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“By Almost Every Measure,” Economic Reality Tells a Different Story than the President’s Rosy Rhetoric

September 03, 2014

Political Rhetoric

“By almost every measure, the American economy, the American workers are better off than when I took office,” [President Obama] added. “We’re better off by almost every measure.” (Source: New York Daily News, 9/1/2014)

Economic Reality

•    “The labor force participation rate is well below what CBO estimates would be achieved if the demand for workers was currently stronger…”

•    “The unemployment rate is above CBO’s estimate of the natural rate…”

•    “In combination, the shortfall in labor force participation and the elevated unemployment rate have resulted in substantially lower employment in 2014 than would otherwise be the case…”

•    “The share of part-time workers who would prefer full-time work is significantly higher than it was before the recession…

•    “…the rate of long-term unemployment is still about a percentage point above its average rate during the years before the recent recession.”

•    “One important signal that significant slack remains in the labor market is continued slow growth in hourly labor compensation.”

•    “According to CBO’s analysis, most of the decline in the rate of labor force participation since late 2007 is attributable to two other factors: First, long-term trends, especially the aging of the population, account for about 1½ percentage points of the decline. Second, unusual aspects of the slow recovery of the labor market that led workers to become discouraged and permanently drop out of the labor force account for about ¾ percentage point of the decline.”

•    “The unemployment rate stood at 6.2 percent in the second quarter of this year, roughly 1¼ percentage points above its level before the recession…”

•    “The stigma and erosion of skills that can stem from long-term unemployment (wherein a person has been jobless for more than 26 consecutive weeks) account for about ½ percentage point of the increase” (in the unemployment rate)…

•    “In the second quarter of this year, if the unemployment rate had returned to its prerecession level and if the labor force participation rate equaled its potential rate, about 3¾ million more people would have been employed, according to CBO’s estimates.”

•    “Those estimates of the shortfall in employment do not reflect the number of people who have left the labor force permanently in response to the recession and slow recovery.”

•    “The incidence of part-time employment for economic reasons (resulting from slack work or business conditions or a worker’s inability to find full-time employment) remains much higher than it was before the recession…”

•    “…average hours worked per worker fell ​substantially during the recession and remain below their prerecession level.

•    “…the rate of long-term unemployment was still about a percentage point above its average rate” (between 2001 and 2007).

•    “The fact that the elevated amount of unemployment is concentrated among the long-term unemployed has accentuated concerns that stigma and an erosion of skills may be hindering their efforts to secure stable work.”

•    “Finally, labor compensation (the combination of wages, salaries, and benefits paid to workers) has grown slowly, another indication that a significant amount of slack remains in the labor market.”

(Source: Congressional Budget Office, 9/2/2014)