Did 5% of The Population Win The Lottery?

Sometimes a picture is worth a thousand words. Sometimes much more.

The following chart is a Federal Reserve Chart of employment as a percentage of working age adults. We have all seen it before, I think. Now let’s look at it more closely and explore its implications.

employmentgraph

 

We all know the economy is recovering because the Administration, their media minions and the sell-side analysts on Wall Street tell us this routinely. Most of us also know the propensity for government manipulation of data and/or definitions in a manner that will overstate reality in a favorable fashion. Nevertheless, let’s accept the data and the chart from above.

There is something wrong with this chart. It contradicts claims that we are in an economic recovery. First, the recession appears to have been declared over prematurely. The gray bar on the chart is the “official” dating of the recession, declared over  in June 2009. If it had ended, then why did the labor participation rate continue to decline? From the onset of the declared recession to the end, the participation rate declined 3.5 percentage points. Yet it continued to decline another percentage point after the recession had officially ended. This behavior is not normal.

Five years into the “recovery” and the labor participation rate is still lower than when the recession was declared over by almost a percentage point. It is still over 4 percentage points lower than when the recession officially began.

This simple chart shows one of two things:

  1. There is no recovery, even five years after announcing there was. The economy, in terms of labor participation is lower than during the Great Recession.
  2. Or, about five percent of the working population hit the lottery and have no need for employment anymore. If one defines the lottery as being encouraged not to work as a result the increased rewards for not doing so, that might be an explanation. 

Both of these are possible and they are not mutually exclusive. Regardless, of what the cause for the above graph is, it ensures that the country will be poorer than it need be.

 

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