Don's Tuesday Column

THE WAY I SEE IT   by Don Polson  Red Bluff Daily News   3/24/2015

Real unemployment: over 15%

The Tea Party Patriots have scheduled another high-profile public servant: Tehama County Chief Administrator Bill Goodwin. Attendees will be able to hear an update on current county business and issues, as well as ask questions on topics of interest. The meeting is at 6 PM at the Westside Grange on Walnut St. west of Baker Rd.

The monthly pronouncements of employment/unemployment figures are invariably used by journalistic analysts to gauge Obama’s economic progress. What is regarded as a “plow horse” economy (by Brian Wesbury, First Trust chief economist) compares unfavorably to a “race horse” which would characterize Ronald Reagan’s economic growth. Just to roughly summarize previously written points, America’s economy under Reagan over-performed expectations: 1) our GDP recovered the lost growth of the early 80s recessions within several years whereas Obama’s economy has under performed and failed to fully recover lost GDP;

2) Employment under Reagan rebounded by objective standards to robust and full employment whereas Obama’s 6-year recovery term has succeeded only in driving record numbers of workers and work-seekers out of the labor pool (lowest labor participation rate in 30 years) which provides an artificially reduced 5.8% unemployment rate.

Please closely follow and avoid “eye-glazing” over the following information. It’s not difficult to use local data to illustrate how numbers have been “massaged,” shall we say, to produce so-called “improvement” in employment statistics. From last Saturday’s report (based on EDD data and press releases) by the Daily News’ Andre Byik: “Tehama County’s jobless rate fell to 9 percent in February, breaking a three-month streak of rising unemployment rates. Figures released Friday by the state Employment Development Department peg the county’s unemployment rate down 0.4 percent from a revised 9.4 percent in January.

“While overall civilian employment in February was down 1.3 percent compared to January—23,180 to February’s 22,890—the county’s labor force also shrank. The civilian labor force in Tehama County was 25,150 in February, down from January’s figure of 25,590.” Also, the raw number of unemployed civilians was shown to have fallen from January to February by 150 people (2,400 in Jan. to 2,250 in Feb.), which begs a few questions and observations.

We are apparently supposed to nod and shrug shoulders over a locally disturbing narrative (that is replicated nationally). They tell us that the local “jobless rate dipped to 9 percent” (or, nationally, to 5.8%)—hooray! However, in February compared to January, there were 1) fewer people actually employed, and 2) fewer people considered to be in “the civilian labor force.” The first is explained by “Hundreds of farm jobs were lost accompanied by ‘minimal gains’ in federal government jobs, financial activities and other services.”

Of the second point, one could ask, “How is the labor force determined to have declined?” Is there a numerical method that identifies each person no longer part of the labor force? Or, is there a formula that estimates the number of people retiring compared to those turning 16 or 18, leaving high school or college? Are reductions in the labor force actually a way of saying people by the droves just aren’t looking for work anymore? I meant to ask someone how they calculate it but people at the EDD wouldn’t take my questions. They referred me to the EDD web site—I looked things up and have shocking results.

First, we have previous monthly employment news reports. In the December 20 Daily News article, “Jobless rate rises to 8.6 percent,” Mr. Byik conveyed that month’s report, which also had numbers to describe jobs and jobless progress. “Progress” may be a misnomer because 1) a falling unemployment rate should represent an improvement but 2) fewer people working clearly is not and 3) people leaving the work force because they are discouraged and no longer looking for a job is clearly not an improvement. That last point is, in fact, what is going on and driving the rate of unemployment down, locally and nationally.

So, when you read that the unemployment rate was 8 percent in October, 8.6 in November, then 8.8 in December, 9.4 in January and now 9 percent, it might seem on the surface to be improved from 10 to 12 percent. But is that the real story? Our national, state and county population hasn’t declined but has rather grown around 1 percent a year for quite some time. Millions of young people start looking for work yearly. While the EDD can proclaim that our “labor force” has declined, from almost 26,000 in October to 25,150 in February (because, remember, of able-bodied people no longer looking for work)—it defies logic.

Here is what I discovered with the help of a calculator and almost 20 years worth of Tehama County employment and population data (www.labormarketinfo.edd.ca.gov): Our population increased about 18 percent over the period. Our “labor force,” if it increased similarly (why wouldn’t it?), would be about 26,740 compared to EDD’s 25,150. That means that EDD has effectively, gradually, “erased” about 1,600 people from the ranks of those that ought to be counted as “unemployed”; if you add those to the official tally of 2,250 persons unemployed in February, that total of about 3,800 unemployed people would give us—I hope you’re sitting down—an unemployment rate over 15 percent. The local observable economy would seem to support just that conclusion.