Punch line: The US economy added 130,000 jobs in April … pushing the unemployment rate down to 8.1% since over 350,000 left the labor force.
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First, let’s look at the 130,000:
According to US News & World Report …
There is a little-known category of job creation called the birth/death model, a seasonal adjustment in which the Bureau of Labor Statistics (BLS) arbitrarily adds jobs for net new companies it thinks are starting up and creating positions.
Last month, the BLS made the assumption that 206,000 jobs were created in this category based on the companies that it thinks, but really can’t prove, have just started up and essentially are invisible to government labor surveys.
This is an imprecise, controversial guesstimate based on historical extrapolation.
One must be skeptical, since this figure of 206,000 rose from 172,000 in April 2011 despite the obvious decline in economic activity this spring and the general lack of financing for start-up companies.
In other words, 76,000 jobs were lost in “countable” businesses … and 206,000 jobs were added in the “your guess is as good as our/s” category … netting to the reported 130,000 jobs.
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Now, let’s look at the denominator … the 350.000 folks who stopped looking for jobs.
Prior posts have addressed the decline in the labor force participation rate.
One of the reasons offered up for the decline in the labor force participation rate is that that low paying jobs are “under water” compared to unemployment benefits. Specifically, according to the WSJ, in some high-benefit states women need to earn $30,000 or more to compensate for the benefits they lose if they get a job. Since minimum wage is about $10 per hour and there are about 2,000 hours in a work-year, a minimum wage job pays about $20,000. So, many folks are making the economically rationale decision to stay home.
Additionally, also according to US News & World Report, the number of people applying for disability benefits has been skyrocketing … apparently, new stealth welfare program
Last month alone, 225,000 signed up for government=paid disability payments.
That’s up since last year when about 1 million Americans applied for disability.
Since President Obama took office more than three years ago, more than 5 million people have been added to the nation’s disability coverage, costing the government billions upon billions of dollars every year.
“Either the safety standards at work have eroded dramatically or many working people have found a creative way to game the system and turn it into a quasi-welfare state.”
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