CNNMoney says that “The general public has ‘extremely little factual knowledge’ about the job market and labor force” The truth is that the public have a better understanding of the economy than our learned economists

From CNNMoney:

Most Americans think unemployment is a lot higher than 5%

Americans think the economy is in far worse shape than it is.

by Heather Long | @byHeatherLong | September 6, 2016: 2:28 PM ET

The U.S. unemployment rate is only 4.9%, but 57% of Americans believe it’s a lot higher than that, according to a new survey by the John J. Heldrich Center for Workforce Development at Rutgers University.

The general public has “extremely little factual knowledge” about the job market and labor force, Rutgers found.

It’s another example of how experts on Wall Street and in Washington see the economy differently than the regular Joe. Many of the nation’s top economic experts say that America is “near full employment.” The unemployment rate has actually been at or below 5% for almost a year — millions of people have found jobs in what is the best period of hiring since the late 1990s.

But regular people appear to have their doubts about how healthy America’s employment picture is. Nearly a third of those survey by Rutgers believe unemployment is actually at 9%, or higher.

Republican candidate Donald Trump has tapped into this confusion. He has repeatedly called the official unemployment rate a “joke” and a even “hoax.”

There’s more at the original.

What this tells me is that “regular people” just might have a better understanding of the economy than the highly-educated economists working for the federal government and august publications like The Wall Street Journal. So, “(n)early a third of those survey(ed) by Rutgers believe unemployment is actually at 9%, or higher?” Well, for August of 2016, the U-6 unemployment rate, defined as “Total unemployed, plus all persons marginally attached to the labor force,1 plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force,” stood at 9.7%. To me, it sure looks like those “regular people” are the ones who have it right: without the vast majority of them actually looking at the U-6 numbers — you do have to know where to look — they still guesstimated that unemployment was 9% or higher, right in line with the official numbers.

In August of 2016, the “participation rate”2 in the labor force was 62.8% of the eligible population; that was lower than any August of the entire Obama Administration, except for 2015. In 2009 and 2010, the worst years of the economic downturn, the August participation rate was 65.4% and 64.7%, respectively. It was in the 66% range every August during the Bush Administration. Other than 2015, it was the lowest August participation rate since 1977, Jimmy Carter’s first year as President.

Despite the “malaise,” high inflation and unemployment of the Carter years, despite the recession during Ronald Reagan’s first two years in office, people were moving into the labor force, not moving out of it, people were looking for jobs, not quitting the work force.

Let’s be honest here: people are dropping out of the labor force because they think that it’s simply a waste of time to go out and look for jobs that they know are not out there. The learned economists just don’t get it.

Paul Krugman, a Nobel laureate in economics, regular columnist for The New York Times and $225,000 per year professor at City University of New York, wrote:

For while the U.S. has done reasonably well at recovering from the 2007-2009 financial crisis, longer-term economic growth is looking very disappointing. Some of this is just demography, as baby boomers retire and growth in the working-age population slows down. But there has also been a somewhat mysterious decline in labor force participation among prime-age adults and a sharp drop in productivity growth.

Really? A Nobel Prize-winning economist, and all he can say about the persistent decline in the participation rate is that it’s “somewhat mysterious”? Unlike the esteemed Dr Krugman, I don’t have a PhD in economics,3 nor am I a “distinguished scholar” at CUNY Graduate Center’s Luxembourg Income Study Center, but the persistent decline in the participation rate isn’t “somewhat mysterious” to me; I just told you what has caused it!

More, the “regular people” mentioned in the CNNMoney article have told us what the problem is: they recognize what the real unemployment rate is, and understand the futility some people feel in looking for jobs that simply are not there. The CNNMoney article said, “The general public has ‘extremely little factual knowledge’ about the job market and labor force, Rutgers found,” but, looking at how the “general public” estimated that the real unemployment rate is “9%, or higher,” and got it right, I’d say that the “general public” actually have more factual knowledge about the job market and the labor force, and the economy, than do the highly educated talking heads.

Dr Krugman is paid $225,000 a year by CUNY, to teach one seminar a year.4 Robert Stacey Stacy McCain guessed that Dr Krugman’s salary from The New York Times ought to be at least the equal of Tom Friedman’s reported $300,000 a year. I suppose that, to him, it’s easy to advocate policies which would drive up energy costs, because he is wealthy enough to afford them, having conveniently forgotten that there are other people who cannot.5 It’s easy for him to say that “the U.S. has done reasonably well at recovering from the 2007-2009 financial crisis,” because he only hobnobs with people who do have jobs, good jobs: Times colleagues, university professors, government officials and, occasionally, graduate students in economics. It’s easy for him to say, look, unemployment is down to 4.9%, because the people with whom he associates are not worried about their careers, are not worried about losing their jobs, and are not worried about whether they’ll have enough money to make it until next payday. Thing is, it was the people who do have to worry about paying their electric bill, who are worried about making last Friday’s paycheck stretch until next Friday’s paycheck, who got it right about the economy.

How have the professional economists done? Here was Heather Long’s tweet about economists’ estimates of what the August jobs report would show:

And then she tweeted the actual results:

So, CNNMoney came closest, but was still off by 15.9%. @Estimize, on the other hand, which sells itself as “access to earnings estimates from 16,000+ of your buy-side & independent analyst peers. Academically proven more accurate & representative than First Call,” missed by 42.4%. Remember: these aren’t economic forecasts of what will happen, but economists’ estimates of what has already happened, and they are still getting it wrong.

I do not know if Miss Long wrote the article headline and subtitle; that is normally the job of editors. But the article subtitle, “Americans think the economy is in far worse shape than it is,” reflects a belief by the editors, and I presume Miss Long, that the American economy is in good shape. Perhaps, for them, it is, but when we get to the “regular people” mentioned in the article, no, it isn’t. The American economy is not creating jobs at a good rate, wages remain stagnant in real terms, and people are genuinely afraid that the jobs they have now might not be there over the long term.
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Cross-posted on RedState.
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  1. Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.
  2. The civilian labor force participation rate is the number of employed and unemployed but looking for a job as a percentage of the population aged 16 years and over.
  3. My highest degree is a Bachelor of Arts, and while I took a lot of economics courses, economics was not my major.
  4. Dr Marcie Bianco, a part-time adjunct professor at CUNY, complained that Dr Krugman would earn more in one year at CUNY than she would over her entire career.
  5. Nobel prize winning economist Joseph Stiglitz, an advisor to the Hillary Clinton campaign, advocates taxing fossil fuels, even though such a move would immediately lead to higher prices for oil, gas and coal. It would also hike the cost of anything that uses those fuels such as electricity and transportation. The goal is to force Americans to find alternatives that are cheaper and better for the planet.

4 Comments

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  3. The general public has “extremely little factual knowledge” about the job market and labor force, Rutgers found.

    Or it could be the general public doesn’t trust the Obama Admin not to
    “cook the books” on economic data, and most likely they wouldn’t trust a potential Hillary Clinton Admin from doing the same.

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