The Collapse of America’s Labor Force

America continues to face a true national tragedy as tens of millions of unemployed people have been literally discarded because of big business outsourcing to China, India, and elsewhere. Worse yet, the unemployment statistics are manipulated every month in a cruel hoax to make it look like the unemployment rate is far lower than it really is. A high unemployment rate is embarrassing and would depress workers and business psychology, so workers are surgically removed from the labor force and hidden from view.

While the financial press states that we need to create at least 150,000 jobs a month to keep up with a growing labor force, they have failed to report that the number of workers no longer employed jumped by two million last year to 85 million, from 83 million in 2009. Some of these workers hidden from view are in welfare programs, and millions more simply vanish from the workforce using the government’s statistical magic.

Following are some examples of how statistical magic is used to shrink the labor force and lower the unemployment rate:

• The rush to start collecting social security at age 62: When you begin collecting social security, you drop out of the labor force. A few years ago, the forecast was that social security tax would exceed payments until 2016, yet the program ran a deficit last year for the first time ever of $41 billion. While a good part of this year’s social security deficit is related to a one-year two percent social security tax reduction to individuals, a sizable part of the deficit has been caused by less people working, and early filers. Filings were up over 10 percent last year because adults over 62 years old can’t find work.
• 51.2 million Americans are currently collecting social security benefits and of that amount, 7.7 million are early retirees, or young survivors of retirees who have passed away. This group is not in the labor force and the vast majority will never return.
• Filing for Social Security Disability or SSI: If you are Caucasian, 55 years old, and a permanently-trashed factory worker, this is about the only place you can hope to go and survive as state and local governments gut welfare. In 2000, before employment fell off the cliff, it was reported that 1.4 million a year filed for SSI (only about 50 percent of applicants are approved). In 2010, three million filed.
• Looking at the government statistics for social security and SSI, of the 51.2 million people currently collecting social security, 5.2 million are “disabled” and collecting SSI. Remember, if you’re retired or on SSI you’re not counted as unemployed or in the labor force, so SSI is a neat place to hide over five million desperate workers.
• Workers dropped from the labor force: If you haven’t looked for a job for a few weeks, the government, in their ultimate wisdom, assumes you don’t want a job so they drop you from the labor force. Yet, if you were to ask all those people who didn’t look for a job – because there are no jobs – they would surely tell you they wanted one. There are 6.65 million people in this category and if they were added back in, the unemployment rate would immediately jump from 9 percent, to 12.8 percent.
• The self-employed counted as working: Even though they’re self-employed and have no income, this group is counted as working. The number of self-employed people (who have an unincorporated business) has been rising by a few hundred thousand a year since the recession began. The total number is up to a staggering 9.7 million and many in this category have discovered that to have a job, all you need to do is print up a business card and hand it out.
  • An industry conference we attended recently had over 5,000 attendees. The industry turns assets like car loans, credit cards, and mortgages into securities, but there are not a lot of deals being done. In looking at the business cards, we estimate that 1,500 of the attendees were consultants (without clients) looking for a real job.
• The self-employed job category includes barbers, construction workers, real estate agents, etc. For them, there seems to be a lot less work, than people. In Palm Beach where I reside, there are twice as many registered real estate agents as there are homes for sale and that doesn’t bode well for income levels. We estimate that of the 9.7 million self-employed, a few million are probably doing fine, a few more million are hanging on, and at least four million are not covering their costs and operating at a loss.
• Counting part-timers as full-time: Part-timers are lucky to have a job at all, but their luck is overstated. Part-time work only pays for a part-time life, and the number of people working short-term for economic reasons in January of this year was 9.2 million.
• Escalation in the number of people relying on a government check: The food stamp program is a startling example of how many people have stopped supporting themselves. Since 2006, when 26 million people were receiving food stamps, the number has shot up 63 percent. As of November 2010, the number was up by 16.5 million to 43.5 million collecting. This means that out of a population of 311 million, 14 percent are on food stamps!

When you add up the number of recipients receiving a government handout, there are now over 100 million people (almost a third of the population) relying on Uncle Sam to survive. The only problem is Uncle Sam is poor and running another $1.6 trillion deficit this year.

While the government has focused on blowing up American factories and moving all new factories overseas, the Federal Reserve has created stock market and housing bubbles to give the American economy a false rosy glow. Working their Keynesian magic together, our leaders have managed to lead America and its struggling workers to the poor house.

The table below shows what the federal government and Federal Reserve policies have done to America:

So, what is the real unemployment rate?

First, we adjusted the labor force back up from the 153 million reported for January 2011 by adding back in workers who are either marginally attached and/or collecting SSI or early Social Security. This brings the total to 163 million. When you divide the total of labor force collapse of 38.3 million by 163 million, we get a real measure of unemployment and under employment of 23 percent!

Judging from these numbers, much of the collapse of the American labor force looks permanent, and the majority of job seekers will be lucky if they earn 60 percent of what they made in their last full-time job.

There’s no end in sight for the housing collapse either, and most experts are in agreement that without a recovery in housing, there will be no real economic recovery. Unfortunately, with so many people surviving on a small crummy government check, the question remains who will be able to afford any of those 10 million vacant homes, or 6 million foreclosures yet to come, particularly with mortgage rates and required down-payments going up.

Time is running out and it may already be too late but the leadership in Washington needs to step up to the plate and put Americans back to work before our country turns into “The Banana Republic of the North”.