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The New Normal Economy We Don't Need

Monday, November 16, 2015 @ 9:49 AM
The New Normal Economy We Don't Need When you do real math there is not so much to be excited about where it concerns the nation's economy despite what government bureaucrats would have you believe.
A 49.1% Labor Participation Rate is not something we should be excited about. - Dan Celia

Let’s examine the math . . .

So we got a little meat on the bone about the economic plans from those fighting against a third term of this economic disaster. But they missed something.

Many think the unemployment rate will go even lower than the current 5%?

I find it comical that we would take victory laps and sing the praises of this economy. If we are in recovery mode and expanding back to where we were, it has taken 77 months so far (the fifth longest recovery since 1900). Moreover, so far, it has taken longer than any recovery since World War II to reach the prerecession supposed growth in output (according to Minneapolis Fed data).

Many strategists expect only continued good times in this economy. They may be right if we are satisfied with living in 1977. That’s the last time the Labor Participation Rate was at this level.

Why do we get so excited about living in a 1977 economy? While it does provide good talking points and continues to drive home this new normal of the economy—a normal with GDP growth that can’t even come close to keeping up with population growth. Any GDP growth less than 2.7% is actually a downhill slide.

I decided to look at the numbers a bit deeper. Right now, according to the Department of Labor, 157,065,000 people are participating in the labor force. According to the Census Bureau, our population is projected to reach 320,000,000 by the end of this year. In 1977, the population was 220,000,000 people, with a labor participation rate of 62.6%. According to the Bureau of Labor Statistics (BLS), that’s about where we are today. But here is the problem: their numbers just don’t work. So how do they come up with their numbers? They don’t use 320,000,000 as a projected population growth. They don’t even use the 2012 Census Bureau 307,000,000. They use 250,000,000. If they did use real numbers, the labor projections numbers would take on an entirely different color. BLS is President Obama’s best friend.

Here is the real math. A population of 320,000,000 with 157,000,000 participating in the labor force makes the Labor Participation Rate about 49.1%--nowhere near 62.6%. The BLS’s numbers only go back to 1948. The lowest number I found was May 1948 a Labor Participation Rate of 58.3%. I assume that it likely dropped as low as 49.1% sometime during the Great Depression or in the early 1900s.

It is hard to argue with the math. A 49.1% Labor Participation Rate is not something we should be excited about.

(This blog was first posted HERE on townhall.com)

Dan Celia Host of Financial Issues More Articles SHOW COMMENTS
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