High Underemployment Sucking American Productivity

Unemployment has been the big headline grabber over the past 4 years, but underemployment has been a chronic problem that hasn't gotten its fair share of coverage in the MSM. As I explained in my post about how the unemployment rate is derived, underemployment, as defined by the Bureau of Lies and Subterfuge, is working part-time hours while desiring full-time work. This definition has nothing to do with skill utilization or pay scale. So, while the BLS is reporting a 15.3% U-6 unemployment rate, which translates to just under 14 million underemployed, there are in reality 16-18 million Americans working jobs below their pay grade, or "outside their career paths", we might say.

If, over the last 4 years, 16-18 million Americans have been working jobs they aren't optimally suited for (in addition to the unfortunate displaced workers who have taken McJobs, imagine a laid-off engineer working on a factory floor or a laid-off corporate manager working as a tax preparer), it would only make sense that American productivity (total economic output divided by total economic input) would be flattened. Indeed, productivity growth in United States has been anemic since the Great Recession, with the exception of 2009, when businesses cut their organizations down to the bone. Reduced productivity growth is yet another impediment to economic recovery, which the Fed and Washington have significantly impeded.

Buried Headlines: August 8, 2012

As I've stated many times on this blog, the Federal Reserve's liquidity pumping is largely responsible for the nation's economic woes. The Fed promoted the speculation that led to the tech bubble bursting in 2000, the Fed blew up the mortgage bubble (which burst and plunged the economy into deep recession), and the Fed has prolonged our economic malaise by continuing to pump liquidity, which has prevented the "patient" from properly healing by delveraging and purging himself of malinvestment. Now, incredibly, the Fed has published a mea culpa of sorts: research that suggests its own organization is responsible for the Great Recession.

Fed Study Says Bush And The Banks Didn’t Cause The Great Recession. The Fed Did.

Thanks, Bernanke: Zero Return World Squeezes Retirement Plans

In other news:

43% Of U.S. Immigrants On Welfare After 20 years

Obama Blames State And Local Governments, Congress For 14.1 Percent Black Unemployment

Obama's Welfare-To-Work Firestorm

Protect The Cronies! Corporate Fraud Cases Often Spare Individuals 

Full-Time Jobs -228,000; Part-Time Jobs +31,000

Italy Sinks Deeper Into Recession As Monti’s Problems Swell 

Wealthy French Vow To Leave Country If Socialist Government Passes 75% Tax

New York Tests "Social Impact" Bond Investing With Evil Goldman Sachs

Four-Year Silver Probe Set To Be Dropped

741 Tax Returns Filed From Single Florida Address, IRS Sent Back Over $1 Million In Refunds

IRS Incarcerating 84 Year-Old Tax Protester

Like millions of Americans, I loathe the IRS. I dislike them for a number of reasons, but I can't stand their inverse implementation of two integral Common Law principles, the presumption of innocence and the burden of proof. I've had the unfortunate experience of being audited (love how they go after the small businessman but not Big Business), and I can't imagine the nightmare of agents knocking on your door because you don't have health insurance (which will soon occur thanks to Obamacare). That being said, I respect tax law, and I protest the IRS though the legal means of writing, broadcasting, and supporting the FairTax.

Some Americans, on the other hand, protest the IRS by outright refusing to pay taxes. More often than not, these people end up in prison. One such individual, life-long tax protester Irwin Schiff, investor and libertarian activist Peter Schiff's father, is currently serving a 13 year sentence in Indiana. The elder Schiff clearly got himself into his current predicament (he's no stranger to jail time due to tax evasion), but this time the state handed down too harsh a punishment for the crime. Schiff, you see, is 84 years old and has health problems.

House arrest would be more appropriate for the old man. He clearly isn't a flight risk, and he likely isn't getting adequate health care. But the state is making an example of Schiff, and that is simply wrong. Listen to Peter talk about his father's experience:

Buried Headlines: August 7, 2012

One of my more interesting college jobs was Spanish-speaking role player for the U.S. Border Patrol Academy. Anglo as the sky is blue, I got to play the part of an illegal immigrant trying to sneak across the border. It was a really fun job, and I got to get to know of lot of people because of the long periods of down time. During one of the periods of down time, I somehow got reeled into a political conversation. I'll never forget what one nice but misguided Nuyorican said: "Republicans only care about rich people." I didn't bother trying to explain that crony capitalism knows no political party.

