Policy Feature Issue: The Real Economic Progress Report
Yesterday, President Obama pivoted back to jobs for the 17th time since he took office. In an effort to tout his economic record, the President has refocused his efforts by pointing to declining unemployment. But in reality, the President has presided over the weakest economic recovery since World War II, exacerbated by his own policies. In fact, the President’s economic policies, in addition to Obamacare and the administration’s regulatory agenda are putting the weakest economic recovery since World War II in jeopardy.
The Current State of Jobs and Unemployment:
- Although the unemployment rate currently sits at 7.6 percent, its use as an indicator of labor force and labor market dynamics is significantly flawed. If factors such as the number of people “marginally attached” to the labor force as well as discouraged workers are taken into account, the unemployment rate would be about 9.1 percent.
- When taking into account people who are employed part-time for economic reasons, the true unemployment rate is approximately 14.3 percent. This signals not only that there is a large portion of the population who have simply given up on finding a job, but that there is an even larger “BLS-defined employed” population who have had to settle for part-time work due to weak economic conditions.
- Though the President argued that in the past 40 months, 7.2 million jobs had been created, this statement misrepresents the strength of actual job growth. Average job growth over this period stands at 180,000 jobs created per month. In other recoveries, private sector job growth averages 288,000 jobs per month. However, in order to keep pace with population growth, the economy must create 107,000 per month. This means that a large proportion of these 7.2 million jobs have only been sufficient enough to keep up with population growth. A stagnant Employment-Population Ratio (EPR), which currently sits at 58.7 percent, confirms that current job growth is only barely sufficient to keep up with the growth of population.
- According to Joint Economic Committee (JEC) estimates, the current recovery has created four million less private sector jobs than the average of other post-World War II recoveries. The fact is that despite the President’s rhetoric, he has presided over a recovery significantly weaker than the average of other recoveries.
- A more accurate measure of the long-term strength of an economic recovery is the Labor Force Participation Rate (LFPR), which better identifies who is and is not working. The current LFPR stands at 63.5 percent. However, as recently as March and April of this year, labor force participation was at its lowest level since May, 1979 at 63.3 percent. The drop in labor force participation signifies that declining unemployment misrepresents actual trends.
- Under the Obama Administration, a new class of perpetually unemployed persons has begun to develop. Since the President took office, the average duration of unemployment has climbed from 19.8 weeks to 35.6 weeks. The number of long-term unemployed (those jobless for more than 27 weeks) is approximately 4.3 million. In January, 2009 there were 2.7 million long-term unemployed.
- In addition, the President’s regulatory agenda has the potential to hurt job growth by overburdening business and industry. A study from the National Economic Research Associates found that EPA regulations could cost as many as 887,000 job-equivalents annually from 2013-2034, a loss of $416 per year in labor income per household.
The Current State of the Middle Class:
- The weakness of the economic recovery poses a significant barrier to the well-being of our nation’s Middle Class. As of May 2013, disposable income per person has risen by only 2.3 percent since the end of the recession, meaning that real disposable income has increased by only $745 per person in the last four years. According to Joint Economic Committee estimates, in an average recovery since 1960, an individual would have $3,604 more in disposable income over the same period.
- A recent report by the House Energy and Commerce Committee found that, “consumers purchasing health insurance on the individual market may face premium increases of nearly 100 percent on average, with potential highs eclipsing 400 percent based upon plan and age. Meanwhile, small businesses can expect average premium increases in the small group market of up to 50 percent, with potential highs over 100 percent.” Premiums could increase as much as 73 percent for those who will be able to keep their employer-sponsored insurance. Those individuals who were uninsured prior to the enactment of the bill and are now forced to purchase healthcare could see their premiums skyrocket, as the average yearly cost for a new customer in the individual market will grow from $1,896 to $3,708. The mandate and penalty system of Obamacare is inherently regressive – despite the subsidies that Obamacare provides, individuals and families with limited incomes will still take a larger hit in their disposable income as a result of these premium increases.
The Current State of Youth:
- The President’s economic agenda has done little to better the employment situation of the nation’s youth. Unemployment among young people aged 16-19 is at 24 percent, and 13.5 percent among young people aged 20-24. Unemployment among 20-24 year-olds is essentially unchanged from 13.7 percent a year ago.
- Obamacare will also have an extremely detrimental impact on young people in terms of premium increases. Premium rates for young people could increase by as much as 413% based upon the type of plan they receive.
In reality, the President’s policies have not made the economy stronger. One could argue instead that his policies have made the economy and America worse off overall. Individuals who have been out of the workforce for more than six months are having a harder time finding the work they need to support themselves. Families are continuing to struggle to pay the bills as their healthcare costs look likely to increase. Young people, especially those under 25, are experiencing high and levels of unemployment that are not improving. The President’s answer to these problems is more regulation and more mandates. Yet for the millions of Americans without work, it is of little consequence. In order to truly improve the economy, the President must focus instead on unleashing the private sector, reining in out of control spending and making strategic reforms to our entitlement programs.
 According to the BLS, “marginally attached” persons are “those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.” Discouraged workers, according to the BLS, “have given a job-market related reason for not currently looking for work.” The rate given is known more officially as the U-5 unemployment rate. Table available: http://www.bls.gov/news.release/empsit.t15.htm
 According to the BLS, “Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.” The rate given above is more officially known as the U-6 unemployment rate. Table Available: http://www.bls.gov/news.release/empsit.t15.htm
 Source: Bureau of Labor Statistics (BLS); Jobs added per month by average of other recoveries calculated on percentage increase from cycle low points by Joint Economic Committee Staff.
 The Labor Force Participation Rate is a ratio that identifies the number of people who are active participants in the labor force relative to the overall population (within the same age range). Active participants in the labor force include those who currently hold employment as well as those individuals who are unemployed but actively seeking work, and are between the ages of 16 and 65.
 http://www.bls.gov/news.release/empsit.t12.htm; Link to historical data from 1948-present: http://ycharts.com/indicators/average_duration_of_unemployment