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Atlas Groans July 3, 2009

Posted by geoff in News.
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Yesterday’s unemployment rate press release showed a very small increase in unemployment from May to June – only 0.1%. The natural question is: Why? Why is it so small? Are things getting better?

The answer is: Not Really.

Here’s why.

  1. The civilian labor force dropped by 150,000 people, as people either retired or gave up looking for work.
  2. The government added 200,000 people to its payroll, artificially lowering the unemployment rate.
  3. Despite the preceding two items, the number of employed people dropped by almost 275,000.

If not for the first two factors, the unemployment rate could have hit 9.7%. It’s clearly not time to relax and wait for job offers to roll in.

But why do I say that Atlas is groaning? Take a gander:

Atlas-Groans-June-09

What it means is that a year ago (the June ’08 point) we had about 54 people working in private industry to support a total of 100 people. Now we only have ~50 to support the same number, and the maroon line shows that the trend is only continuing downward.

Note to President Obama: I don’t think it’s a good time to add to the regulatory restrictions, costs of living, or tax burdens of those 50.

Comments»

1. Herr Morgenholz - July 3, 2009

So when Social Security finally admits bankruptcy, I can get rid of my Citizen Registration Number, right? Right?

2. MostlyRight - July 3, 2009

54 to 50 in a year? Or 51.3 to 50.3 in a year…am I reading this wrong?

Also, don’t millions of high school, college and university students get dumped into the job market in June? Where do they factor in the unemployment mix? It would be interesting to see seasonal trends from previous years compared to what is happening now.

3. Mrs. Peel - July 3, 2009

MostlyRight – the June ’08 data point is the solid blue rhombus at the left. The maroon trendline is from Feb ’09 to June ’09.

I had trouble understanding the graph, too. Obviously, geoff should have used triangles.

4. geoff - July 3, 2009

54 to 50 in a year? Or 51.3 to 50.3 in a year…am I reading this wrong?

The abscissa is only 5 months long (the span of the data that was easy to find). The June ’08 point (placed arbitrarily over the Feb ’09 hash mark) is the 0.54 ratio that is equivalent to 54 privately employed citizens supporting 100 people.

Also, don’t millions of high school, college and university students get dumped into the job market in June?

These are seasonally adjusted numbers.

5. geoff - July 3, 2009

There. I updated it a bit for clarity.

6. The Noble Triangle - July 3, 2009

So, diamonds are geoff’s best friend, huh?

7. Michael - July 3, 2009

Great header, by the way.

8. Michael - July 3, 2009

I’m thinking the situation might not be quite so dire as the graph implies, because you can’t totally discount 200,000 government jobs. Two reasons for this:

1. Whatever they are up to, you have to believe some useful work is getting done, i.e., those 200,000 people are not totally displacing private sector productivity. Some are teachers, police, health inspectors and so forth who are doing meaningful tasks.

2. The multiplier effect, i.e., those new government employees will necessarily either spend or save their net income, thereby putting more money into circulation, and actually helping to create or save both jobs and investment as the spending/saving turns over in the economy. The actual multipliers involved are debatable, and diluted by stuff like consuming foreign goods, but it’s something. They will also help out by paying taxes.

Don’t get me wrong, I’m not saying that 200,000 new government weenies is a good thing (compared to just cutting taxes, for example), I’m just saying it is not entirely bad, and economically not the same as the people who just gave up and quit the work force, retired, or died.

9. MostlyRight - July 3, 2009

Now I understand 🙂

And I agree, nice header.

10. Michael - July 3, 2009

Actually, I admit having to look up the “Oh Frabjous Day!” reference, but once I did I realized that was a super-cool header as well.

For others who don’t recognize this, it’s a reference to a famous nonsense poem in Lewis Carroll’s “Through the Looking Glass.” On the frabjous day the Jabberwocky was slain.

Well played, Geoff.

11. Mrs. Peel - July 3, 2009

Callooh! Callay!

Carroll invented the word “chortle” for that poem. Such a great word.

12. divemedic - July 3, 2009

Michael- Remember though, that those 200,000 government jobs do not PRODUCE anything. They are not adding to our production as an economy, and as far as production goes, they are overhead.

Michael - July 3, 2009

Michael- Remember though, that those 200,000 government jobs do not PRODUCE anything.

Nah, you just can’t blow off all government jobs as unproductive overhead. Are you saying that NASA, for example, has not produced anything? Or the National Weather Service? Or the U.S. Geological Survey? Or the National Parks System? How about those satellites that make the GPS system in your dashboard possible? Don’t policemen and soldiers contribute to our overall productivity by providing a relatively safe and free environment for our economy to operate? Do public school teachers totally fail to create human capital?

Look, I’ll be the first to say that private sector jobs are, on average, more productive than public sector jobs. That’s because private sector jobs are subject to the chastening fires of competition. But it goes too far, and we conservatives lose credibility, by suggesting that every government employee is unproductive.

13. Michael - July 3, 2009

Carroll invented the word “chortle” for that poem. Such a great word.

“Galumphing” is the other word from that poem that has been adopted into English.

14. BrewFan - July 3, 2009

Carroll also invented the phrase, “Michael, eat me raw dude.”

