Obama's Achilles Heel: China

To contact us Click HERE
UNITED STATES - The US National Debt continues to go up $3.87 billion USD per day and is currently hovering around $12.4 trillion.

The problem is its going to continue to skyrocket as long as the United States is fighting off a recession, two wars and high oil prices. US President Barack Obama thus has his work cut out for him, problems left behind by George W. Bush, and his problems are quantified by the statement that "Most Americans don't buy American, they buy Chinese."

"Most Americans don't buy American, they buy Chinese."

That is not completely true. What is true that on average the USA imports $2 trillion USD worth of products every year of which approx. $300 billion is from China (approx 15%).

That is peanuts when you realize the USA only exports an average of $65 billion to China annually. The end result is an annual trade deficit of $235 billion taken out of the American economy and bolstering China's economy.

China is not the only country that enjoys a trade deficit with the United States. Japan, South Korea and numerous other countries trade heavily with the USA, often in products that Americans "need" in terms of electronics, but also a lot of products that could be made in North America but has been outsourced instead.

What the USA needs is more factories inside America that is hiring people, making products Americans can use (preferably products and equipment that will make them more competitive internationally) and are priced fairly.

Otherwise what we're opening ourselves up to is to communism... Oh dear, I said it. The dreaded C-word.

If the USA cannot shake off the recession and high unemployment rate America's economy will continue to flounder and will eventually be forced to create a more socialist-based economy as capitalism falls apart. This means government "work-fare programs", huge cutbacks to arts & culture funding (including Hollywood), an increase in food stamp usage, and a skyrocketing crime rate as Americans become more desperate for survival.

The 1st thing the USA needs to do is put a halt on all free trade discussions with Asia. America isn't ready for such big trading partners. The economy is too fragile right now.

The 2nd thing the USA needs to do is find cheaper alternatives to expensive oil. Oil prices are simply too high and its hampering transportation costs of materials/products. Hydrogen power perhaps.

The 3rd thing the USA needs to do is cut taxes on the poor, increase taxes on the rich. The poor will spend every dollar they have anyway, whereas the rich have a tendency to stick their money in the bank and sit on it.

The 4th thing is create tax breaks for companies that operate solely in the USA. This will benefit small businesses and new startups.

The 5th thing the USA needs to do is enforce mandatory retirements. Old people who keep working when they should be retired are essentially stealing jobs from younger Americans. Exceptions can be made for industries that have a shortage (ie. doctors), but otherwise these people need to be put out to pasture.

The end goal is to get more Americans working and building things again, creating opportunities for a new generation of hard working Americans.

Evacuated Tube Transport | A Silver Bullet

To contact us Click HERE

Nix the Bullet Train to Bankruptcy

* By: Larry Walker, Jr. *

Forget about airplanes, electric cars, algae biofuel, and the bullet train to bankruptcy, evacuated tube transport is the wave of the future. At 1/10th the cost of high speed rail, and 1/4th the cost of a freeway, with top speeds of 370 mph intrastate and 4,000 mph interstate/international, silent, safe, and faster than jets, ET3’s six passenger frictionless magnetic levitation capsules are far more viable than any other form of transportation on the horizon.

Does the idea of travelling from New York to L.A. in 45 minutes, without a TSA pat down, and at a fraction of the cost sound appealing to you? Would I buy a ticket? Hell yeah! I would ride today if I could. Looks like the government can cancel its plans on that $500 billion high-speed rail network to nowhere. It’s already obsolete.

There’s just one caveat: Let the private sector run it.

Reference: http://www.et3.com/

Related: Obamarail | The Bullet Train to Bankruptcy

Rising Interest on Federal Debt | Don’t Double My Rates

To contact us Click HERE

Hey, Don’t Double Obama’s Rates!

* By: Larry Walker, Jr. *

Mr. Obama asked students at the University of North Carolina yesterday afternoon to tell their members of Congress one thing: Don’t double my rates.

Once again, Mr. Obama doubled down on flimflam, this time misdirecting towards rising interest rates on student loan debt -- instead of targeting the rising cost of interest on the federal debt. According to the White House, interest on the federal debt is projected to surpass $1.0 trillion per annum by the year 2020. Mr. Obama also failed to mention the $494 billion tax hike scheduled to hit American taxpayers on January 1, 2013.

