Tuesday, July 17, 2012

June Jobs Report Even Worse Than Headlines State: Disability Claims Outpace Job Creation

John Merline for the Investor’s Business Daily reports on an IBD study that dug into the June jobs report, and compared the figures with information gleaned from other reports from the Social Security Administration, Bureau of Labor Statistics, Department of Agriculture, and Sentier Research.  The jobs report (among other things, unemployment still remains at 8.2%) was already bad enough – again – but the figures, taken in conjunction with the other data, paint an even bleaker picture.

Obama has already drawn heavy criticism for his remarks, speaking after the release of the jobs report, that the private sector economy was “doing fine”, along with his statement that the June report that indicated job growth for the month, at 80,000 instead of the expected 130,000-150,000 (again – ‘unexpected!’), was “a step in the right direction”.  There are cracks in the wall of media protection that show the flaccidity of the Obama campaign’s full-throated attempt to shift from the news of the economy (‘nothing to see here – move along, move along’) to ludicrous accusations of commission of a felony about Romney’s association with Bain Capital during the time he was in charge of the Salt Lake City Olympics.  Jennifer Rubin of the Washington Post:

The divergence between what the Obama campaign and the media (I repeat myself) are talking about (Bain, Bain and Bain) and the most important economic (and hence political) news of the year is breathtaking.  To put it bluntly, we are looking at economic contraction.  In laymen’s terms, that is a recession....
The political media’s failure to grasp the import of the economic news is as embarrassing as Obama’s economic policy failure.  Both expect the public can be bamboozled by rhetoric.... Right now they are acting as if the real world and the prospect of a literal recession (which would be two quarters of negative growth) is [irrelevant]. As we approach zero percent growth, so do Obama’s chances of reelection.  The rest is just smoke and mirrors.
Even the wildfires in Colorado can’t provide that much smoke.  The IBD report now includes the news that for the first time, disability claims have outpaced new jobs.  As we added only 80,000 new jobs, some 85,000 workers dropped out of the workforce to enroll in the Social Security Disability Insurance (SSDI).  [Click to enlarge]
More workers joined the federal government's disability program in June than got new jobs, according to two new government reports, a clear indicator of how bleak the nation's jobs picture is after three full years of economic recovery....
The disability ranks have outpaced job growth throughout President Obama's recovery. While the economy has created 2.6 million jobs since June 2009, fully 3.1 million workers signed up for disability benefits.  
In other words, the number of new disability enrollees has climbed 19% faster than the number of jobs created during the sluggish recovery.
It gets worse:
In addition, while hiring has been very weak during the recovery, the number of people who have dropped out of the labor force entirely has exploded by 7.3 million since June 2009, an IBD analysis of BLS data show.  Some aged into retirement, but most either signed up for disability, stayed in school, moved back in with parents, or just quit looking for a job.
As a result, the "labor force participation rate" – the number of people who have jobs or are actively looking for one compared with the entire working-age population – is now 63.8%, down from 65.7% in June 2009.  This participation rate is at the lowest levels in 30 years.  In previous recoveries, the participation rate has almost always risen, not fallen....
The unemployment rate has been above 8% for 41 consecutive months.  In the previous 60 years, the jobless topped 8% in a total of only 39 months....
The median length of unemployment is 19.8 weeks.  Throughout Obama's recovery, it has averaged 20.6 weeks.  Prior to Obama, that number had never exceeded 10.5 weeks.
The poor recovery has also driven people to sign up for food stamps in record numbers.  From June 2009 to April 2012, food stamp enrollment surged 11.3 million, or 32%....
In addition, the soft jobs market has driven median household incomes down more after the recession ended than during the recession itself, according to Sentier Research, which tracks monthly household income.
After adjusting for inflation, median annual household income tumbled 5.3% from June 2009 to May 2012.  In contrast, median incomes dropped 2.6% during the 18-month recession, Sentier found.
As to the original question of the spike in disability claims, Ed Morrissey of the Hot Air web log discussed the topic with economist John Lott (whose most recent work is Debacle: Obama’s War on Jobs and Growth):
Lott explains that as people run out of jobless benefits after the two-year cycle, they look to transfer to a more permanent subsidy.  These people have given up hope of finding any kind of work in the future, and probably for good reason; two years without a job makes skill sets erode, and creates anxiety among employers who are definitely in a buyer’s market in terms of labor needs.
John Hinderaker at Power Line picks up the story too, reporting that, while the increasing number of the “disabled” has been a factor since before the Obama administration, the rate of increase has accelerated:
[Click it]

Given the immense amounts of money that are spent on medical and vocational rehabilitation, it is hard to believe that the number of Americans who are physically incapable of working has grown.  The causes of the increase must be sought elsewhere.  Note that the percentage of working-age Americans living on disability has more than doubled since the Reagan administration.
At this rate, SSDI trust fund will be depleted within only four years.
One more thing – after two years, anyone receiving SSDI benefits is automatically eligible for Medicare.  So the burgeoning ranks of the “disabled” contribute to the Medicare crisis.  The CBO report says that in 2011, Medicare costs for SSDI recipients added up to $80 billion.

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