The mainstream media has been busy showering outgoing US president Barrack Obama with accolades after 8 years in office. Headlines like ‘Obama’s Jobs Boom’ and ‘Handing a strong economy to his Successor’ have been coming thick and fast. The Federal Reserve hiked rates in December and has been notably more hawkish based on their perception of a tight labour market. Three more quarter point rate hikes are expected in 2017. Official unemployment stands at 4.7%, lower than for the vast part of the past half century.
So, why is it that almost half of the US population think they are worse off than 8 years ago? Why, if things are going so well, did Hillary Clinton, the continuation candidate, not win in a landslide? Maybe the official story is just window dressing. Several indicators point to a labour market that is far from tight.
One often cited statistics is labour force participation, which has been falling for two decades but accelerated down after the Global Financial Crisis (GFC) and has shown no signs of recovery.
If people believe the current bullish rhetoric and regain faith in finding employment, some may choose to re-join the labour force. The question is, can they find employment? Otherwise, unemployment will start to rise.
Anyway, what statistical category people are put in obviously doesn’t really matter. The question is, if you are able bodied and of working age, why are you not working? Shadowstats, an independent economic statistics website, produces an unemployment figure that tries to take account of workers discouraged from being part of the labour force and who are therefore not included in the BLS (Bureau for Labor Statistics) figures. It paints a different very picture. Not only is unemployment much higher, but there has been no recovery in employment since the official figures peaked in 2009.
But unemployment rates are only part of the picture. What about actual jobs? Mainstream media has congratulated Obama on his jobs creation. According to the BLS, Obama added 11.3 million jobs (non-farm payrolls) during his tenure. The quality of those jobs has however been questioned. A Princeton University study (one of the authors served as chairman of the Council of Economic Advisers under Obama) suggests that the share of what they call ‘Alternative Work Arrangements’ has gone up from 10.7% in 2005 to 17.2% in 2015 (weighted to adjust for sample being unreflective of general population).
Alternative Work covers temporary help agency workers, on-call workers, contract workers, and independent contractors or freelancers. Startlingly, 94% of the jobs created under Obama was in this category. The US economy added precious few secure 9-5 jobs under Obama.
The media is painting a picture of Obama enjoying a triumphant exit from the White House. Showering him with praise serves also to set Donald Trump up for failure: handed a booming economy, things can be expected to take a turn for the worse. But the glossy image presented in the media hides a disturbingly different picture. The US jobs market is not strong. The Fed will be hiking themselves into a recession or be forced to abandon course.