Thoughts on our low unemployment rate

Economists have been baffled by economic circumstances since the Great Recession.  The statistical tools they use to understand what is happening in the economy have lost their predictive value.  In classic economics the fact that current unemployment is near historical lows should mean our economy is robust and wages are rising.  But the economy is mediocre, artificially supported by deficit spending by the government, and the evidence suggests the only real increases in wages are not market driven, they are a result of many local and state governments enacting substantial increases in the minimum wage beginning in 2013.

It makes be think of the old story about the 12 blind men each hanging onto a bit of the elephant and arguing about the nature of the elephant by extrapolating from the little bit of the elephant they can touch.  Each one experiences a different elephant but they all assume what they extrapolate is all they need to know to understand the elephant. 

Economist are self selected.  In my experience generally people who become economists place a high value on wealth as a primary goal in life, and are more inclined to see logic as the reality rather than as a tool to understand reality.  They bury us in the data they develop to the point it is incomprehensible to folks who don't want to take the time to sort it all out.  So we, and in particular, politicians, defer to their apparent expertise.

But they sometimes seem to be incapable of putting all the pieces of their own data together if it contradicts their own ideological view of how people should think and behave.

Sure we have an unemployment rate down pretty low, around 4%.  But 4% of what?  According to the Bureau of Labor Statistics  (see the link below) in late 2006 about 63.5% of the population was working.  Today that figure is below 60%.   That amounts to something like 10,000,000 fewer folks working today than were working in late 2006.  In fact since the bottom of the great Recession when unemployment was at 10% the number of folks working has only risen about 1%.

The unemployment rate isn't low because we have been engaging in wise economic policies, its low because a lot of people left the job market.   Probably part of the reason the Great Recession did not turn into a Great Depression is because many of those people were old enough to turn to retirement accounts or Social Security so the consumer base of the economy did not collapse.

Wages have stagnated for nearly 40 years.  Economists have hailed modest rises in wages in the last couple years as a sign the free market is working and we are on our way back.  But they ignore the fact that much of the rise in wage growth is probably related to governments in the biggest commercial States and cities nearly doubling the minimum wage in their jurisdictions.  

The media are not helpful, they parrot the Wall Street views, although Wall Street cares about little other than keeping the markets churning so they can make money. 


https://www.bls.gov/opub/ted/2016/mobile/employment-population-ratio-59-point-7-percent-unemployment-rate-4-point-7-percent-in-may.htm