The Untold Economic Story of the 2016 Election
It’s 2016, we are eight years removed from the 2008 crash and we have been told that the current unemployment rate is currently at 4.9% and all is good. The only problem is that it really doesn’t feel like we’ve recovered, our wages aren’t much higher and something just feels off. Many of us in middle America have that same opinion that something is wrong but the media tells us that the job numbers simply won’t and can’t support that feeling we have. Perhaps there’s something in the Bureau of Labor Statistics (BLS) jobs report that others might have missed, some change in the standard accounting that began around 2009 when the recovery began.
The one figure that stands out like a sore thumb is the Labor Force Participation Rate (LFPR). The LFPR is the percentage of people of working age (typically 16+) who are eligible to enter the labor force and are counted among the employed or unemployed. Historically, the LFPR was one value that would continue to increase due to the addition of women into our workforce. The LFPR continued to increase from the 1970s all the way up until about 1988 when the number became very steady and reliable, at that point we had full female employment. The LFPR would remain stable with minor oscillations around 66-67% for a full two decades from 1988-2008. Then something happened, something that is quite unusual, our LFPR actually dropped. Just take a look for yourself, you can see on this graph of the LFPR from 1970-2016 everything I described above, the slow but steady increase from 1970-1988 and even the stability from 1988-2008 as well as the sudden drop from 2009 forward:
This is the story we need to tell of the 2016 election, we need to explore the implications of this significant drop in the LFPR. This is why things don’t feel quite right and why the jobs numbers don’t reflect that feeling we have and that disconnect is why many people voted how they did; they felt like the media and government conspired against us to give us a rosier picture than exists for many Americans. While there was likely no intentional conspiracy to deceive us there was a lack of exploration and investigation of how the LFPR can change the entire conversation around the unemployment rate and we need to look at how it might look if we simply maintained the steady and stable LFPR rates we had for two decades from 1988-2008 around 66-67%. Let’s explore some hypothetical unemployment rates as if our LFPR remained high; as it was for all those years, how about we use 66% as our LFPR and hold it steady for our unemployment rate calculations. What we will discover is eye opening, let’s take a look:
We should demand that those in the media explore why the LFPR has dropped so significantly and why this story has been ignored throughout the election. We need to talk about those who have left the labor force or never really joined it in the first place. But as you can see if we use the same standard (~66% LFPR) we had from 1988-2008 the economic numbers tell a completely different story than the media narrative that we’ve had for the past 5 years. In fact, going into the 2016 election the story should have been the 9.5% unemployment rate, instead it appeared to be 4.9% by simply moving the goal posts and lowering the LFPR. This is the reason why so many of us in the real economy feel like things haven’t improved and why so many people simply don’t believe the job numbers. I don’t think there was an intent to deceive people but there has been a lack of investigating these figures and flat out ommission of some of the numbers over the past 8 years of “recovery”. Just so everyone is on the same page, all these numbers come directly from the Bureau of Labor Statistics.