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6 Myths About the Economy

If you pay attention to social media, or even just talk amongst your friends, you may have heard some awful things about the economy.  Many people, Republican and Democrat, are convinced that things are simply not improving.  The feeling tends to be stronger among Republicans, especially Tea Partiers, who believe that socialist policies are still killing us.  But the mood crosses party lines rather fluidly.

It boils down to six persistent myths about our economy today.  Some are based on old news, taken from horror stories from the depths of this depression around 2010.  Some are simply wrong.  But all of them reinforce the emotional reason why this is indeed a depression, a dark feeling shared across society.  It’s also rather wrong.  Let’s run them down.

1)  There is no increase in jobs (or even a loss).  As we have noted here many times, the Bureau of Labor Statistics counted 2.3M jobs created in 2013, roughly tying 2006 for the record since the depression started in 2000.  That’s 192k per month by the BLS, and the independent payroll firm ADP figures about 180k per month.  It’s not a great gain, but it’s the best in 13 years – and may even be accelerating.  Two bad months, December and January, were likely a statistical aberration, but the bad numbers fed into this common myth.  We are creating jobs, just not quickly.

Job Gain by Year since 1998, from the St Louis Federal Reserve

Job Gain by Year since 1998, from the St Louis Federal Reserve

2)  The only jobs created are in government.  This one is just plain wrong.  In January 2009, 22.5M workers or just under 17% of all workers were government employees at all levels, including police, fire, teachers, and everything.  2.8M worked for the Feds, or around 2%.  As shown in the chart below, Federal employment has been remarkably steady each January since then but state and local governments have lost a total of 700k jobs.  This has added about 0.4% to unemployment – not the other way around.

Year Total Gov’t (% workers) Fed only (%)
2009 22.5 (16.8%) 2.8 (2.1%)
2010 22.4 (17.4%) 2.9 (2.3%)
2011 22.3 (17.0%) 2.9 (2.2%)
2012 21.9 (16.5%) 2.8 (2.1%)
2013 21.9 (16.0%) 2.8 (2.1%)
2014 21.8 (15.8%) 2.7 (1.9%)
Hospitality workers often don't have the hours they want

Hospitality workers often don’t have the hours they want

3)  What jobs are being created are part-time.  This one is simply wrong.  It doesn’t come from any mainstream sources, but I’ve seen it mentioned on facebook and twitter several times.  People did have their hours cut in 2008-2009, with “part time for economic reasons hitting a record 5.1% of the workforce.  But new jobs are not following that path.  Since that time, the jobs being created have a higher percentage of full-time 40 hours than in a typical postwar recession.  It’s not clear why we are doing better on this front, nor is it clear where this myth came from.  But it’s plain wrong.

4)  The only reason unemployment is falling is because people are giving up.  This one is more than a myth, it’s a very persistent lie as we have noted before.  It is true that before 2011 a lot of people left the workforce, going back to school or their parents.  But in the last two years it’s been driven by retirement.  We covered this one in detail before and if you want to read more please follow the link.

I'm still not impressed.

I’m still not impressed.

5)  The economy is stagnant and has no growth.  Economic growth is not great, running 4.1% in 3Q13 and 3.2% in 4Q13.  That’s better, again, than it has been growing since 2000 and roughly ties the best times in the last 13 years set in 2013.

6)  The Federal deficit is at record levels and growing.  It did spike over 10% of GDP during the worst part of the Depression, in 2008-2010.  But it’s been dropping rapidly since then.  It’s taken a mix of tax increases, budget cuts, and economic growth to do it, but it’s now below 3.0%.  The same mix will likely be the magic formula that take us towards a balanced budget, which would be a good idea once we get out of this Depression.

These are just some of the myths that are common about our economy, but they are the most persistent.  While the harsh negativity isn’t justified, it’s hard to be especially positive about everything as long as there are so many people unemployed.

Part of the problem, I believe, is that leaders both left and right were far less than honest about the depths of the problems we faced from 2001-2010 as jobs were shed every year except a brief period from 2005-2007.  By not confronting what can only be called a Depression the realities of today are not appropriately compared to the very hard times we have already been through.  Today’s struggles are not much lighter than they were, but things are slowly improving.

If leaders had been honest with us, I think that people would recognize that it is better today than it has been in quite a while.  Although, it’s important to note that this isn’t saying much.

If you have any questions please comment below or follow the links.  Thanks!

6 thoughts on “6 Myths About the Economy

  1. I have not heard all of these. This really upsets me because there are people who are clearly just trashing the economy because they hate Obama. Things are not great but to make it sound as bad as you can just because you hate the president is wrong. If people put as much effort into improving things as they did into hating it would get better in a hurry.

    • I agree, most of it is just trashing Obama. But some of it is darker and more persistent. We get over the Depression when people stop believing this stuff, I think, given that we have turned the corner. It’s about time we move ahead.

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