U-6 is the broadest measure of unemployment officially defined as “U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force“. Why is this bit of Economist’s Wonkism important to you? Well, today is Friday, and today at 0830 Seasonally Adjusted unemployment numbers for July are out. The White House will do some sort of hideous spin today.
(Do Read The ‘Seasonally Adjusted‘ link in the last sentence).
The other reason U-6 is important is that it is fresh meat for the Romney campaign. This topic and the structural reasons behind the high unemployment will be the driving force behind his campaign. James Carville’s words in 1992 ring truer today than they did then, “It’s the economy stupid!”.
With U-6 at an official 15%, or over 22% if you use real data that includes ‘the long-term discouraged workers’ we have a real issue going into the campaign season. The BLS defined the ‘the long-term discouraged workers’ out of the definition of U-6 back in 1994. Since I prefer to work in real numbers, lets use the Really Real U-6 which is over 22%, a variation in data of almost 30+%. Imagine if you missed your mark by 30% at work? You wouldn’t be there very long, would you? Ah, the life of the bureaucrat!
22+% U-6…1 in 5 or so Americans are not working at their potential. If there are 10 houses on the block with 20 adults then 4-5 are in U-6. You Betcha this has a negative effect on the economy! This basically means that everyone knows someone who is in U-6, be it a family member or a friend. I can think of 4 people who I know that are U-6 and frustrated.
Here is how some of the coverage of U-6 will be, do note that BLS numbers which removed 7% of U-6 are used, this is something the Romney campaign can hit and hit hard, its an easy soundbite:
While the national unemployment rate paints a grim picture, a look at individual states and their so-called real jobless rates becomes even more troubling.
The government’s most widely publicized unemployment rate measures only those who are out of a job and currently looking for work. It does not count discouraged potential employees who have quit looking, nor those who are underemployed — wanting to work full-time but forced to work part-time.
For that count, the government releases a separate number called the “U-6,” which provides a more complete tally of how many people really are out of work.
The numbers in some cases are startling.
Consider: Nevada’s U-6 rate is 22.1 percent, up from just 7.6 percent in 2007. Economically troubled California has a 20.3 percent real rate, while Rhode Island is at 18.3 percent, more than double its 8.3 percent rate in 2007.
Those numbers compare especially unfavorably to the national rate, high in itself at 14.9 percent though off its record peak of 17.2 percent in October 2009.
Only three states — Nebraska (9.1 percent), South Dakota (8.6 percent) and North Dakota (6.1 percent) — have U-6 rates under 10 percent, according to research from RBC Capital Markets.
Election battleground states paint a picture not much more flattering. Florida’s U-6 number is an ugly 17 percent, though Pennsylvania and Ohio are both around 14 percent, below the national U-6 average.
The numbers come as the government prepares to release its latest reading, the July nonfarm payrolls number, on Friday. Economists expect the report show about 100,000 jobs created for the month and the traditional “U-3″ rate to hold steady at 8.2 percent.
“The lack of improvement in state U-6 rates continues to be troubling,” Chris Mauro, head of US Municipals Strategy at RBC, said in a research note. “While down from recent peaks, state U-6 levels remain dramatically higher than they were in 2007 and 2008.”
So where does this 22% drag on the economy come from? Well, a good portion of it comes from over regulation and over taxation of business. Tax and Regulation to operate in America directly from government drives up costs and makes it more profitable to move overseas. Fact is, the board of Corporations have one job, maximize the shareholders return on investment. If they are not doing then then they are not doing their job.
Let me relate a story to you about how regulation kills jobs. At my former place of work we were going to put in a 12 pump diesel fueling pad, a very large garage to rent to a contractor to fix the trucks, and a wash rack that could handle 2 18-wheeler rigs at the same time. Expansion means jobs, right? Wrong. we were told by the state that any dirt removed from the ground had to be cleaned before we put it back in the same hole. Cleaning dirt is very expensive. This caused us to cut the number of American made fuel pumps in half and lop off half of the wash rack. Regulations are job killers…
So now that it is August, let the campaign begin. Lets look at the differing campaigns:
Firing back instantly, Obama said his rival favors “trickle-down fairy dust” that has failed to fix the economy in the past, and unleashed a new television ad with a scathing summation of Romney’s tax plans: “He pays less. You pay more.”
Instead, he unveiled what aides called Romney’s plan for more jobs and more take-home pay, backed by an eight-page paper arguing that the economic stimulus and other policies backed by Obama “exacerbated the economy’s structural problems and weakened the recovery … At the present rate of job creation, the nation will never return to full employment,” it said, on the eve of the release of the government’s official report on July joblessness.
Following the release of Friday’s jobs report, Obama planned to use the backdrop of the White House and surround himself with families who would benefit from the election year middle-class tax cut he’s pushing Congress to adopt. “As dysfunctional as Washington can be, this fight is far from hopeless,” White House senior adviser David Plouffe said in an email.
In remarks in Golden, Colo., Romney said his economic policies would lead to creation of 12 million jobs in the four years of his term, if he is elected, and help make North America energy independent, a pledge that aides said included Canada and Mexico as well as the United States.
Romney pledged expanded international trade, particularly with Latin America, and vowed to confront China over its own policies. “I’m finally going to sit down with the Chinese and they’re going to understand that if they cheat there are going to be consequences, because we’re not going to let them walk all over us,” the former Massachusetts governor said.
