Making Machines Competitive

Robots are coming to a burger joint near you

CNBC

Here is an article that talks all about the efficiencies of replacing human fry cooks with a machine named Flippy because cooking burgers is just repetition.  Unmentioned is that machines long ago ate into a far more complex repetitive task of assembling automobiles.  Why has it taken so long to move into the burger flipping efficiency?  That would be the ever expanding minimum wage and the associated costs of human employees.  It is no coincidence that California is the first to see inroads by Flippy.  Get rid of the government-imposed cost burdens related to human employment and Flippy would have no market.

 

Unlike how telephone operators and horse-drawn carriages were replaced by new technologies, this is a case of government driving up the price of a product - low-skilled wage labor - to the point that machines became competitive.  Rather than providing more money to low-skilled workers, the minimum wage is going to put them in the unemployment line.  If one believes that the intent was to improve the standard of living of those on the bottom rungs, then this is a clear case of unintended consequences.  On the other hand, if government wants more citizens dependent upon it, perhaps this is the intended - though unstated - goal.

President Asterisk

During the Presidential election, there was a miraculous and timely burst of employment that resulted in the unemployment rate dropping below the 8% mark.  No president since FDR had been re-elected with unemployment above 8%.  Here is my blog on the subject:

http://hicsum-musings.blogspot.com/2012/10/peculiar-numbers.html

Today, I was checking the links at Instapundit (http://pjmedia.com/instapundit/) and came across the following article:

http://nypost.com/2013/11/18/census-faked-2012-election-jobs-report/

This may explain the peculiar numbers from last year.  Combined with the IRS harassment of Tea Party groups and the stonewalling on Benghazi, and the continued assurance that Obamacare would allow voters to keep insurance plans they liked, it appears that President Obama was making a full-court press to get re-elected, even if it required some tactics that are shady at best.  Such shenanigans are why some want to mark his re-election with an asterisk.

Peculiar Numbers

Miracle of miracles, the unemployment rate has dropped below 8% for the first time in nearly 4 years and it happens coincidentally the month prior to the election.  But there is something funky with the numbers.  I checked out the Bureau of Labor Statistics (BLS) and got the following numbers:

Month / Jobs Created / Unemployment Rate

1. January / 275K / 8.5%
2. February / 259K / 8.3%
3. March / 143K / 8.3%
4. April / 68K / 8.2%
5. May / 87K / 8.1%
6. June / 45K / 8.2%
7. July / 181K / 8.2%
8. August / 142K / 8.3%
9. September / 114K / 8.1%
10. October / no data / 7.8%

So, February saw the creation of 259,000 jobs and didn't budge the unemployment rate for March.  The 275K jobs in January saw a drop of 0.2% in the unemployment rate.  Now, between August (142K) and September (114K), there have been 258K jobs created but the unemployment rate drops by half a point!  So, fewer jobs than in January have had double the impact.  Something doesn't smell right here.

 

Mitt Romney has been reporting that if the same number of people were in the workforce as when Obama was inaugurated, the unemployment rate would be closer to 11%.  What he is talking about is the Labor Force Participation Rate.  It was 65.7% in January 2009 but has fallen to 63.6% as of September.  What that means is that of people between the ages of 15 and 65, 2% of them have dropped out of the labor force and are no longer counted in the unemployment numbers.

 

Then there is the growth rate.  The economy grew at a 3% rate in the first quarter (Jan to Mar) of this year and that shows in the job creation numbers.  That dropped to 2% in the second quarter, which likewise is reflected in the job numbers.  It fell to 1.3% in the third quarter and yet we have this sudden burst of employment?  Again, something doesn't make sense here.  Let's say I'm skeptical.

Misleading Employment Numbers

President Obama is hyping the drop of the unemployment rate down to 8.1%.  This is important since no incumbent president since FDR has managed to get re-elected with an unemployment rate above 8% and he seems on track to squeeze under that dread number.  The economy is recovering, right?  No.

The unemployment rate is determined by dividing the number of people unemployed (U) by the number of people in the job market, called the Labor Force (LF).  Currently, we have 12.5 million unemployed out of a Labor Force of 154 million people, which works out to 8.1%.  Cut and dry, right?  Yes, but that's not the whole story.

The Labor Force is only a portion of the population who fall between the ages of 15 and 64.  In 2008, 66% of the people in that range were in the Labor Force; this is called the Participation Rate.  Today, only 63.6% are in the labor force.  Though that may seem a small change, it adds up to millions of people.  Those not in the labor force has grown from 79.5 million in 2008 to 88.4 million today.

If the participation rate were still at 66%, the unemployment rate would be over 11%.  A shrinking participation rate has lowered the unemployment rate.  When the economy really starts to recover, the unemployment rate will go up as the chronically unemployed returned to the labor force.  The current drop just means more people are throwing up their hands and dropping out of the labor force.