Wednesday, July 24, 2013

"Recovery"? Yes, for "Alternative Forms of Compensation"

It's a great "recovery" for non-earned compensation, as Gary Shilling demonstrates here.

And as we also learn, it is truly a jobless recovery.  Obozo is totally useless as a "jobs" President, except for golf caddies and community organizers.

The outlook for the labor market remains bleak. Older Americans are holding on to their jobs longer, limiting openings for newcomers, and employers are cutting costs by extending working hours and paying overtime, rather than hiring. 

Layoffs and discharges remain low. Voluntary departures have risen a bit, but are still sluggish as workers stay put in uncertain times. Meanwhile, job openings have risen rapidly after a collapse, though new hires have increased much more slowly.

... People out of the labor force for nondemographic reasons react to the push of few job prospects and the pull of alternative forms of compensation. If physicians certify job-related disabilities and judges approve them, people can draw disability benefits until they reach normal retirement age, when they are eligible for Social Security retirement benefits. 

...In June, almost 11 million people collected disability benefits, up from 3 million in 1970. In addition, disability benefits are higher than earlier in relation to wages.

And 'alternative forms of compensation' is not just "disability."

...drawing Social Security benefits has become more attractive. The payments have been adjusted for cost of living increases since 1975. Because of the lack of inflation, there were no increases in 2010 and 2011, but there was a 3.6 percent adjustment in 2012 and a 1.7 percent revision this year. The number of recipients of the Supplemental Nutrition Assistance Program, known as food stamps, jumped to 47.8 million in December from 28.2 million in 2008, a 70 percent increase.

The problem is that there is not enough "recovery."  It's only about 2/3rds what's required:

My company’s research has found that, based on post-World War II history, it should take 3.2 percent real gross domestic product growth just to keep the unemployment rate steady -- meaning that at the current growth of about 2 percent, the unemployment rate would rise more than one percentage point a year and now would be 12 percent. Instead, it was 7.6 percent in June.

There is ... a logical explanation for the huge differences between the actual unemployment rate and the higher expected rates: a big drop in the participation rate. As discussed earlier in this series, the decline in the labor participation rate to 63.5 percent in June from its February 2000 peak of 67.3 percent means there are 9.5 million fewer people in the labor force

Per Shilling, this whole thing will straighten out in about five years.  By no co-incidence, that's after Obozo gets shown the door.

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