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Bad News From Those Good Unemployment Numbers

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Wow, did you see the new jobs numbers? Unemployment is down to 5.1%. In the current definition of full employment (during the 1960’s it was a 4% unemployment rate) we are getting near that point. In fact, the unemployment rate is now lower than it was anytime during the Reagan presidency. We have had 67 consecutive months of job growth. The unemployment rate has dropped almost 5% from the high point of the Obama administration in October 2009. With all this good news why are things so bad?


You may have heard something about a controversy regarding the unemployment numbers. There is focus on such matters as underemployment which for example having someone with a college degree waiting tables or bartending for lack of any quality opportunities for a person with their educational qualifications. Or you may have heard about the many people working part-time jobs due to lack of full-time opportunities or employers attempting to circumvent the rules established by Obamacare which states that a full-time employee reaches that status at 30 hours per week.

What we really need to spotlight is the crushing economic effect of a lower labor participation rate (LPR). There are now 100 million Americans over the age of 16 that are not working. The Obama Administration keeps running out the deceit that this is because of all the baby boomers retiring. The fact is that the labor force participation rate for the age group 16 to 24 is only 55.1%. That is a reduction of over 10% from 66% during the 1990’s. It is also down over 5% (60.8%) from 2005. Sure myopic minimum wage increases are harming the employment of this age group with the least work experience, but that is not the total explanation.


The Obama manipulation gets worse because the LPR is lower for the prime working years of 25-54 years old. In 2000 the LPR for this age group was almost 85%. It was down to 83% when the recession started, but has now plummeted to 80.7%. It is clear the baby boomers are not the only source of reduction in the LPR.

You may wonder why this is such a big deal. The LPR for September 2015 was 62.4%. That is 3.7% less than August, 2005 exactly ten years earlier. One can argue this reduction in rate has to do with the “Great Recession.” Not true. If you review the Dept. of Labor statistics you see virtually unstopped monthly decline in the LPR during the entire Obama Presidency. From the point that the recession was pronounced over the LPR has steadily declined by 3.3%.

As shown above this is not just because of old folks retiring. In fact, more and more seniors are working longer to compensate for inadequate retirement savings or just because they are healthy and want to continue working.

If you calculate what that means in human costs at least 12 million more people would be working today if we had the same LPR as ten years ago. And this rate isn’t even a high-water mark for the American economy.


If you are doing national budgeting that means 12 million less people are paying taxes and 12 million more people are drawing government benefits. Is it now clear why our national deficit has not shrunk to a lower amount than the estimated $439 billion for this fiscal year even though the Obama Administration is touting that as a victory?

Let’s just focus on one of the estimated 100 welfare programs the federal government operates – the food stamp program. One year after the end of the recession – 2010 – there were 40 million recipients of this program. In the latest year available, 2014, there were 46.5 million food stamp recipients. If the economy was improving one would expect the usage rate to plummet. Instead this increase is partially explained by the LPR.

Some who are cynical would say that the fact more people are receiving government benefits is the driver behind the reduction in people participating in the labor force. There was an upswing in hiring when the long-term unemployment benefits were scaled back. Might we find the same result if the food stamp program was tightened up and a few million people were reduced from the rolls?

If we want to cure the ills of this economy and reinvigorate the middle-class the presidential candidates should be focusing on these facts. You will not hear this from Clinton or Sanders. They want to expand the government to provide more drag on the economy. But we have hardly heard anything from the Republicans as they spend time reacting to banalities from Trump.


Republicans have a clear opportunity to retake the White House and restore economic sanity to the country. They need to make the stuttering economy issue number one. We will see whether they are able to do that in this week’s debate.

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