Problems in Latest Jobs Report
July 9, 2014
Recent reports on the state of the economy seem to paint a promising economic picture, explains Lawrence Kudlow for the New York Sun. For example, according to the June jobs report:
- Employment increased by 288,000 jobs, with 262,000 jobs gained in the private sector. This growth beat the forecast figures of 215,000.
- The unemployment rate dropped from 6.3 percent to 6.1 percent.
- Stocks surged, and the Dow closed above 17,000 -- a record high.
- The small-business household survey gained 407,000 jobs, while the number of unemployed Americans fell by 325,000.
However, this good news masks some serious problems:
- Worker wages rose by only 2 percent over the last year.
- The number of hours worked are ahead of last year by 2.1 percent, suggesting that overall income and nominal GDP are growing at a slow 4 percent rate.
- The U6 unemployment rate -- which includes part-time job seekers and those who have given up work -- only dropped to 12.1 percent, remaining at a historic high.
- The labor-force participation rate remained unchanged, at 62.8 percent.
It is important to scrutinize these jobs reports numbers. Unemployment, for example, can fall in two ways: it can fall because more people find jobs, or it can fall because more people give up looking for work. While 2.15 million Americans gained jobs in June, even more -- 2.35 million -- dropped out of the labor force altogether.
In fact, in every month since December 2008, more unemployed have dropped out of the labor force than have found jobs, with the exception of two months.
Kudlow writes that cutting business tax rates would be the most significant way to improve economic growth today. The National Center for Policy Analysis's Tax Analysis Center has modeled such a reform, finding that replacing the U.S. corporate income tax with a 9 percent rate would raise GDP and increase wages for all workers.
Source: Lawrence Kudlow, "Big Problems Lurk Behind Latest Report On Jobs in U.S.," New York Sun, July 5, 2014.
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