concern for President Obama is that not only will he have to talk more about the economy and his previous policies as the cycle continues, but that he may have to offer a new prescription to reverse the trend. The president has been calling for the nation to stay the course and give his prior policies a chance to work, meanwhile focusing on ancillary issues like income inequality and green energy.

If Obama is forced to make a broader policy prescription it will be a very bad. He can hardly call for another deficit-fueled stimulus given the low estimation in which voters hold his 2009 one. But neither can he move right and suddenly embrace tax cuts and austerity.

There is good news here though: The utter uselessness of the old baseline unemployment rate may have finally been fully exposed. The baseline is a useful indicator in times of growth or recession, but not during periods of stagnation.