When a drop in unemployment is bad news

unemployment and graph

Some will trumpet today’s announcement of a two-tenths of one percent drop in the June unemployment rate as great news, but in fact it just masks the truth of what is happening in the US economy: The administration is breaking the back of the job creators.

Once again we’ve seen an unemployment rate drop due to workers dropping out of the labor force far more than due to adding jobs. The labor participation rate is the lowest in 38 years – 400,000 workers left the labor force. These are Americans who have given up trying to find jobs. We could call this the “Hope Index” and it has been miserably low throughout the current “recovery.”

Youth employment is pathetic and unemployment among African Americans is terrible, nearly double the national average. The average workweek has stalled at 34.5 hours and hourly wages are also stagnant, despite cities in many major urban areas passing higher minimum wage laws.

National leadership and major news sources seem unable or unwilling to “connect the dots.” For example, under the Affordable Care Act, when many employers hit a 30-hour workweek level with their employees, they are forced to buy overly expensive health insurance. Is it any wonder the workweek is failing to grow?

I know a pre-school teacher whose employer had to cut everyone’s hours to 29 per week. Because of this, several teachers were forced to find second part-time jobs. Do you know how many additional problems this causes for the very people the administration was seeking to help via the ACA? It is ruinous on family life, increases commuting costs and causes enormous personal stress. This scenario has been playing out all across the country.

Further, the administration has imposed regulation-after-regulation on businesses in recent years. Every regulation costs money; money which otherwise could have gone to increasing wages and hiring additional employees to carry out expansion plans. On top of that, the 150,000-plus pages of federal regulations prevent many would-be entrepreneurs from even testing their ideas in the marketplace.

Right now the administration is gearing up to redefine exempt and nonexempt employees with the hope of increasing worker pay by increasing overtime pay. However, business owners and managers are not stupid; if these new regulations are imposed, businesses will merely cut jobs and reduce hours to minimize costs. In the end, workers – and the labor force in general – will suffer.

Unfortunately, today’s drop in the unemployment rate is bad news. When we consistently have months where the labor participation rate goes up while the unemployment rate goes down, then we’ll have some news to celebrate.

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