According to Mr. Obama, “Five years ago, Congress cut the rates on federal student loans in half. That was a good thing to do. But on July 1st -- that’s a little over two months from now -- that rate cut expires.  And if Congress does nothing, the interest rates on those loans will double overnight.... And just to give you some sense of perspective -- for each year that Congress doesn’t act, the average student with these loans will rack up an additional $1,000 in debt -- an extra thousand dollars.  That’s basically a tax hike for more than 7 million students across America…”

If rising interest rates on student loan debt represents a tax hike, what are we to make of next year’s higher income tax rates?

Nine years ago, Congress cut income tax rates across the board. That too was a good thing to do. But on December 31st -- that’s a little over eight months from now -- those rates expire. And if the U.S. Senate does nothing, income tax rates will rise overnight… Tax policies in seven different categories will expire, including the Bush Tax Cuts, the payroll tax cut, and the AMT Patch. Plus five of the 18 new tax hikes from Obamacare will begin. And just to give you some sense of perspective -- Taxmageddon is a $494 billion tax increase, so each year that the U.S. Senate doesn’t act, every man, woman, and child in America will rack up an additional $1,500 in income taxes -- an extra fifteen hundred dollars. That’s an extra $6,900 for every U.S. taxpayer (the 50% of us who actually pay income taxes) – an extra six thousand nine hundred dollars.

So should my three children, who are all in college, be worried more about rising interest rates on student loans, dismal employment prospects, looming tax hikes, or rising interest on the federal debt?

Rising Interest on the Federal Debt

Based on Obama’s fiscal year 2013 budget, per Table 27-13, Baseline Budget Authority and Outlays by Function, Category, and Program, Gross Annual Interest on Treasury Debt Securities is projected to grow from $453.9 billion in 2011 to over $1.0 trillion by 2020, and to surpass $1.2 trillion by the year 2022 (see Chart below). Since this represents about half of the government’s current revenue, that doesn't leave much room for anything other than Social Security and Medicare.

Today’s college students need to give serious and careful thought to a lot more than interest rates on student loan debt. Within the next eleven years, on a cumulative basis, the U.S. Government will incur more than $9.3 trillion in interest on the federal debt (see Chart below). That equates to roughly $30,000 for every man, woman and child in America. And since only 50% of working Americans pay income taxes, for those fortunate enough to obtain gainful employment, it amounts to nearly $131,378 each. And that’s just over the next eleven years -- an extra one hundred and thirty one thousand three hundred and seventy eight dollars.

Thanks, Mr. Obama, for sugarcoating the dire consequences of your lack of a cohesive economic plan, and for sacrificing my children and grandchildren’s futures in lieu of your own selfish ambitions.

Tables

Reference:

Table 27-13. Current Services Budget Authority and Outlays by Function, Category, and Program

Related:

#DontDoubleHisDebt

#DontDoubleMyTaxes

Real GDP Per Capita -- Dead!

To contact us Click HERE

Moving Forward -- Without Obama

* By: Larry Walker, Jr. *

Why do I get the eerie feeling that we’ve gotten nowhere in the last four years? The answer is because we’ve gone precisely nowhere with Obama. As the chart above displays, on a per capita basis, real gross domestic product has declined by a cumulative -0.20% during Obama’s four-year term (through Q1 2012).

President’s Ronald Reagan and Bill Clinton both inherited rather weak economies. Each achieved real GDP per capita growth of 1.52% in the first year in office, but by the second year, Reagan’s cumulative GDP had declined to -1.35%, while Clinton’s rate climbed to 4.34%. Yet by the end of the fourth year, Reagan’s policies resulted in cumulative GDP per capita growth of 8.47%, versus Clinton’s 8.19%. Man, whatever Reagan was onto needs to be codified and replayed, over and over and over again. Needless to say, both were overwhelmingly re-elected.

George W. Bush inherited a really crummy economy. After only achieving real per capita growth of 0.08% in his first year, by his fourth, Bush’s policies had grown the economy to cumulative real GDP per capita of 5.06%. And with that, Bush ’43 was easily re-elected.

