Today on NPR we heard that the labor-force participation rate–the employment rate–decreased to 62.6%, “the lowest since October 1977.” This was only mentioned in passing with no real discussion dedicated to it–it’s a story of our time, a fact that should shock everyone.
Meanwhile, CNN reported today that “the weather is warming up in America and so is the economy,” because unemployment “fell to 5.3%, its lowest level since April 2008.” The contradictions don’t get much more Orwellian than this: unemployment down, employment down.
Of course, the reason for this discrepancy is well-known. The official unemployment rate doesn’t include those that are: (a.) long-term unemployed and have, therefore, stopped looking for work; (b.) underemployed, only working part-time when they would like full-time employment; and (c.) working even a single hour a week, which makes you no longer officially “unemployment”.
A recent, must-read, article by Jim Clifton, Chairman and CEO of Gallup, entitled, The Big Lie: 5.6% Unemployment, put it clearly: “Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast “falling” unemployment.”
“There’s no other way to say this,” says Clifton. “The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie.” Clifton goes on to comment on the starkness of the situation, “Gallup defines a good job as 30+ hours per week for an organization that provides a regular paycheck. Right now, the U.S. is delivering at a staggeringly low rate of 44%, which is the number of full-time jobs as a percent of the adult population, 18 years and older.”
Moving back to the CNN article, try not to throw-up when you hear the overly-upbeat language of the report: the economy is “warming up”; “America [is] back to a rate last seen before the financial crisis”; “it was an even healthier rate than economists predicted”; “the U.S. is the growth engine for the world this year as many other nations slow down.”
CNN *does* mention that there might be some kind of a problem with this glowing picture of the economy–who would have thought? “There’s just one major complaint for many: Where’s the wage growth? Average hourly earnings rose only 2% annually in June — still far below the goal for a healthy economy of 3.5% or more.” But there’s far from “one” major complaint one could raise about the troubled U.S. economy, as CNN divulges in its very next paragraph: “There are also concerns about the labor force participation rate, which measures how many Americans are employed or looking for work. It hit a 37-year low in June. That means a lot of people aren’t working or have given up trying to look for work.” CNN doesn’t seem to care enough about the issue to mention the actual percentage: 62.6%.
It doesn’t take long to learn why CNN might be so upbeat about the allegedly impressive job growth: “After years of waiting, the Federal Reserve could raise interest rates in September for the first time since 2006. A rate hike would be a healthy sign that the economy is almost fully recovered from the Great Recession.”
CNN then takes the opportunity to quote a fellow, overly-upbeat “chief” economist, “Chris Williamson of Markit,” who needs only a single sentence to tie the two events together: “Yet another month of impressive job creation pushes the Fed closer to hiking interest rates later this year[.]”
In its excitement to see interest rate hikes, CNN adds further that there is a “catch”: the economic growth must remain “strong” through September–don’t make economic growth sound so gloomy, CNN.
What does raising interest rates by the Federal Reserve actually mean? As has been mentioned–countless times–by economist Dean Baker (here just four days ago), raising interest rates by the Federal Reserve directly leads to job-loss by American workers; it’s a class issue, with corporate media outlets like CNN having a predictable stance on the issue. Interest rate raising is a process in which unemployment rates simply become too low for the Federal Reserve to handle, which in turn, out of fear of inflation going up as unemployment goes down, raises interest rates in order to slow the economy. That’s right, people are intentionally put out of work.
Low inflation benefits creditors: you don’t want the 10$ you lent yesterday to be paid back at lesser value. It also benefits those with overseas investments (i.e. rich people): a strong dollar buys more overseas. Low inflation, however, hurts workers (i.e. regular people): the Federal Reserve will slow down the economy, driving many out of work, in order to maintain its inflation targets. Also, a strong dollar makes manufacturing exports less attractive to foreign buyers–it amounts to a tax on exports; less exports leads to less jobs.
Interesting–with Independence Day the day after tomorrow, you should know this–monetary and central-bank policy were leading issues of the day during the lead-up to the American Revolution: Britain’s unwillingness to print money in the colonies, to prevent inflation, lead many to take up arms against the British Empire.
The struggle continues to this day.