You might have heard that unemployment fell in August only because armies of the unemployed are despairing of finding work. The reality is more complicated -- but it's true enough that somebody should do something about it.
There's no doubt the August jobs report was not great. The economy isn't producing enough jobs to bring unemployment down quickly. The unemployment rate dropped to 8.1 percent in August from 8.3 percent, but not because a lot of people were finding jobs. The number of employed people actually fell by 119,000.
The unemployment rate is the percentage of people in the labor force who want work but can't find it. So sometimes the unemployment rate can shrink simply if the labor force shrinks. That's what happened in August, big time. The labor force shrank dramatically, by 368,000 people. The number of people in the labor force who are unemployed fell, too, though not by as much. Together, these two shifts pushed unemployment lower.
The labor-force participation rate -- the percentage of the civilian working-age population that is either working or looking for a job -- fell to 63.5 percent, the lowest since 1981. For men, the labor-force participation rate was the lowest on record, at 69.8 percent, notes Neal Lipschutz at the Wall Street Journal's Real Time Economics blog.
The majority's reaction to these numbers on Friday was that they were an awful sign, that the job market is so bad that hundreds of thousands of people every month are simply giving up in despair. We have growing numbers of people sitting around doing nothing, losing their job skills and their ability to buy stuff.
But a few economists pointed out that a lot of people are leaving the labor force for more benign reasons, like retiring or going to college.
"We have consistently held the view that the labor force participation rate would not rebound any time soon and its decline is mainly driven by the ageing (sic) of the population and the exit of the baby boomers from the labor market," Barclays Capital economist Michael Gapen wrote in a research note. "Therefore, the decline in the unemployment rate is not reflective of underlying strength in employment in this report."
The number of Americans the BLS says are "not in the labor force" has risen by 2.7 million in the past year, to 88.9 million. That sounds bad -- nearly three million people dropping out of the job market.
But of that 88.9 million, just a little less than 7 million people who are out of the labor force say they still want a job. That is a horribly high number. But it has only grown by 488,000 in the past year. In other words, of the 2.7 million people who have dropped out of the labor force in the past year, about 2.2 million of them say they're not interested in finding a job anyway.
And what are the majority of these 2.2 million people who don't want a job doing instead? Retiring, it seems. About 1.6 million people who have dropped out of the labor force in the past year are 65 and over, according to the BLS.
That leaves another 600,000 dropping out for other reasons besides retirement or an inability to find a job. Some could be teens going back to school -- the number of teenagers not in the labor force has grown by 245,000 in the past year. People could be going to college to get better skills. Unfortunately, we don't know for sure, because the BLS doesn't have a detailed breakdown of what people do when they leave the labor force.
But we shouldn't just assume that everybody dropping out of the labor force, or even most of the people dropping out, are doing so because they're simply discouraged. We just don't know that for sure.
Still, it is also entirely possible that many of the people who are retiring now are doing so before they were fully prepared to retire. They may feel pushed into an early, risky retirement because they think the job market is so lousy.
Felix Salmon, a blogger at Reuters, on Friday posted a chart of labor-market churn, showing that the number of people moving monthly from the ranks of the unemployed to the ranks of the not-even-trying-any-more has been unusually high since the recession. Though the majority of those people would appear to be new retirees, that doesn't mean they're happy retirees.
And ultimately, though it's possible to see shrinking labor force participation as not universally awful, we are clearly failing those 7 million people who have undoubtedly given up in despair, leaving the labor force even though they still want a job.
And though President Barack Obama proposed another stimulus plan to help -- a year ago Saturday, appropriately -- Congress has no interest in passing it, and Obama apparently has no interest in pushing it any further. Talk about despair.
Below are 14 things Obama doesn't want you to know:
Despite Obama's promises to crack down on Wall Street, federal prosecutions of financial fraud hit a 20-year low last year, according to a November study from a watchdog group. The number of these types of prosecutions has been falling every year since 1999 -- in other words, there were more prosecutions during every year of George W. Bush's presidency than during every year of Obama's.