The policies of Reagan, Clinton and Bush ’43 moved America ‘forward’. That’s what I call progress – moving the economy forward in real and measurable terms. Terms that every American could see, touch and feel in their own billfolds, as real GDP per capita was spread around, lifting many from poverty and mediocrity into new realities.

Why Real GDP Per Capita?

Why measure GDP on a per capita basis? GDP is an aggregate figure which does not consider differing sizes of nations. Therefore, it should be stated as GDP per capita (per person) in which total GDP is divided by the resident population on a given date.

Why use chained dollars? When comparing GDP figures from one year to another, it is desirable to compensate for changes in the value of money – i.e., for the effects of inflation. The factor used to convert GDP from current to constant values in this way is called the GDP deflator. Unlike the Consumer price index, which measures inflation or deflation in the price of household consumer goods; the GDP deflator measures changes in prices of all domestically produced goods and services in the economy.

It is only by comparing cumulative changes in real GDP per capita that we are able to understand whether today’s economic policies are helping or hurting. Furthermore, by making the comparison in 4 and 8 year increments we are able to determine whether to re-elect a POTUS or send him packing, or to continue with the same party affiliation or make a break towards independence. So where do we stand today?

GDP is Dead

Although Barack Obama also inherited a bad deal, his policies made it worse. The economy was declining at a real per capita rate of -1.27% in 2008, but by the end of 2009, Obama turned that into a decline of -4.33%. That’s a fact. Then, by the end of his second year, Obama’s stimulus programs resulted in a slight improvement, as the economy achieved negative cumulative growth of -2.15%. Although similar to Reagan’s second year decline to -1.36%, that’s where all similarities end.

Now in his fourth year (as of Q1 2012), Obama has achieved cumulative real GDP per capita growth of -0.20%. Compared to Reagan, Clinton, and Bush ‘43’s fourth year benchmarks of 8.47%, 8.19% and 5.06%, Obama is clearly a first-term loser. In absolute terms, the economy has gone nowhere under Obama. In terms that really matter, inflation adjusted dollars, as a percentage of the population; the economy hasn’t moved at all under the policies of Barack Obama. We are still below zero as far as real per capita growth – below zero, in spite of $6.3 trillion of additional debt. If Barack Obama is re-elected, he will be the only POTUS in modern history to be reinstated based on driving our economy into the ground.

Forward

“If you cry ''Forward'' you must be sure to make clear the direction in which to go. Don't you see that if you fail to do that and simply call out the word to a monk and a revolutionary, they will go in precisely opposite directions?” ~ Anton Chekhov

Forward? Yes, we will be moving forward – without Obama. The distraction of rising student loan interest rates is irrelevant in a shrinking economy. The concepts of a fair shot and a fair share are inapposite and unworthy of further discussion given the circumstances. And this garbage about being the only American around capable of giving a nod to take out a dangerous radical jihadist is just that – garbage.

I care about my children, my grandchildren, my parents, my sisters, my friends, my business, my customers, my community and my neighbors, but I could care less about Afghanistan. Why are Americans still dying in that cesspool? If Obama really wants to take responsibility for all of his actions, then why not include the fact that 69% of U.S. Afghan War casualties have occurred during his 39 month command? Explain that! How did Obama manage the war for only 30% of the time, 3 years out of 10, yet wind up responsible for 69% of the casualties?

Between the trail of blood, death and destruction abroad and his tanking of the economy at home there’s really no reason to grant Obama a second chance. It’s time for Obama to give up the keys, stop impersonating a president, and go home. Only new leadership will move America forward.

References:

Bureau of Economic Analysis, Table 7.1. Selected Per Capita Product and Income Series in Current and Chained Dollars (A) (Q)

Spreadsheet:

Per Capita Product and Income

Related:

Point of No Return | National Debt Tops Personal Income

National Debt Bomb | 1976 to 2011

Rising Interest on Federal Debt | Don’t Double My Rates

The Real Employment Situation – January 2009 through March 2012

Watcher’s Council Nominations – Post Memorial Day Edition

To contact us Click HERE

Check out the Watcher’s Council, a blogging group consisting of some of the most incisive blogs in the ‘sphere, and the longest running group of its kind in existence. Every week, the members nominate two posts each, one written by themselves and one written by someone from outside the group for consideration by the whole Council. Then they vote on the best two posts, with the results appearing on Friday.

