For most of these last 100 years, unemployment has been an obsession of both economists and government. Because it is a reliable indicator of the business cycle, this makes sense. The rate rises in good times and falls during bad.
This pattern often leads to an absurd conflation between cause and effect. The economic recovery will happen by itself, according to policy makers.
Put that way, the theory sounds as silly as it is but this ambition drove much of the economic policy of the 1930s, and it accounts for the long obsession with the topic in public life. Our times have thrown off all the usual assumptions of macroeconomic forecasting. These seem like boom years when you consider the unemployment rate (3.6%). Everyone is now waiting with baited breath for the official declaration of recession.
What gives? While this will continue to be researched for years to come, it is impossible to comprehend without referring to the most disastrous economic policy ever implemented by humans: the forced locking down of all economic activity in order to control a disease. It caused chaos and disruption in the market, both because normal business was severely harmed but also because bureaucrats were left with the task of dividing the worker workforce into essential vs. nonessential.
These designations proved to be much more complicated than what they appear at first glance. These designations were created by top government officials and sent to all citizens in pdf form. The essential meant not only health-care professionals, but also grocery workers and truckers. People who work in restaurants and entertainment were the non-essential workers. Historiographers will be amazed.
In all cases, there was an immediate rise in unemployment. This would be followed by a slump in the opposite direction as economies open up. These bizarre policies, more than anything, divided the population by type and class of worker. The physicals vs. virtuals. People who stare at and type on screens were told to remain home in order to be safe, while others were encouraged to bravely confront the virus and serve society. This meant that there was a significant gap between blue and white collar jobs.
The chart below shows the effects of trauma. This chart tracks the change in job opportunities over time. It shows the percentage of people who have jobs and the unemployment rate. These lines often mirror each other. In the course of 70 years, only twice before and very briefly has the percentage change in the number of people working outstripped the unemployment rate. It has always been an indicator of economic boom in the past. It is exactly what we are seeing now, but in recession.
This is due to the large number of people who are leaving the workforce. This has resulted in a severe labor shortage. This is partially due to women quitting their jobs in order to take care of children and early retirements. There are also huge demographic shifts that have seen people move from one state to another. This is also due to a general demoralization among the people who had their liturgy broken by prolonged periods of inactivity for a greater part of a decade or longer.
These policies were far too exploitative for working-class people without college degrees. It was they who experienced an incredible 17.5 percent rate of unemployment following lockdowns.
There is no question that lockdowns were designed by professionals for professional-class populations who suffered far less pain and suffering. Fauci/Birx/Collins actually cared? Were the health officials who made this decision even aware of the inequalities and undemocratic effects?
Get to know the truth: The blue is for the population without college and the red is for the college-educated.
The labor force participation rate plummeted and has yet to recover fully. It is right now back to low levels that we haven’t seen in 1977, nearly a decade before more than half of the population of women with children entered the workforce. Policies wholly supported by the left have erased forty years of labor inclusion!
Let’s take an even closer look at what might have been by tracing the trend lines in labor force participation from 2015, a time when the labor markets had finally started recovery from the trauma of the 2008 financial crisis. This chart shows that things are worse than they appear on paper. These jobs are those that could have been created but were not made possible by pandemic policies.
The results were strange to any standards.
Last night I had a martini at a separate bar from the restaurant of a Washington D.C. hotel. The nice man serving me had worked in this place for 30 years and was clearly beyond retirement age. The man was working alone in the restaurant and bar, serving customers. One cook was in the kitchen. Although my server appreciated the work, he ran around like a mad man because it was impossible to find people who wanted to do the work.
Now let’s get to the bottom of the problem: The decline in work ethic. Many young people believe they will get a six-figure job after completing a fancy, debt-financed college.
Long before the pandemic hit, college students were taught this belief. They learned that money does grow on trees and that you don’t really need to be skilled to make ends meet. They will never accept regular work. These people are largely unqualified and have no skills, but they still expect that the American economy will provide them with a good standard of living.
It’s not surprising that this country’s working class is angry, bitter and resentful. They were subject to unbearable cruelty during lockdowns and fought the virus with courage. Then, they were told to hide and take their shots. Many of them shrugged and that’s completely understandable.
These days, we are experiencing an economy that is not only marked by low unemployment. However, it is also underperforming in fundamental productivity. This is due to a high inflation rate which is depriving the middle and poor of their purchasing power. The entire profession is being weighed down by an overclass of people with very few skills, high expectations for their status, and constant income.
None of these are sustainable. All the models which once suggested neat bundles of aggregates that were easily controlled by Washington, D.C.’s central planners, are now obsolete. It has become clear that printing and government spending can not replace market function.
This is why Treasury and Fed economists and Administration officials appear so lost and confused when asked about their plans to solve all of this. They don’t know.
It isn’t surprising to learn that President Donald Trump doesn’t know anything about economics. He tweeted that he wanted gas sold at the cost of production. Nikita Khrushchev was the last stateman to believe such things. It is alarming that White House staff likely approved that tweet. This shows that ignorance pervades the entire administration.
These people won’t dig us out from this hole. The labor market is fixable, but it cannot be fixed using old-fashioned command and control tactics.
Jeffrey Tucker is founder and president of the Brownstone Institute. Five books have been written by him, including “Right-Wing Collectivism : The Other Threat To Liberty”. “