Reality check: Unemployment rate "drops" to 8.6%. Good news, or bad?

According to major news reports, the unemployment rate has dropped from 9.0% to 8.6%

This is great news, right? Well, not really, and I will explain why.

First, the unemployment rate measures people who are without any employment (including part-time), who are *actively looking for work. *So, if you are unemployed, and give up looking for work, you are no longer part of the "unemployment rate."

Here is where the important part of the Washington Post article comes into play:

"The jobless rate fell to 8.6 percent last month, from 9 percent in October, the lowest level since the economic free-fall of March 2009, the Labor Department reported Friday morning. But the improvement in the job market was not quite as strong as that drop would suggest: *About half the decline was attributed to people dropping out of the labor force, no longer counting themselves as even looking for work." (emphasis mine)* * *

What we have here is not so much the generation of new jobs to absorb unemployed job-seekers, we have a general contraction of the labor force as people simply give up looking because so few new jobs are actually being created. This is a tragic loss economically, not only to the people out of work, and the economic and social disruption that unemployment causes, but to the nation in general - we have so much creative talent and productive capacity laying idle, the loss is tragic.

Steps to recovery: 

1. Admit you have a problem, and begin accurately measuring it. A reasonably accurate unemployment rate would take into account: people unemployed who are actively seeking work, people under-employed (laid off and took a lower paying full time job or a part-time job), and the discouraged unemployed (have given up looking for work).

2. Protect the economic status of the laid off through unemployment insurance. Why? Once you sink into poverty, it is very hard to get of poverty. At the macroeconomic level , this keeps more people at a higher level of economic consumption.

3. Engage in value-added public works programs - schools, roads, bridges, dams, conservation projects, inner city revitalization, etc - so that when the economy ticks upward, there will be infrastructure to support growth.

Green vs Greed - The Green Party economic alternative

If you are over the age of 20, then you have lived through the following cycle:

Recession (1991-1993)

Economic Boom (1993-2000)

Recession (2001-2002)

Economic Boom (2003-2008)

Recesssion (2009 to present)

See a pattern here? You should. It is the classic boom/bust cycle of capitalism. Rather than get into a tedious debate over whether or not capitalism is good/bad/evil, let us just say that this boom/bust cycle is intrinsic to capitalism, and if you have a capitalist system, then you ought to be on the lookout for this cycle and the economic damage it causes.

So the alternative to continual enabling of the boom/bust cycle of the past 2 decades (and indeed 200yrs of American economic history) is to embrace a new definition of real wealth, and consider carefully what we truly value in our society. Is it tech bubbles, and phony real-estate booms? Or is it something else - the value of hard work, knowledge, expertise, and personal fulfillment?

An excellent source for new economic ideas is from David Korten's presentation at 2010 Pacific Northwest Regional Gathering.

Some great highlights are:

The Green Party begins not with an ideology, not with a quest for political power, but with a set of ten positive values that align with the needs of our time and frame a vision of the world of peace, justice, and environmental vibrancy for which most psychologically healthy humans have longed for millennia. These 10 values are: (1) Grassroots Democracy, 2) Social Justice and Equal Opportunity, 3) Ecological Wisdom, 4) Non-Violence, 5) Decentralization, 6. Community-Based Economics and Economic Justice, 7) Feminism and Gender Equity, 8) Respect for Diversity, 9) Personal & Global Responsibility, 10) Future Focus and Sustainability.

Our current economic system advances exactly the opposite of each of these values. We need to replace the defective system with a new system that honors these universal human values.

As Wall Street so clearly demonstrates, capitalism seeks monopoly control of every aspect of daily life to avoid market discipline and uses its financial power to circumvent democracy and hold politicians hostage to Wall Street interests in disregard of the interests of the electorate. Far from being the champion of markets and democracy, capitalism is the mortal enemy of both.

Far from facing a choice between capitalism and socialism, we face a seamless consolidation of economic and political power in a Wall Street-Washington axis dedicated to the further consolidation of its power beyond public accountability.

A Threefold strategy:

1. Change the defining stories of the mainstream culture. It is a simple, but rarely noted truth. Every transformational social movement begins with a conversation promoted through education and media outreach that challenges a prevailing cultural story and ultimately displaces it with a new story of unrealized possibility. The civil rights movement changed the story on race. The environmental movement changed the story about the human relationship to nature. The women’s movement changed the story on gender. Our current task is to change the prevailing stories about the nature of wealth, the purpose of the economy, our human nature, and the path to prosperity.
   
   The old story would have us believe that money is wealth. That the purpose of the economy is to make money. That it is our human nature to be individualistic, materialistic, greedy, competitive, violent. And that unleashing the unrestrained pursuit of individual greed is the path to universal prosperity. It takes only a moment’s reflection to realize that each of these ideas is false and morally bankrupt. Together these story elements constitute the foundation of false and morally bankrupt economic theories and policies that lead to terminal species failure.
   
   Our common future depends on expanding public awareness that money is only a number. That destroying real wealth to make money is an act of insanity. That it is our mature human nature to care and share. That unrestrained pursuit of individual greed in disregard of the needs of others is a sign of deep psychological dysfunction and presents a threat to the well-being of all. Positive action necessarily begins with new stories.
2. Create a new economic reality from the bottom up, as millions of people the world over are doing in their efforts to rebuild local economies and communities.  They are supporting locally owned human-scale businesses and family farms, developing local financial institutions, reclaiming farm and forest lands, changing land use policies to concentrate population in compact communities that reduce automobile dependence, retrofitting their buildings for energy conservation, and otherwise working toward local self-reliance in food, energy, and other basic essentials. This is the work for example of the Transition Towns Movement. I serve on the board of the Business Alliance for Local Living Economies (BALLE), which serves as a support system for such efforts in the United States and Canada.
3. Change the rules: Current law and public policy largely favor the self-serving and deeply destructive corporate-led global economy. That works well for the interests of big money. People and planet are better served by rules and policies that support local control and protect community interests. To change the rules, however, is necessary first to build the necessary political support through work at local levels to change the defining stories and demonstrate their application by building a new reality from the bottom up. As we are seeing about the country, rule changes also best start at the local level with action by local governments that are close to the real life concerns of people and place.

We already have a Green Party consensus on the framing vision and agenda; we simply need to boil it down to a coherent story that connects with the concerns at the fore of the public consciousness:  jobs and money.

Jobs and money are entry points to virtually all the issues central to the Green party vision. Our immediate priority should be to reframe the debate on jobs and money as an entry point to a broader discussion about economic policy options and the need for fundamental system transformation.

I hope you take the time to read his entire article (I've put about 1/2 of it here). The economy of our nation should serve the needs of the people vs the people serving the needs of Wall Street and its servants in Washington, DC.

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Daryl Northrop