Council Submissions

• The Noisy Room – Stalking the Blogosphere – BlogBurst Friday for Free Speech
• The Colossus of Rhodey – This Is Even Funnier Because Of Her Obstinance
• Simply Jews – Viktor Dvorakovsky: an undermartyred Russian Islamist
• The Independent Sentinel – Obama’s Truth Team Engaging In Deceptive Propaganda
• The Political Commentator – The IPO: Did Facebook “Jump the Shark”?
• Joshuapundit-Memorial Day: An Honest Man Versus A Liar
• Rhymes With Right – Religious Freedom Alert – South Carolina Jailer Declares No Mass For Catholic Prisoners
• The Razor – Media Bias and the Sin of Omission
• GrEaT sAtAn”S gIrLfRiEnD – Syria Phobia
• The Right Planet – BlogBurst Friday: Blog About #BrettKimberlin Day
• Bookworm Room – Book review: Marcus Luttrell’s “Service: A Navy SEAL at War”
• The Glittering Eye -I’d Really Like to Know How They Think Things Should Work
• Gay Patriot – Richard Grenell, gay conservatives & the GOP
• VA Right!- McConnell Blasts Obama Admin for Spending $20 Mil to Promote Obamacare at a Time of Record Debt & Deficit
• The Mellow Jihadi – Mandatory Arabic In Harlem

Honorable Mentions

• Right Truth – Bob Dylan Receives Medal Of Freedom
• Crazy Bald Guy – The Happiness Index
• Common Cents – 43 Catholic Organizations bring lawsuit against Obamacare…19 seconds of Press Coverage
• The Pirates Cove – Today’s Hyperventilating AGW Story: “Climate change ‘will cause civilisation to collapse’”
• Against All Enemies – The Six Commandments

Non-Council Submissions

• Mark Steyn –The Facebook Caliphate submitted by The Noisy Room
• Natural Born Conservative – Adventures in Politicking II : No Shot submitted by The Colossus of Rhodey
• The Warped Mirror – Think Progress On Preconditions For Negotiations submitted by Simply Jews
• Newsmax – MSNBC Host ‘Uncomfortable’ Calling Fallen Soldiers Heroes submitted by The Independent Sentinel
• Mises Institute -The Systemic Siesta submitted by The Political Commentator
• Adam Garfinkle – Look Before You Leap submitted by Joshuapundit
• Breitbart.Com – Former DOJ Attorney: Eric Holder Could Stop SWATings ‘in 48 Hours’ submitted by Rhymes with Right
• Victor Davis Hanson –The Power of Cool submitted by The Razor
• Security Clearance – Inside Jordan, Worries About Iran And Syria submitted by GrEaT sAtAn”S gIrLfRiEnD
• American Spectator – Terror by Any Other Name submitted by The Right Planet
• Omri Ceren/Commentary Magazine -The Consequences of Obama’s Conceit submitted by Bookworm Room
• Azizonomics – Keynesianism & Eugenics submitted by The Glittering Eye
• Nice Deb -Aaron Worthing Arrested After Kimberlin Peace Order Hearing submitted by Gay Patriot
• Jim Treacher–Jay Carney explains the difference between Solyndra and Bain Capital, so try to keep up submitted by The Watcher
• Barry Rubin – Bush And Obama Together At Last In Misunderstanding the Middle Easat submitted by The Watcher
• Hugh Hewitt – The Chicago GangGoes After Romney submitted by The Watcher

Enjoy! And don’t forget to follow them on Facebook and Twitter..’cause they’re cool like that!

Obama’s International War on Justice

To contact us Click HERE

* Predator Drone and Hellfire Missile *

Fighting Terror with Terror

* By: Larry Walker, Jr. *

“Last week officials in the Obama administration talked to the New York Times about the "Secret Kill List" drawn up for drone assassinations. Democratic strategists in an election year calculate that the article will prove a vote-winner, dispelling any notion that Barack Obama is soft on terror.” ~ Clive Stafford Smith

Unfortunately for Mr. Obama, his not so secret "Kill List" has proven him to be even weaker than most of us already knew. He is clearly a loser on the economy, a near Enemy of the State when it comes to preserving, protecting and defending the Constitution, and he has abased himself to the level of a cold-blooded murderer, assassin, and international terrorist. He has done irreparable damage to any sense of justice in the World.