Cronyism Likely Behind Obama, Holder Failure To Charge Banksters After 2008 Financial Meltdown

Timmah Geithner, Treasury Cut Off Non-Union Workers’ Pensions

In other news:

Young Americans Face Bleak Economic Futures

ECOMINOES FLASHBACK:  We Are The Lost Economic Generation

For Unpaid College Loans, Feds Dock Social Security

Wait, Economy Actually Lost 1.2 Million Jobs In July?

Art Cashin On Obama's Reelection Tactic: Pleading For A Spanish Bailout

Obama's Actions Toward The Private Sector Louder Than Words

Taxpayers to Recover A Mere $24 Million From Solyndra; Networks Ignore

Futile War On Drugs: Drug Cartels Using Drones To Identify Unpatrolled Border Areas

The Global Arms Trade Interactive Inforgraphic

ECOMINOES FLASHBACK:  Gun Control Futile: Supply Will ALWAYS Meet Demand

THIS Is How The Unemployment Rate Is Derived

Chronic unemployment makes recovery impossible in an economy that's 70% consumer spending. It's also a pestilence that ruins peoples' lives, promotes societal ills, and can ultimately tear at a nation's social fabric. And our nation's unemployment problem is much worse than the Bureau of Labor Statistics has been reporting.

The methodology the BLS uses to calculate the unemployment rate is fundamentally flawed. Contrary to popular belief, the bureau doesn’t tally numbers from state employment agencies. In fact, it derives its figures from an unscientific telephone survey.

Each month the BLS compiles unemployment data from a US Census Bureau telephone survey of approximately 60,000 households. As per internal regulation, the Census can only contact prospective survey participants via land line. Therein lies the fatal error: According to the Centers for Disease Control and market reports from the telco industry, more than 1/3 of Americans don’t have access to a land line at home, including 50-60% of those age 18-30 and 40-50% of those living below the poverty level. As unemployment rates for the young and thepoor run nearly twice the national average, there is a high probability that these groups are severely undercounted.

How much are the young and the poor undercounted? Using a fair sample of 50% cell phone respondents, I calculate by more than 2 million. Adding 2 million to the official tally of 12.7 million unemployed, we get a U-3 rate of 10.3%.

The BLS definition of “underemployment” is working part-time hours while desiring full-time work. This definition has nothing to do with skill utilization or pay scale. Since there are approximately the same number of underemployed Americans as there are unemployed Americans, and the U-3 rate is likely under-calculated by 2 million, the U-6 rate (U-3 rate plus the underemployed) is likely under-calculated by 4 million. Adding 4 million to U-6 would put the rate at 20%. That would correspond to 28 million displaced American workers.

Buried Headlines: August 6, 2012

In one of my first posts I detailed the negative impact of federal debt on GDP beyond the 85% debt/GDP threshold. Former Reagan economic adviser Art Laffer recently penned a column for the Wall Street Journal in which he explained the inverse relationship between government spending and GDP. If you're not registered with the WSJ, I highly recommend that you do. It's well worth it.

Art Laffer: Increased Government Spending Acts Like A Depressant

ECOMINOES Flashback:  Deadbeat Uncle Sam: Bringing Down The Whole Family

In other news:

Obama’s Budget Would Add $10.6 Trillion To Federal Debt

Why Did Unemployment Rate Increase In July?

195,000 Fewer Americans Had Jobs in July; 150,000 Dropped Out of Labor Force

$460 Million In Food Stamps Going To Ineligible Households

60% Of Companies Have Missed On Earnings, Revenues DOWN 1% From Last Year

NYSE In Talks With SEC To Settle Data Probe

Where Do Ron And Rand Paul Fit In At The GOP Convention?

"Land Of The Free": Man Arrested For Wearing A Superhero Outfit

Buried Headlines: August 5, 2012

At the turn of the 20th century, Argentina, not the United States, was primed to be the world's superpower. But the Argentine government coddled an aristocracy, and the fruits of free market capitalism were never allowed to ripen. And now Argentina is a pretty, but economically pathetic, country.

Socialist Saber Rattling: Argentina Bans British Ships

In other news:

On The One Year Anniversary Of The US Downgrade, Debt Situation Even WORSE!

JPMorgan Chase Denies Manipulating California's Electricity Market

Will We Have to Wait For A 21st Century Peasants’ Revolt Before Seeing Any Real Change In Banking?

ECB Saves Greece From Certain Bankruptcy. Again.

Investors Await Tax Hike

Rahm Emanuel Refers Solyndra Questions To WH Lawyer

Mark Zuckerberg Has Lost $9 Billion Since Facebook's IPO

Evil Cass Sunstein Leaves White House Post