Connect the Numbers

As I noted below, today the unemployment rate for June was released, and it was up 0.1% to 9.2%.   Not good, to say the least.    But it's likely worse than what's reported.... if the employment participation rate was as high today as it was in Jaunary 2009 -- meaning the percentage of the population who are in the job market -- then the unemployment rate would actually be 11.2%.   In other words, with a work force of approximately 150 million people, we've lost 2% -- 3 million or so -- who have simply left the work force.  

On the other hand, consider three other numbers:  (1) the minimum wage, which was $5.15 until July 24, 2007, ratcheted up over the next two years until it reached its current figure of $7.25 in July 2009; (2) federal  unemployment benefits are now extended to a maximum of 99 weeks, or nearly two years; and (3) the number of Americans on food stamps has increased 37% since January 2009.   Couple these with the federal mortgage assistance available, where homeowners behind on their mortgages can refinance, lower payments, lower interest rates, etc., and what have you got?   Simultaneously you have government programs which:

• reduce incentives for employers to hire new people (high minimum wage); and
• reduce incentives for the unemployed to accept new jobs, even at low wages (free food, help with housing, free money in unemployment insurance).

Now that's a bad equation:   Employers who don't want to hire plus employees who don't want to work.  Not too surprising that the unemployment figure has stayed high. 

Funemployment!   It's the new normal.