If Black Friday was last week, “gray Friday” is today. The news is that unemployment dropped to 8.6 percent in November, from 9 percent the mo
nth before. Sounds promising. What happened? Could it reflect the gainful seasonal employment of department store Santas? Not exactly.
While 120,000 jobs were added last month, 315,000 people gave up looking for work. Now the labor force participation rate (LFPR) is 64 percent, so far the second lowest monthly rate in 2011 and more than 3 percentage points lower than it was 10 years ago. The declining LFPR does not bode well for a government reluctant to reform entitlement programs. Social Security and Medicare depend heavily on payroll taxes to continue their obligations to seniors. With fewer people working, fewer tax revenues are coming in to pay Social Security and Medicare benefits.
This is why the new job numbers are not clear cut. However, the gray area is glossed over. Lawmakers and the administration will undoubtedly claim credit for reducing the unemployment rate by nearly one-half percentage point. And mind you, it won’t be long before the credit-taking starts, attributing the drop to a two-year old stimulus package, shovel-ready jobs, green jobs programs, the payroll tax cut, Fannie Mae, Freddie Mac, the Fed, etc. You name it, someone will claim it.
Meanwhile, 315,000 people would like to work but have given up looking. If 315,000 people could find jobs earning an annual wage of $26,000 (the median wage for all individuals in 2009), the total income earned over a year would be almost $8.2 billion. Social Security and Medicare tax revenues from those gainfully employed people would total $1.2 billion, assuming the current payroll tax holiday for employees expires at the end of the year.
Now what is it again we are cheering about?