January 22, 2020
We’ve talked a lot about universal basic income lately… the idea that everyone in America should get a certain amount of cash a month, no matter if they’re a working stiff, a multimillionaire, or a bum on the street.
But today, the job market is at, or near, an all-time high. There is no shortage of work for anyone who wants it. And wages are climbing, especially for entry-level positions. As the Wall Street Journal reports:
Wages for rank-and-file workers are rising at the quickest pace in more than a decade, even faster than for bosses, a sign that the labor market has tightened sufficiently to convey bigger increases to lower-paid employees.
So why are so many politicians promising free money to the masses while inciting ideas of “fairness” and “economic justice?”
A company won’t last for long if it pays folks far and above their value… and a government won’t last if it massively takes from the most productive and gives it to the least productive.
And if you can’t get a decent job in this environment – the single-best time for workers since the late ’80s or early ’90s – what do you think is going to happen when the next recession comes?
Do you think the government will always be there for you?
We doubt it… After all, it already owes $23 trillion and counting.
The next crisis will be a disaster for the very Americans who look at the economy today and think that it’s “not fair.”
And we suspect that anyone falling for free-money promises from politicians today will get exactly what they deserve. Good and hard.
In the meantime, economic journalist Stephen Moore shows the full story about the U.S. job market…
Working Hard Versus Hardly Working
By Stephen Moore
Almost all of us know (because President Donald Trump boasts of it in nearly every speech) that our 3.5% unemployment rate has reached a 50-year low. But this official decline in joblessness doesn’t tell the entire story of the improvement in the job market in the United States. And it doesn’t fully capture the change in direction between what happened under President Barack Obama and Trump.
In the Obama years, the unemployment rate kept falling after 2010. That’s great. But the untold story was that the number of people moving from the living room couch into jobs was exceeded by the number who dropped out of the workforce, or – as was the case with millions of 20-somethings – never got a job. From January 2009 to December 2016, almost 10 million jobs were added, but amazingly, 1.6 million working-age people dropped out of the workforce.
The percentage of people participating in the labor force fell from 65.7% to a low of 62.7% under Obama. Generally, in a recovery, job seekers rise as jobs reemerge.
A chart from the U.S. Bureau of Labor Statistics shows the trend in labor force participation and the unemployment rate adjusted for labor force dropouts from 2009 to 2019. The strange thing about the Obama recovery was more jobs and less willing workers.
When a person isn’t looking for a job, for whatever reason, they do not get labeled as unemployed. The joke a few years ago was that Obama would shrink the unemployment rate to zero through the magic formula of driving millions out of the workforce. In a world where everyone is living off of welfare or a trust fund, and no one is looking for a job – there are officially no unemployed people.
Under Trump, we are experiencing the best of all worlds. Unemployment is down, and the labor force participation rate is finally starting to grow again, albeit still slower than needed. Some 2.3 million more people have entered the workforce under Trump. Part of the rise in the workforce is undoubtedly due to the steady increase in wages, which attracts workers to come off the sideline.
Is the healthy job market today due to a continuation of the Obama recovery? Hardly.
My Heritage Foundation colleague John Merline ran the numbers. When Obama left office, the Congressional Budget Office (“CBO”) predicted the “trend” in hiring. For example, the CBO forecast that the unemployment rate would never get below 4.4% and would start rising again in 2019. The current unemployment rate is now a full percentage point below the CBO’s forecast, with 1.6 million more jobs than the Obama trend line would have predicted.
The CBO also predicted at the end of the Obama years that the labor force participation rate would continue to fall under Trump. Wrong: It rose.
One last point: When I was studying economics in college in the 1970s, the professors and the textbooks instructed us that an unemployment rate of about 4% was “full employment.” Can’t go any lower than that. How good is the job picture today? We now have an unemployment rate that’s a half a percentage point below full employment. So, on a scale of 1 to 10, how does this job market rate? It’s an 11!
Now here are some of the stories we’re reading…
For financial markets, it’s hard to see how the 2020s could top the 2010s. Interest rates and inflation are low, so the potential for bonds to have big gains is limited. As for stocks, valuations are as high as they were in the late 1990s bull market, while tightening labor markets and the potential for higher wages limit the prospect of rapid corporate profit growth.
Capitalism is doing what it’s supposed to do. It’s rewarding productivity with pay, and some people and companies are more productive. If you improve worker bargaining power, that may help a bit, but over the long run people can’t earn what they don’t produce.
Asked if investors should sell now to avoid a blow-up like the one that took place in March of 2000, Jones said, “Not really. The train has got a long, long way to go if you think about it.”
The discovery of a legendary, lost shipwreck in North America has pitted treasure hunters and archaeologists against each other, raising questions about who should control sunken riches.
You likely know your blood type… but what about your aging type? I’m not talking about how you look – if you age more like Helen Mirren or Ozzy Osbourne. I’m talking about how your body ages on the molecular level.
And let us know what you’re reading at [email protected].
Publisher, American Consequences
With P.J. O’Rourke and the Editorial Staff
January 22, 2020