Picture this. A friend calls me and says, “Hey, I want you to meet a guy named so and so. He has a few dollars to spend and he wants to hire you to do such and such.” I agree to meet him. I don’t know this guy from Adam. I have no idea that he’s on Obama’s “kill list”. He arrives at my home along with two other guys. I don’t know any of them, or what they are about, I’m simply meeting with them to find out. The doorbell rings. I open the door. Within seconds, 4 hellfire missiles rain down on my house killing me, my family, and the alleged bad guys. The story comes out that my family and I were a group of “suspected militants” meeting with some top commander of some militant group when we were killed by a U.S. drone. You cheer. But an innocent family was just murdered, and for no good reason.

An article appeared on Saturday entitled, “We are sleepwalking into the Drone Age, unaware of the consequences.” It was written by Clive Stafford Smith, the founder of Reprieve, a group of international charities dedicated to assisting in the provision of effective legal representation and humanitarian assistance to impoverished people facing the death penalty at the hands of the state. Mr. Smith has spent 25 years working on behalf of defendants facing the death penalty in the USA.

According to Mr. Smith, who visited Pakistan last October, “The CIA is paying bounties to those who will identify "terrorists". Five thousand dollars is an enormous sum for a Waziri informant, translating to perhaps £250,000 in London terms. The informant has a calculation to make: is it safer to place a GPS tag on the car of a truly dangerous terrorist, or to call down death on a Nobody (with the beginnings of a beard), reporting that he is a militant? Too many "militants" are just young men with stubble. At least 174 have been children.”

Whenever I read a news headline, stating that “we” just killed another group of suspected militants, I don’t feel any sense that justice was served, none at all. I think to myself, ‘Great, now were killing suspects.’ There’s a big difference in my mind between a “suspect” and a “known terrorist”. What are we fighting now, the War on Suspected Militants? Don’t get me wrong, I don’t mind hearing that the CIA took out Abu Yahya al-Libi, al- Qaeda’s second-in-command, in its latest bombing raid. That doesn’t bother me so much, although I would rather he had been captured, interrogated, and tried. But what disturbs me is that 16 other people were killed in the attack, and no one has bothered to mention who they were.

When we read the story from Bloomberg, we learn that the bad guy, Abu Yahya al-Libi, was spotted by a drone, which followed him to a house and killed him. There’s no mention of whose house he went to, or of the other 14 people (aside from his driver and personal bodyguard) who lost their lives. Were the others terrorists, suspects, or just innocent victims who happened to be in the wrong place at the wrong time? The problem is that we may never know.

The Bloomberg story reads, “The U.S. drone that spotted al- Qaeda’s second-in-command getting into a car, followed him to a house in a North Waziristan tribal region and killed him on June 4 dealt another serious blow to the terrorist group’s remaining core in Pakistan, administration officials said.” It just sounds like a drone followed a bad guy and killed him. But when we read the story from the Guardian UK, we learn that actually up to 17 people were killed in the attack.

“Four missiles launched by a US drone has killed up to 17 people in north-west Pakistan, according to security sources, in the latest in a series of remote-controlled attacks which are straining relations between Washington and Islamabad… The most recent drone operation targeted a hamlet in North Waziristan on Monday, a tribal area regarded as a hub for al-Qaida and Taliban fighters waging insurgencies on both sides of the porous Afghanistan-Pakistan border. U.S. and Pakistani government sources said Abu Yahya al-Libi, a senior al-Qaida leader who had survived previous drone attacks, was a target of one of the strikes. It was the third such strike in as many days – similar operations over the weekend claimed a dozen lives – and the eighth in two weeks.”

