OPINION:
The Biden administration’s latest jobs report is another example of how all that glitters is not gold. What looked like 206,000 jobs added to the economy were actually less than half that, with terrible internal dynamics. All while the labor market ominously flashed a recession warning sign with a perfect 50-year track record.
More than half the payrolls that businesses allegedly added in June were simply replacing jobs we thought we already had but didn’t: Both May and April job numbers were revised down by nearly 100,000, making June’s growth anemic.
Worse, fully one-third of the jobs added in June were in government — within spitting distance to Soviet levels of employment composition. Considering it takes many private sector jobs to support a government worker — who produces nothing — a 2-to-1 ratio is nowhere near enough.
For that matter, even if 10 times as many private sector jobs were added, it still wouldn’t create enough tax revenue to support the number of public sector jobs being added, making the current job market trend unsustainable.
Of course, those are just direct hires by the government, not all the new jobs paid for with taxpayer dollars — the “welfare-Industrial complex.” To illustrate, when the government gives money to a hospital for migrant care that hires a nurse, this new job is also taxpayer-funded. Adding these indirect hires to the direct government hires shows that about 60% of new jobs are paid for by you, the taxpayer.
It worsens when we look at the composition of full-time and part-time jobs. June saw 30,000 full-time jobs evaporate, replaced by part-time work. This is not a new phenomenon but an ongoing trend: In the last year, the economy has hemorrhaged 1.6 million full-time jobs, replacing them with 1.8 million part-time ones.
This matters because part-time jobs are overwhelmingly for economic reasons. People would rather work a full-time, stable job. But when those aren’t available, they’ll take what they can get, replacing a 9-to-5 job with two or more part-time gigs. A consistent income stream has been replaced by several volatile ones.
This helps explain why the number of payrolls has continued to rise substantially while the number of people employed has not. Employment has fallen by 667,000 since last November, which has caused the unemployment rate to rise from 3.7% to 4.1%, nearly triggering the dreaded Sahm Rule, which indicates a recession has likely begun.
This indicator is not to be taken lightly. It hasn’t had a false positive since 1976 and has signaled the start of every recession since 1970.
Even that’s sugarcoating it. The unemployment rate is still artificially low because millions of Americans are missing from the labor market. The reason: When the government imposed draconian lockdowns in 2020, millions of people dropped out of work, and many never returned.
Even though these people didn’t have jobs, they weren’t counted as unemployed since they were not actively looking for one. That reduced the unemployment rate without creating a single job.
The number of missing workers today is between 4.9 million and 7.3 million. If these people — who don’t have jobs — were accounted for, then the unemployment rate would jump from 4.1% to between 6.8% and 8.1%. That’s deep recession territory.
Last, if there’s any doubt that the American labor market isn’t working for Americans, consider that literally all the net job growth over the last year went to foreign-born workers. While native-born Americans lost over 900,000 jobs. Fewer people are employed today than before the pandemic, while their inflation-adjusted earnings are down almost 4% on average.
As Congress’ big spenders keep fueling inflation and crowding out the productive private sector, the infamous stagflation of the 1970s is about to rear its ugly head — and that means more job losses are to come.
In short, the radical left has turned the American labor market into a temp agency for foreigners while creating a record number of government jobs.
• E.J. Antoni is a public finance economist and the Richard F. Aster fellow at The Heritage Foundation, where Peter St. Onge is a visiting fellow.
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