Spend much time looking at the drop in the percentage of Americans participating in the labor force and you're likely to think not. Unemployment has fallen 2.5 percent from its post-recession peak, but the share of working-age adults with jobs has barely budged. This leads to scary graphs, like this one, or scary stats, like this one: If labor-force participation had held at its pre-recession peak, unemployment would be around 9.7 percent today.
The implication of these numbers is that the recovery is a mirage. The official unemployment rate only counts people actively looking for work. It's dropped less because people have found work than because they've stopped looking. Ergo, there's been no recovery -- just a hardening of the post-recession labor market.
This is a story I gestured at on Thursday. But Marc Goldwein of the Center for a Responsible Federal Budget pointed me towards an Urban Institute paper that complicates the situation considerably.
The popular (well, popular among depressed econ wonks) image of discouraged workers sighing and deleting their Monster.com account once and for all is wrong. The rate of labor force exit is actually lower than it was in the aftermath of the 2001 recession. It's labor force entry that's suffered.
In particular, it's suffered among women -- and it's really suffered among young women -- who are a lot less likely to enter the labor force than they were in 2002 and 2003.
That is, in certain ways, a more encouraging trend: Discouraged workers who leave the labor force typically see their skills erode. Young people who delay entry are often staying in school longer, gathering skills that will ultimately prove valuable to them (and student loan debt that will prove burdensome).
But that comforting possibility surely doesn't explain all of the drop in entry we're seeing among younger people. And it doesn't really explain any of the drop in entry we're seeing among older people.
There's been a recovery. The growth numbers, and the payroll numbers, and the consumer confidence numbers, are all enough to tell us that. But not as much of a labor-market recovery as the unemployment rate indicates. A lot of people have been left behind, or perhaps more accurately, been discouraged from starting at all.
Wonkbook's Number of the Day: 3.8 billion. That's the increase in "proved" oil reserves in the U.S. since last year, according to the Energy Information Administration.
Wonkblog's Graph of the Day: This graph calls the entire economic recovery into question.
Wonkbook's Top 5 Stories: 1) three candidates left standing for Fed chair; 2) jobs report today; 3) burning nonexistent Obamacare draft cards; 4) the big legislative THUD; and 5) UN no longer Power-less.
1) Top story: And then there were three
Obama narrows field for Fed chairman to three. "Mr. Obama is now in the process of interviewing three candidates for the position at the helm of the central bank: Mr. Summers; Janet L. Yellen, the vice chairwoman at the Federal Reserve, who had generally been considered the front-runner for the job; and a dark horse for the post, Donald L. Kohn, a former Fed vice chairman. In his meeting on Capitol Hill, Mr. Obama stressed that he had not yet made up his mind...One early candidate for Fed chairman was Timothy F. Geithner, the former Treasury secretary and Obama confidante, insiders said. The White House approached Mr. Geithner to ask if he would be considered for the job, but he declined." Annie Lowrey in The New York Times.
@TheStalwart: Yellen would provide continuity from Bernanke. Summers believes more in fiscal stimulus. Why is Yellen more favored by the left?
What kind of Fed chair would Larry Summers be? This March speech gives hints. "Summers argued that the goal of monetary policy is changing. Instead of focusing on reducing volatility in the near-term, central banks should concentrate on preventing disasters. That suggests he might at least be open to raising interest rates to pop emerging bubbles...Summers seems to give more weight to the argument that the levels of economic activity before the crisis were artificially high due to bubbles and that the economy is undergoing a more fundamental shift — and that the Fed has limited power to counteract a structural change." Ylan Q. Mui in The Washington Post.
Explainer: A reading list to the Fed contenders. Binyamin Appelbaum in The New York Times.
Former Fed vice chairman Roger Ferguson could be contender for top job. "On Sept. 11, 2001, Roger W. Ferguson, then the mild-mannered vice chairman of the Federal Reserve, found himself unexpectedly asked to play the role of first responder in what could have been a global financial meltdown...Ferguson, by all accounts, nailed it. He issued a statement short enough to get through to people but clear enough that no one could mistake its meaning: “The Federal Reserve System is open and operating. The discount window is available to meet liquidity needs.” Banks took out $46 billion in emergency loans, 200 times the daily average before the attacks. He led briefings to organize the Fed banks across the country to work in concert to ensure that the human disaster of Sept. 11 did not also become a financial disaster." Dylan Matthews in The Washington Post.
KRUGMAN: Sex, money and gravitas. "[T]here are not one but two sexist campaigns under way against Ms. Yellen. One is a whisper campaign whose sexism is implicit, while the other involves raw misogyny. And both campaigns manage to combine sexism with very bad economic analysis...The wrongheadedness of the gravitas crowd, like its sexism, is subtler. But to the extent that having gravitas means something other than being male, it means being what I like to call a Very Serious Person — the kind of person who talks a lot about the need to make tough decisions, which somehow always involves demanding sacrifices on the part of ordinary families while treating the wealthy with kid gloves." Paul Krugman in The New York Times.