On the previous day, Mail Online reported that 10 people went to a home to console the brother of a suspected militant killed in a drone attack on the previous day. When they arrived at the home, they were killed by hellfire missiles launched from another U.S. drone. Of course, they were all classified as “suspected militants,” although the story reported that the brother was among the dead along with at least two who were believed to be foreigners. Is this the new justice? Kill a suspect, and then when friends of his survivors come to mourn, kill them too?

The story reads, “A U.S. drone strike today killed 10 suspected militants in Pakistan as they 'offered condolences' to the family of a commander who died in an attack 24 hours earlier… Four missiles were fired at the tribal village of Mana Raghzai in South Waziristan near the border with Afghanistan, intelligence officials reported… A strike by the remote-controlled aircraft in the same area killed two suspected militants on Saturday.”

Following a group of people who have gone to a home to offer condolences to the family of someone you murdered yesterday, and then killing them, along with the family of the deceased, is an act of terrorism. Are we following al Qaida’s playbook now? Do we know who we killed? Or more importantly, do we care? Apparently, Barack Obama doesn’t. He just wants to look like he’s doing something, but we must never confuse motion with action. Two wrongs don't make a right.

If this is justice, then I’m living in the wrong country. What really worries me is what’s going to happen in the future, when the bad guys get their own drones, and start targeting U.S. households. We’re not the only ones with drones now, so what makes us think we can control them? Are we controlling them? This reckless Administration has set a dangerous precedent, and it may be too late to reverse. I think we need to revisit the idea of what it means to bring someone to justice.

By using terrorist tactics to assassinate alleged terrorists and suspected militants, without due process, Barack Obama has presumed the role of judge, jury, and executioner, and has single-handedly destroyed any sense of justice in the World. Yet justice must be served. It’s up to the rest of us to right Obama’s wrongs. Step one is his removal from office. Step two is ensuring he stands trial for war crimes. If you are a Democrat, and don’t agree with Obama’s policies, then either jump ship now and help to ensure his defeat, or keep your mouth shut and get out of the way. You have no defense.

Manipulation 401 : U-3 vs Real Unemployment

To contact us Click HERE


Another 522,000 left the labor force in April 2012.

April’s Bogus Unemployment Rate

* By: Larry Walker, Jr. *

Now that economists, media pundits, and the Obama administration have weighed in with half-hearted and inaccurate theories respecting April's decline in the U.S. unemployment rate, it’s time to set the record straight. We learned yesterday, that the official rate declined from 8.2% in March to 8.1% in April, but what’s really beneath the decline? To know, one must have an understanding of how the unemployment rate is calculated, and how to access the appropriate reports. From there it’s just a matter of simple mathematics. After poring through the numbers, I have concluded that the official unemployment rate actually rose to 8.3% in April, while the real unemployment rate ticked up to 11.1%.

According to the U.S. Bureau of Labor Statistics (BLS), as of May 4, 2012, “Nonfarm payroll employment rose by 115,000 in April, and the unemployment rate was little changed at 8.1 percent.” What’s wrong with this pronouncement? The quandary is that nonfarm payroll employment comes from Establishment Data, reported in Table B-1, and has nothing to do with the official unemployment rate. The official unemployment rate is completely derived from Household Data, which is found in Table A-1.

Nonfarm payroll employment and the official unemployment rate are inapposite (one has nothing to do with the other). In fact, if you take a gander at Table A-1, from which the unemployment rate is officially derived, you will notice that the number of employed persons actually declined by 169,000 from March to April of 2012. Does it make sense that establishments reported the creation of 115,000 jobs, while households reported losing 169,000 jobs? Which data set are we to trust? Well, since most of the hoopla surrounds the decline in the unemployment rate, we shall focus on Household Data.

As I outlined in Manipulation 101: The Real Unemployment Rate, the Labor Force is comprised of those who are either Employed or Unemployed, and the Unemployment Rate is calculated by dividing the number of unemployed persons by the size of the labor force, as follows:

[ (A) Total Unemployed / (B) Labor Force = (C) Unemployment Rate ]

Thus, the official unemployment rate of 8.2% in March, as reported by the Bureau of Labor Statistics on April 6, 2012, was calculated as follows:

[ 12,673,000 / 154,707,000 = 8.2% ]

As shown in the table below, at the end of March 2012, 12,673,000 persons were officially unemployed, out of a labor force totaling 154,707,000, equaling an unemployment rate of 8.2%. Got it?

