Obama Is Ruining the American Economy

Unemployment is hitting the depths, with only 115,000 new hires, following 120,000 new hires last month. Yet the unemployment rate actually declined a tick to 8.1% The Wall Street Journal explains this insanity fashioned so that the Demonrats can still say the economy is "improving."

The economy turned in another lackluster month for job creation in April, with 115,000 net new jobs, 130,000 in private business (less 15,000 fewer in government). The unemployment rate fell a tick to 8.1%, albeit mainly because the labor force shrank by 342,000. This relates to what is arguably the most troubling trend in the April jobs report, which is the continuing decline in the share of working-age Americans who are in the labor force. The civilian labor participation rate, as it's known, fell again in April to 63.6%. That's the second decline in a row and the lowest rate since December 1981. That's right—more than 30 years ago, longer than Mark Zuckerberg has been alive. The nearby chart shows the disturbing round trip the workforce participation rate has taken since 1980 and the precipitous drop in the last three years This decline is highly unusual coming out of a recession. Normally as hiring picks up, more Americans see more job opportunities and jump back into the labor force. That's what happened after the sharp recession of 1981-82, when the participation rate last hit 63.6%. It rose smartly through the boom of the 1980s to a peak of 66.8% in January 1990. The rate dipped to 66% in the mild 1991 recession, but then rose again through the 1990s to a modern peak of 67.3% in January 2000 at the top of the dot-com bubble. The last decade has never reached the same heights, though the participation rate did rise back to 66.4% in late 2006 and early 2007. The rate fell to 65.7% in July 2009 when the last recession officially ended, yet the distressing fact is that it has kept falling over the course of the next 33 months of ostensible economic recovery. The trend deserves deeper economic study, though we can offer a few of the likelier explanations. One may be demographic as the baby boom generation gets closer to retirement age. Economist David Malpass notes that Americans age 55 and older are a rapidly rising share of the working-age population, a trend that has historically meant a lower overall labor participation rate. Still, the recent fall is so sharp and surprising that aging baby boomers can't be the entire reason. Another explanation is surely the slow pace of job growth, which means fewer opportunities to entice what economists call the "marginal" worker back into the labor force. Older workers who've lost a longtime job may find themselves unemployable in a rapidly changing economy. They may retire earlier than they might have preferred. Second earners in a household may also not find work at a high enough wage to justify the costs of commuting or child care. In a recovery that is really cooking, like the Reagan boom, these workers find that the opportunities reward more work. In today's mediocre expansion, not so much. That's especially true when stagnant wage growth means less reward for the effort. Over the past 12 months, average weekly earnings are up 2.1% but inflation has climbed by 3%. Real pay is rising far too slowly, which makes work less attractive. The Federal Reserve has maintained a super-easy monetary policy in the name of reducing the jobless rate and to reflate the housing market, but this has contributed to higher food and energy prices and thus reduced real income gains. This too is a disincentive to work and undermines one ostensible purpose of the Fed's easing. Another culprit may be the rapid expansion of government transfer payments during this recession. Medicaid, disability payments and food stamps have all risen sharply in recent years, starting under President Bush and accelerating under President Obama. This is a particular disincentive to low-skilled workers to enter the job market because in some high-benefit states they need to earn $30,000 or more to compensate for the benefits they lose. This is an insidious high marginal tax rate that deters many from ever acquiring the basic skills and experience they need to move up the income ladder. Reversing this falling labor force trend is a major policy challenge, especially as more of the baby boomers retire. The U.S. will need more workers to finance more retirees. This will require faster growth and more job creation than we've seen in this disappointing recovery. The tragedy of the Obama Administration is that it put the political pursuit of its social welfare agenda above policies to nurture a strong, durable economic expansion. Americans are paying for that mistake in less work and less reward for the work they get. The priority of the next Administration must be to reverse the decline.