The rich took home a greater share of America's income pie from 2009 to 2010 than they did between 2002 and 2007, according to an April analysis from Emmanuel Saez, a professor at the University of California, Berkeley. That means the gap between the rich and the poor was more pronounced under Obama's presidency than under George W. Bush's.
Some of America's most profitable companies used a variety of loopholes to pay less than zero in taxes between 2008 and 2010, according to a November 2011 report by the Citizens for Tax Justice. But the Obama administration wants to make it even easier for corporations to have a smaller tax bill; Obama proposed a tax overhaul that would cut the corporate tax rate from 35 percent to 28 percent.
Once the health care law takes effect, insurance companies will be footing the bill for millions of previously uninsured Americans and for those who were denied coverage for pre-existing conditions. And health insurance companies will likely pass on to consumers the cost of insuring the new patients. After Massachusetts enacted a similar health care plan in 2006, premiums for an individual plan in the state rose 18 percent over three years.
In 2009, Obama announced the Home Affordable Mortgage Program, promising to help 3 to 4 million borrowers, but as of January -- more than three years into the program -- HAMP had only reached 1 million borrowers. In an aim to give the program legs, administration officials changed the rules in January to make more borrowers eligible. Still, the fixes were likely too little too late, experts said at the time.
The Obama Administration touted the $25 billion mortgage deal it reached with 49 states and the big banks to settle allegations that banks mishandled mortgages. As part of the settlement, banks said they would offer at least $10 billion in loan forgiveness to homeowners. But months after the deal was inked, banks have been slow to hand out the money.
The Democratic National Convention will feature employees of firms run by Bain Capital -- the private equity firm where Mitt Romney was formerly CEO -- likely in an aim to raise questions about Romney's tenure at the now-controversial company. But Democratic candidates and committees had actually netted double the amount of campaign cash from Bain workers as of May than their Republican counterparts since 2008, according to the Boston Globe. Now, Republicans are beating their Democratic colleagues in Bain cash, with 58 percent of donations from Bain employees going to Republican candidates and parties, according to the Center for Responsive Politics. CORRECTION: An earlier version of this slide misstated that Democrats were receiving more donations from Bain employees than Republicans. That was the case in May. As of September Republicans are receiving more donations from Bain employees.
The announcement last month that the Justice Department wouldn't be prosecuting Goldman Sachs over allegations surrounding the financial crisis was a reminder for many that the Obama Administration has largely let banks off the hook for their role in the meltdown. And regulators and officials may be running out of time; the statute of limitations for crimes related to the financial crisis is fast approaching, according to The New York Times.
Many current and former members of the Obama Administration have ties to Wall Street. The list includes the president's current and former chiefs of staff -- Jacob Lew and Bill Daley, respectively -- as well as his former budget director, Peter Orszag, and others.
At the end of 2011, five big banks, including Bank of America and JPMorgan Chase, held 56 percent of the U.S. economy, according to Bloomberg, compared to 43 percent five years earlier. That's right, the too-big-to-fail banks have actually gotten bigger.
Welcome to the U.S. of Low-Wage America. Most of the jobs lost during the recession paid middle wages, while most of those gained during the recovery were low-wage jobs, according to a recent study from the National Employment Law Project.
Median household income fell 6.7 percent between June 2009, when the recession technically ended, and June 2011, according to a Census Bureau study cited by The New York Times. That's more than the 3.2 percent incomes fell during the recession, between 2007 and 2009.
Last December, congressional Democrats managed to save the payroll tax cut for one more year, giving 122 million workers a few extra bucks each paycheck, but now that boost may quietly disappear, according to the Wall Street Journal. That's because the White House won't be pushing for another payroll tax cut extension this year.
Of the top 10 companies with employees donating money to Obama's campaign, three are big banks: JPMorgan Chase, Citigroup and Goldman Sachs, according to the Center for Responsive Politics. Some of Obama's other major contributors include employees from big companies such as Microsoft and Google.