Falling Unemployment: Blind Optimism in the "Poor" Economy

Let’s see…what’s new?

Bloomberg reported last week that thanks to the mining boom, uneducated Aussie crackers earned more than Ben Bernanke.

“Travis Marks, a 24-year-old with no college degree, is hitting pay dirt as Australia’s mining bonanza fuels demand for workers,” says Bloomberg. “Already making triple the nation’s average salary, he expects to get even richer…

“Marks, who earns A$220,000 ($227,150) a year – more than Federal Reserve Chairman Ben S. Bernanke’s $199,700 – is a rigger for a company providing construction and maintenance services to the resources industry. ‘[This job] is a really good way to get ahead as a young bloke,’ Marks said.”

Well, of course Mr. Marks should earn more than Bernanke. He’s not destroying the world’s financial system. He’s doing something useful.

As we’ve said many times, modern academic economics is a knowledge-subtracting discipline. It’s full of bad ideas and misleading theories. The more you study it, the more you know that isn’t so. Mr. Bernanke proves it. He’s a smart guy. But with so much training in economics he’s worth less than an Outback truck driver.

But this story has a sunny side to it. Turns out, there’s opportunity Down Under.

“Prime Minister Julia Gillard said in February the resource industry could be short 36,000 workers in the next four years,” Bloomberg continues, “and the government will have to introduce measures to encourage older Australians and parents to rejoin the workforce. She also plans to relax restrictions on skilled migration.”

Did you see that last sentence, dear reader? Maybe this is part of the answer to America’s job shortage – export workers to the sunburnt country on the other side of the world. They just have to learn to wrestle crocodiles and to speak Strine.

But let’s turn back to the main story we’re following:

There are now two economies in America.

There’s the “rich,” recovering economy, floating on $2 trillion in excess cash pumped in by the feds. And there’s the “poor” economy, with millions of people drowning in all that Fed-fed inflation.

But wait, what’s this? Unemployment is down to 8.8%. Here’s the report:

“The unemployment rate fell to a two-year low of 8.8 percent in March,” says Bloomberg, “capping the strongest two months of hiring since before the recession began.

“The economy added 216,000 jobs last month. Another month of brisk hiring provided the latest sign that the economy is strengthening nearly two years after the recession ended. Still, a surprisingly large number of people who stopped looking for work during the downturn have yet to start looking again. Private employers, the backbone of the economy, are driving the gains. They added more than 200,000 jobs for a second straight month. It was the first time that’s happened since 2006 – more than a year before the recession started.

“Economists predict employers will add jobs at roughly the same pace for the rest of this year. That would generate about 2.5 million new positions. Still, that would make up for only a small portion of the 7.5 million jobs wiped out during the recession.”

Well, at least that’s progress…but read the next two paragraphs carefully:

“A big factor in the lower unemployment rate is that the proportion of people who either have a job or are looking for one is surprisingly low for this stage of the recovery,” Bloomberg winds up. “People who stopped looking for work during the downturn are not counted as unemployed. If many out-of-work people start looking for work again, they will be counted and the unemployment rate could go up. That could happen even if the economy is adding jobs.”

Let’s see, the economy has to create 125,000 jobs per month just to stay even with population growth. Even so, this isn’t bad. Net, nearly 100,000 jobs to the good. Hmmm… With 7 million officially unemployed…and maybe another 5 million who stopped looking for work…that makes 12 million or so without jobs. If we can sustain this rate – recovering about 100,000 jobs per month – how long will it take for your laid-off nephew to find a new job? Maybe only 10 years!

Bill Bonner
for The Daily Reckoning