The Unemployment Numbers Mean Nothing

Bad analysis:

The Bureau of Labor Statistics‘ most recent unemployment figures are out along with all sorts of analysis from the deluded “See? The economy’s healing. Not very fast, but it’s healing! Chin up there, America,” to the more sober “No, the economy is not healing; people are just giving up on looking for jobs. The numbers say so.”

And they do. But let’s zoom out– like way out, and ask just why so many commentators, even the most sober among them, are treating employment numbers like some kind of useful metric for measuring the health of the economy and deciding whether it’s “healing” or not? I mean, right– even if the employment rate were a good measure, the latest figures are still hardly encouraging, but sound economic analysis has to go so much deeper than that. As far as measuring the overall health of the economy goes, the unemployment numbers mean nothing.

 

Good analysis:

It’s a lot like what one commentator recently said about Black Friday sales, another stupid metric that the media and politicians obsess over as if it were some kind of fool-proof economic barometer:

‘You know the economy and stock market are in deep trouble when the Mainstream Media elevates one essentially meaningless metric to “The One Meaningful Statistic” and then trumpets it slavishly. One such meaningless metric is Black Friday.

The Media has glommed onto Black Friday for a number of flawed reasons, number one being the MSM’s ceaseless drive to reduce all complex problems down to something that can be expressed in a sound-bite voiceover and a video clip of a crowded mall.

The MSM loves binaries: two parties, two final contestants, and if Black Friday is “good,” i.e. sales exceed last year’s consumerist bacchanal, then the economy is “healthy.” Any weakening of the consumer’s lemming-like drive to buy, buy, buy means the economy is “weak.”

This is of course absolutely backward: consumers buying shiploads of poor-quality crap made overseas means the economy is still on the slippery slope to implosion, as debt is being used to fund consumption while capital formation (savings) remains pathetic.’

Did you read that? Someone give this guy a job at CNBC. Media reports and analysis over the unemployment rate are– like Black Friday sales figures– easy, binary, sound-bite friendly fluff to fill the airwaves, distract you, and make you stupid.

But you obviously refuse to be stupid because you’re reading some independent commentary on the Internet and investigating alternative opinions for yourself right now instead of watching cable news. And you’re in luck, because I refuse to fill your head with fluff. If you want fluff, you can go pet a bunny. If you want spin, you can go ride a merry go round (or watch Bill O’Reilly– oops, I said it!).

 

Here is the truth about unemployment figures:

They are a result, a secondary effect of an economy’s health, not a cause of it and not a reliable measure of it. Employment numbers tell us more about what has already happened in an economy than they do about what is happening now or what is going to happen in the future.

Reaching full employment is not a useful or meaningful goal. Reaching full productivity is, and the very highest level of employment, at the best wages, doing the best work, that will create the most value, more job opportunities, and the highest standards of living will result from an economy at its maximum level of productivity. You have to produce something before you can consume it. You also have to produce something before you can invest it in more labor (i.e. jobs).

 

A thought experiment regarding employment:

I can prove it to you. If I were dictator of America, I could create 100% employment tomorrow instantly– the unemployment rate would drop to zero. It would be easy. All I’d have to do is draft everybody without a job into the military. Everyone in America who wanted a job would have one. I’d put them on the DoD’s payroll and cut them checks every week for marching, drilling, (etc.).

If we ran out of things for them to do, I’d pay half of them to move large rocks from one massive pile to a second pile half a mile away during the daytime, and then I’d pay the other half to work night shift and move the rocks back to the first pile. BAM! 100% employment. Would you vote for me if I ran for president on this platform? Of course not.

This policy would create “full employment,” but it wouldn’t make the American economy one cent richer. It wouldn’t create anything of value. I’d just be paying all of these people with money that was taxed– taken from the businesses and individuals who actually are creating value and prevented from being used as capital to create more value and pay laborers for jobs that actually produce something. This thought experiment alone should be enough to demonstrate the error in using employment as a measure of an economy’s health.

 

What we should really be talking about:

Instead of talking about employment figures, we should be asking: Are people saving? Are people investing? Is capital seeking out its most productive uses? Are market distortions siphoning capital off and destroying it in less productive applications?  The answers are no, no, no, and yes.

People are continuing to spend money they don’t have on consumption goods they don’t need (and most commentators consider it a bad sign when this trend weakens, as we all learned on Black Friday). We’re borrowing, not saving. We’re wasting, not investing. We’re consuming, not producing. Without a deep, fundamental, revolutionary change in our economic paradigm and mindset, we are on the road to economic ruin, and these meaningless job reports are a comforting distraction.

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