US Employment Situation: The Big Picture

The March Employment came out April 5, 2013 and reported that the unemployment rate dropped to 7.6% and the economy created 88,000 jobs.  Good, right?    Well, not really.

The civilian labor force dropped by 496,000 according to the Household Survey---the other part of the employment report.  Those "not in the labor force" increased by 663,000.   The participation rate of workers compared to the working age population dropped to 30 year lows at 63.5%.  See the BLS summary here.

The Really Big Picture

The US population keeps rising but the jobs are not being created.

Since the bottom of the steep recession ending in May 2009, 5 million jobs have been created but not enough to keep up with the population and barely exceeding the peak in 2000 and well below the peak in 2007.  See Figure 1.

Figure 1 Total Employment Since 1991

In December 2000, the number of total jobs peaked at 132,000,000  when the working age population was 215 million.   See Figures 1 and 2.  Now fast-forward to March 2013; thirteen years later.  The population is now 240 million and the total number of jobs is 135 million--an increase of only 3 million in 13 years.  The working age population increased about 25 million but only 3 million jobs were created in the period of 2000 to 2013.

Fully 5 million of those people went on Social Security Disability and out of the workforce.  There are almost 11 million total on SSDI roles whereas there were 6 million in 2000.  Once on Disability, very few ever leave it.   See the Figure 3 below.   For current SSDI beneficiaries see here.

Figure 2:  Working Age Population (left scale) Vs Participation Rate (right scale)

Figure 3 Social Security Disability (right scale) and U-6 Unemployment Rate (left scale)

China Helped Hollow-out US Manufacturing Capability

What happened?  China and the rest of Asia were shutting down entire industries in the USA!  Textiles, Furniture, Tobacco,  Steel and countless small manufacturing were put out of business by China, Korea, Japan and other countries in Asia. But the Chinese damage is the worst.  It started in earnest in the 1990s but we didn't notice it.   But, like the rest of Asia, China didn't play by free-trade rules limiting imports by various means.  But China, unlike Japan, and has maintained their currency at an artificially low exchange rate to continue their vast trade advantage while they accumulated some $3 Trillion in USD foreign exchange reserves.
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That's the difference between trade deficits with Japan in the 80's and 90's vs. China in the 00's.  The Japanese Yen was always free-floating and, because of persistent Japanese trade surpluses, it rose and rose eventually causing the Japanese to build car-making factories in the USA.  Today most Hondas and Toyotas in the US are made in the US by US workers.  No such mechanism exists today with the Chinese.   (The Chinese wouldn't even be welcome here or in most countries).

In hindsight, Bush, or even Clinton should have enforced steep tariffs on the Chinese in the 1990s or early 2000s unless they let their currency appreciate in a free market.  This would have stopped the "hollowing out" long ago.