Class warfare versus a positive message that America can work again if the government gets out of the way:
These numbers are not mere abstractions. They represent suffering and hardship on a grand scale. Over the past year, I’ve crisscrossed the country and met so many bright and capable people whose lives have been upended by the continuing economic crisis. I’ve encountered stoicism and hard work and American ingenuity in the face of adversity. But I’ve also encountered anguish and tragedy. With rising gasoline and grocery prices compounding the strains of a barren job market, a great many Americans are struggling just to pay their bills. Almost 46 million Americans—that’s 34 percent more than two years ago—are living on food stamps, the highest number since that program was created. Millions of homes have been lost to foreclosure. I’ve seen far too much hopelessness and too many dreams shattered. I’ve met Americans who lost everything that they had saved a lifetime to build. I’ve also seen fierce anger at Washington, D.C., and the politics and politicians who led us into our travails and who now seem unable to find an exit.
The anger is justified. Things don’t have to be this way. I believe America can do better. That’s why I am running for president.
In 1947, the year I was born, unemployment was 3.9 percent. In 1968, when I turned 21, it was 3.6 percent. Let’s not forget all the periods in our recent history when our economy was humming along at high speed, creating the opportunities that made our country the most successful and powerful in the history of the world. We’ve done things right in the past. We can do things right once again. We have recovered from recessions before. Indeed, the American economy has repeatedly proved to be extraordinarily resilient. After we hit bad patches, as in the early years of Ronald Reagan’s presidency, the economy came roaring back.
But we’ve just gone through 30 consecutive months with the unemployment rate above 8 percent. That’s the longest such spell since the Great Depression, and the end is not in sight. A 21-year-old today fresh out of college is facing very different conditions from those in place when I graduated. Jobs for recent graduates are simply not there. With things so difficult this time around, it is worth inquiring why.
No small part of the answer has to do with the wrenches the Obama administration has thrown into the economy. Badly misguided policies have acted as a severe drag on growth. We can count here the binge of borrowing and spending that set off worldwide alarms about the creditworthiness of the United States and led to Standard & Poor’s unprecedented downgrade of our nation’s sovereign credit rating. We can also count the vast expansion of costly and cumbersome regulation of sectors of the economy, ranging from energy to finance to health care. When the price of doing business in America rises, it does not come as a surprise that entrepreneurs and enterprises cut back, let employees go, and delay hiring.
In addition to the administration’s errors are its missed opportunities—paths not taken that should have been taken. We have just been through a period of extraordinary economic turbulence. Restoring clarity and predictability are essential for igniting hiring and investment. Yet in so many areas, from tax rates to energy policy to labor regulation to trade, the Obama administration has only added to the lack of clarity and the uncertainty. The most dramatic illustration came midsummer, when the absence of presidential leadership brought the country to the precipice of default. Uncertainty is the enemy of growth, investment, and hiring. Unfortunately, uncertainty has been the hallmark of the Obama administration.
As we move forward, a fundamental question before us is the proper role of the federal government in our economic life. The President appears to believe that government can do a better job managing the economy than can a free people and free enterprise. I disagree. Washington has become an impediment to economic growth. Extracting the overreaching hand of government will not be easy. Entrenched interests and their allies in government will fight every step of the way. But it is not a battle from which we can shrink. We must restore the principles that have enabled the American economic engine to outperform the world. The federal government has become bloated to the point of dysfunctionality. It needs to be pared back and redirected. Instead of threatening and stifling enterprise, it must encourage investment in growth and people.
Obama is not working. Obamanomics is a failure. With little private-sector experience, President Obama turned to the only thing he really knew: government. His distrust and antipathy for the private sector led to policies that burdened and constrained business at the very time we needed it to advance, to invest, and to hire.
My experience could not be more different from his. I spent 25 years in business. I led an international consulting firm through difficult times to growth and success, led a financial services business from start-up to global prominence, and led the turnaround of a Winter Olympics to world acclaim. I know what it means to meet a payroll. I know why businesses hire people, and why they become forced to lay them off. I know what it means to compete in this country and abroad. My entire life experience convinces me that with a leader who fundamentally understands the economy, with a government that encourages investment and hiring, and with the faith and hard work of the American people, we will right the economy, create good jobs, and restore the promise of the future.
I believe in America. We have always been a land of discovery and pioneers. We flew the first plane across the ocean, we planted the first flag on the moon, we connected the people of the world with the telegraph, the telephone, the television, and the Internet. It is not an accident of history that America is the home of Facebook, eBay, Apple, Microsoft, and Google. These companies reflect our singular capacity for innovation. Nor is it an accident that the productivity of the American worker is unparalleled. The dynamism of our society is renowned around the world. We should build upon our strengths, not burden them with bureaucracy, excessive regulation, and intrusive government.
DAY ONE Executive Orders, and the larger plan for the relationship between government and economy is here. We will see two competing visions between Obama and Romney on the number 1 topic for the voters, The Economy. It will be very interesting to see how this plays out. Is America still able to embrace and implement a pro-growth message or have we sunk so far that we are now state-dependent quasi-socialists? Is this America or pre-Thatcher Britain? Stay tuned! It’s gonna be a hot rest of the summer!