To take it a step further, if 12,673,000 persons were unemployed, out of a labor force of 154,707,000, then it should follow that the remaining 142,034,000 were employed. I found this to be consistent with BLS data and labeled the number of employed as item (D) in the table above. Next, in order to determine whether or not the decline in the unemployment rate is completely bogus, we must take into account some additional statistics from Table A-1, so I included the number of persons “Not in the Labor Force” (E), and the “Civilian Noninstitutional Population” (F). Now we will compare the March statistics to April’s calculation.

The April Employment Situation Summary concluded that a total of 12,500,000 persons were unemployed, out of a labor force totaling 154,365,000, equaling a decline in the official unemployment rate to 8.1%, from 8.2% in March. So what changed?

Comparing the monthly changes in the table below, you will note that from March to April, the number of unemployed persons (A) declined by 173,000. This would be a good thing, if they were all able to find jobs, right? So how many found jobs? Well, none. As you can see, according to Table A-1, the number of employed persons (D) also fell by 169,000. Since the number of employed and unemployed persons both declined, where did they go? As you can see the entire labor force declined by 342,000. Is it a coincidence that 173,000 plus 169,000 equals 342,000? No, it’s not.

The number of unemployed persons declined by 173,000, not because they were able to find work, the BLS merely removed them from the labor force. The BLS also removed an additional 169,000 persons from the labor force, who were considered employed just a month prior. Thus, 169,000 persons were ushered directly from a status of employed in March, to completely out of the labor force by the end of April. Does this raise any eyebrows? Also noteworthy are changes in the number of persons “Not in the Labor Force” which increased by 522,000, and the “Civilian Noninstitutional Population” which increased by 180,000. How de we reconcile this?

Reconciliation

The table below summarizes the truth behind the decline in the official unemployment rate.

Here’s what happened.

1. The number of unemployed persons declined by 173,000 in April.

2. The number of employed persons declined by 169,000 in April.

3. The labor force declined by 342,000 in April, which is the sum of #1 plus #2.

4. The 342,000 persons in #3, who officially dropped out of the labor force in April, were added to those considered “Not in the Labor Force”.

5. The Civilian Noninstitutional Population (working age population) increased by 180,000 in April, but none entered the labor force.

6. The number of persons counted as ”Not in Labor Force” increased by 522,000 in April, which is the sum of the 342,000 persons who were previously counted as unemployed (173,000) and employed (169,000), plus the 180,000 new working age persons who were swept under the rug.

Sequitur

To sum it up, in April, 342,000 persons dropped out of the labor force, while another 180,000 new entrants fell by the wayside. In effect, a total of 522,000 persons were removed from the labor force. So what would the official unemployment rate have been had the 342,000 April dropouts been instead left in the labor force and counted as unemployed? The answer is 8.3%, as shown below. Thus, the true unemployment rate ticked up by 1 basis point, from 8.2% in March to 8.3% in April, rather than down by 1 basis point as the BLS reported.

The labor force has historically grown at an annual rate of 1.0% (mirroring population growth), but looking back to December of 2008, it is safe to state that the labor force stopped growing altogether since Obama’s inauguration (see chart below). [Note: The labor force participation rate has likewise declined from 65.8% to 63.6% over the same period, or by 220 basis points.]

Final question: What would the unemployment rate be if the 1.0% per annum shortfall in the labor force, since January of 2009, was restored? Well, since 40 month’s have passed, the labor force should have grown by 3.33% ((1.0% / 12) * 40). And since the labor force stood at 154,626,000 in December of 2008, it should have grown to 159,775,000 by April of 2012, a difference of 5,149,000. Thus, the real unemployment rate is 11.1%, not 8.1%, as shown below.

Are we really moving the right direction? That depends on ones definition of the word “right”. Is manipulating the truth right?

“Anyone who doesn't take truth seriously in small matters cannot be trusted in large ones either.” ~ Albert Einstein

Related:

Manipulation 101: The Real Unemployment Rate

Manipulation 201: Playing With Unemployment

Real GDP Per Capita -- Dead!

Data:

Spreadsheets