15. Vmaximus - July 3, 2009

Regardless of the productivity factor those 200k jobs are paying mortgages, buying starbucks etc and helping the local economy

16. Michael - July 3, 2009

Carroll also was fluent in Vietnamese, which is why the phrase “Brewfan, ăn tôi!” became a part of popular culture.

17. geoff - July 3, 2009

The 200K government jobs do contribute to economic churn, but the ultimate source of that money is the taxpayer. As Michael says, you can’t completely discount that money, but I think the value added to the private sector productivity is not nearly as high as he thinks it is.

For instance, the National Parks Service contributes nothing to private sector productivity.

18. Mrs. Peel - July 3, 2009

NASA is definitely the best value for your dollar in the government. (Well, the military, but I was thinking along the lines of civilian agencies.)

19. lauraw - July 3, 2009

Oh, piffle. NASA??

Puhhh-leeez.

You know who’s really good?

The Women’s Bureau. http://www.dol.gov/wb/
That doesn’t seem like a bullshit feel-good obsolete agency at all.

They’ve been around since 1920, and now we have more women around than ever!!won!!

20. Vmaximus - July 3, 2009

We have a womens exchange here. I somehow do not think it is what I think it is, but I often wonder if I can trade one in?

21. Michael - July 4, 2009

For instance, the National Parks Service contributes nothing to private sector productivity.

Of course not, but that’s a meaningless test. The parks themselves are productive, i.e., they create “welfare” in the economic sense. Productivity does not have to be in the private sector, or contribute to the private sector, in order to be real.

22. geoff - July 4, 2009

Productivity does not have to be in the private sector, or contribute to the private sector, in order to be real.

But it has to be in the private sector to pay for itself. That’s the point – that all gov’t jobs are ultimately supported by revenues generated by the private sector. Adding gov’t jobs doesn’t increase those revenues, rather it increases the burden on the private sector.

Certainly gov’t spending can add value, but it can’t add tax revenue.

Michael - July 4, 2009

But it has to be in the private sector to pay for itself.

That’s just not so. If tax-subsidized services return a commensurate benefit to the public, they pay for themselves. You can argue that the benefits provided by the NPS are not commensurate with the tax dollars it consumes, but arguing that their is no benefit because it is not private sector, and that the NPS does not to some extent pay for itself, is nonsensical. If the NPS builds a latrine at a campsite, a productive asset has been created which performs a useful function, no matter that it was funded with tax dollars. Government is founded on the notion that some types of benefits (characterized by externalities) need to be provided by collective, and coerced, funding by the public, and that the welfare created vastly exceeds the cost.

23. geoff - July 4, 2009

but arguing that their is no benefit because it is not private sector

I already said that you can add value. But you can’t add revenue. Everything the gov’t spends, for good or bad, is paid for with revenue generated from the private sector and duties. They “pay for themselves” in terms of utility, but not in terms of cash.

It doesn’t matter how wonderful the gov’t program may be, if the private sector can’t afford the tax burden levied pay for it. I vastly prefer having latrines at campsites, but when you’re tapped out, you’re tapped out. In math terms:

Tapped Out = Tapped Out

The point of the post is so point out that the burden on the private sector is steadily increasing (due to unemployment, demographics, & heightened government spending), but the government’s answer is to spend money on government while pushing costly reform bills. That’s only going to make things worse.

24. daveintexas - July 4, 2009

This is precisely what killed California. Look at the absurd rate of employment increase in state workers over the last 5 years, a complete fob to the unions.

Of course you can’t completely discount the value of their employment, but damn near.

Are the jobs needed and are they productive? Doubtful.

This is a baaaad formula.

25. geoff - July 4, 2009

In the current climate, I think you can completely discount the value of their employment. It’s not like the administration is staffing up for business-friendly types of programs.

Michael - July 4, 2009

I think we’re in agreement, except your math is aspirational (for conservatives), not real.

In real life:

Tapped Out = What the Hell, Borrow Some More From the Chinese.

Michael - July 4, 2009

Are the jobs needed and are they productive? Doubtful.

Having dealt at length with a major California regulatory agency, I can assure you that a great many of these employees are in fact counterproductive. On the other hand, the staff sure was “diverse.” You walked around that office and it looked like a fuckin’ rainbow coalition poster.

26. daveintexas - July 4, 2009

It’s just tenure for the useless, who will continue to vote for the sorry bastards that put them in the fed jobs.

If you remove government employees from the total unionized US workforce, the percentage drops from 14% to less than 4%.

27. Galileo - July 5, 2009

daveintexas, it would be bad enough if they were just useless. But as Michael nicely illustrated with his comments, they have a negative impact on private sector productivity beyond the taxes paid to support them.

The purpose of a regulatory agency is to intrude on the private sector and on individual citizens to make them do things they would not otherwise do, ie to impose a financial and/or welfare cost on them.

Even in seemingly positive functions like education and health care, much of the jobs added are not teachers and doctors, but “administrators” to impose constraints on what the actual operators do. While in theory some constraints are positive, in practice bureaucracy largely imposes counter-productive constraints.

28. The Unemployment Prediction for July « Innocent Bystanders - August 6, 2009

[…] percentage of private-employed workers is steadily decreasing, meaning that the burden of supporting government workers is increasing. How long can this trend […]

29. July Unemployment « Innocent Bystanders - August 7, 2009

[…] percentage of private-employed workers is steadily decreasing, meaning that the burden of supporting government workers is increasing. How long can this trend […]


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