Joint Economic Committee


Congressman Pat Tiberi (R-OH)

Related Image

The Bureau of Labor Statistics (BLS) reported this morning that the economy added a seasonally adjusted 236,000 nonfarm payroll jobs during the month of February. Private sector payroll jobs advanced by seasonally adjusted 246,000 jobs during the month. The unemployment rate declined to 7.7% in February from January’s rate of 7.9%. The broader U-6 measure of unemployment was little changed declining from 14.4% to 14.3%. Just over 40% (4.8 million) of unemployed individuals have been unemployed for more than 27 weeks. The total number of unemployed workers was 12.0 million.

Payroll Employment: Compared to Average Recovery Private Sector Jobs Gap Increases to 4.1 million

Since February 2010, private sector payrolls have risen by 6.4 million, a gain of 5.9%. February 2010 represents the low point from private sector payroll employment and is the reference point used by the White House in discussing job gains. By comparison, the average gain of prior recoveries that lasted longer than a year was 9.8% over a comparable 36 months. In today’s terms, this equates to an average private sector payrolls gain of 10.4 million in other recoveries. The strong Reagan recovery of the 1980s saw private sector payrolls increase by 12.5%, equivalent to a gain of 13.4 million over a comparable period.

Since February 2010, the economy has on average added 176,000 private sector jobs
each month.  As the following graph shows the equivalent monthly gain of the average of other recoveries was 290,000. 

The drop in the unemployment rate to 7.7% was based on both an increase in the number of people counted as employed and a decrease in the size of the labor force. The labor force participation rate declined to 63.5% in February equally the August 2012 level. Prior to August 2012, the last time the labor force participation was as low was in September 1981.

While the decline in the official unemployment rate from it recession high is positive, the decline is largely a mirage that has been created by declining labor force participation. The following graph shows what the unemployment rate would be if labor force participation had not declined from its January 2009 level of 66% the unemployment rate would be at 10.8%, far above the current 7.7% and the promised “stimulus” rate of 5.2%.

Another way to illustrate this point is by looking at the percentage of the civilian
noninstitutional population that is employed.  The employment-to-population ratio stood at 58.5% in October 2009 when the unemployment rate peaked at 10.0%.  In February, the rate was only 0.1 percentage points higher at 58.6%.

While the February jobs report did show a gain of nearly 250,000 private sector jobs,
it was not good enough to close the private sector job creation gap with the average of other post-World War II recoveries.  It is also worth noting that the number of private sector jobs created over the last 36 months (6.4 million) is less than the number of people added to the food stamp program from February 2010 to November 2012 (8.1 million). 

Federal Reserve Flow of Funds Survey

Yesterday afternoon, the Federal Reserve released its Flow of Funds Accounts of the United States for the fourth quarter of 2012. The Flow of Funds Accounts are a system of interrelated balance sheets for the United States, showing the assets and liabilities of various sectors of the U.S. economy.

During the fourth quarter, the net worth of U.S. households (including nonprofit organizations) rose by $1.17 trillion to $66.07 trillion on December 31, 2012. Households have regained 92% of the $16.00 trillion loss in net worth from a peak of $67.41 trillion on September 30, 2007 to a trough of $51.41 trillion on March 31, 2009.

This recovery is largely due to the increase in the value of financial assets. From March 31, 2009 to December 31, 2012:

• Corporate equities increased by 93.7%.

• Mutual fund shares increased by 70.1%.

• Pension fund reserves increased by 41.1%.

• Owners’ equity in residential real estate increased by 31.6% from March 31, 2009 to $8.22 trillion on December 31, 2012. Nevertheless, owners’ equity residential real estate is still down by 38.9% from its peak of $13.47 trillion on March 31, 2006. The value of owner-occupied housing rose by 5.3% from March 31, 2009 to $17.65 trillion on December 31, 2012. Home mortgage loans declined by 10.4% from March 31, 2009 to $9.43 trillion on December 31, 2012.


The Fed’s quantitative easing programs may not have helped the Main Street economy, but they have succeeded in powering the rise in the market value of risk assets, especially common stocks, by inducing investors to seek higher returns.

Also of note: Reflecting the large federal budget deficit, federal debt grew at annual rate of 11.2% during the fourth quarter of 2012. Household debt and non-financial business debt grew at annual rates of 2.4% and 8.2%, respectively. State and local government debt declined at an annual rate of 3.2%.