DELONG: Pick Summers. "If times were normal, my first choice among the Fab Five would be obvious: Ms Yellen...But these are not normal times...And this is why my preference is for Mr Summers. He is the most creative thinker around. If I prepare for four hours for a one-hour discussion with Mr Summers, it takes him 15 minutes to get up to speed, for the next 30 minutes I am holding my own, and for the last 15 he is coming up with insights that I would have missed had I spent 12 hours thinking the issue through. Unless things start getting better faster, in a year or two it will be clear that the Fed’s current policy consensus is past its sell-by date." J. Bradford DeLong in The Financial Times.
@DeanBaker13: If Larry Summers is so brilliant, how did he fail to see an $8 trillion housing bubble? Just curious.
KLEIN: The FinReg question at the Fed. "The strangest part of the increasingly bitter shadow campaign for chairman of the Federal Reserve is that the contest is not really about monetary policy. It’s about financial regulation...This is why the prospect of a Summers chairmanship gives financial reformers heartburn. They think he can’t be trusted to regulate Wall Street. But like many -- though not all -- of his former White House colleagues, Barr thinks reform-minded critics don’t give Summers nearly enough credit." Ezra Klein in Bloomberg.
SWAGEL: Better data, but not enough for the Fed. "I am still not so sure that the Fed is ready to dial back its monetary stimulus. The figures for second-quarter G.D.P. were better than expected, but a growth rate below 2 percent is still too modest to lift job creation beyond the 200,000 recent pace or to hasten the painfully slow downward progression of the still-elevated unemployment rate. There is a sense in which seeing the G.D.P. data as good news only highlights the sadly diminished vigor of the economy since the crisis." Phillip Swagel in The New York Times.
Music recommendations interlude: Andrew Bird, "Imitosis."
RUCKELSHAUS, THOMAS, REILLY, AND WHITMAN: A Republican case for climate action. "Each of us took turns over the past 43 years running the Environmental Protection Agency. We served Republican presidents, but we have a message that transcends political affiliation: the United States must move now on substantive steps to curb climate change, at home and internationally...A market-based approach, like a carbon tax, would be the best path to reducing greenhouse-gas emissions, but that is unachievable in the current political gridlock in Washington. Dealing with this political reality, President Obama’s June climate action plan lays out achievable actions that would deliver real progress." William D. Ruckelshaus, Lee M. Thomas, William K. Reilly, and Christine Todd Whitman in The New York Times.
COCHRANE: E-Verify would be ultimate achievement in government intrusion. "E-Verify is the real monster. If this part of the bill passes, all employers will be forced to use the government-run, Web-based system that checks potential employees' immigration status. That means, every American will have to obtain the federal government's prior approval in order to earn a living. E-Verify might seem harmless now, but missions always creep and bureaucracies expand." John H. Cochrane in The Wall Street Journal.
SOLTAS: Why the CBO's deficit forecasts are too optimistic. "There's an old joke about a physicist, a chemist and an economist stranded on a desert island. A can of soup washes up on the beach. The physicist says, "Use a rock to smash it open." The chemist says, "Put it on the fire and let the heat burst it open." The economist says, "Assume a can opener." In its forecasts of budget deficits, the Congressional Budget Office is assuming a can opener: Starting in 2015, it says, three straight years of 4 percent growth in real gross domestic product will get the U.S. out of its fiscal troubles. Is this any more plausible than the castaway's suggestion?...[T]he problem is its economic model." Evan Soltas in Bloomberg.
REINHARDT: The sleeper in healthcare payment reform. "In late June news organizations reported on a practical application in the United States of “reference pricing” for hospital care...In the arsenal now being assembled on the payment side of health care to address rising costs, reference pricing may well turn out to be the sleeper, because it is a potentially powerful method of “putting the patient’s skin in the game,” the delicate phrase we use for “cost-sharing by patients.” As it is able to shift significant market power from the supply side to the payment side of the health sector, reference pricing is much feared by the providers – physicians, hospitals, pharmaceutical companies and others." Uwe D. Reinhardt in The New York Times.
JOHNSON: Too big to fail isn't dead yet. "Lending by the Fed to one specific company is more difficult to justify under current legislation. But the biggest and most leveraged financial companies in the United States today are all now bank-holding companies, with access to the discount window at the Fed, via their commercial banking subsidiaries." Simon Johnson in The New York Times.
BROOKS: The neocon revival. "[I]n the 1980s, when conservatism was at its most politically and intellectually vibrant, the dominant voices in the movement celebrated Lincoln, the Progressive Era and even the New Deal. The kind of conservatism that Irving Kristol embodied was cheerful and at peace with modern America." David Brooks in The New York Times.
Handpicked by Wonkblog interlude: This is an amazing traffic light.
2) Jobs report today
The forecast: "Payrolls rose by 185,000 workers after a 195,000 gain in June, according to the median forecast of 92 economists in a Bloomberg survey. The jobless rate fell to 7.5 percent, matching a four-year low, from 7.6 percent. Other data may show personal spending climbed in June by the most in four months." Shobhana Chandra in Bloomberg.
Auto sales back to prerecession levels. "Americans love their cars and trucks. And in July, they bought a whole lot of them. Chrysler and Ford each reported their July sales were up 6 percent from a year earlier, while General Motors notched a 12 percent rise, according to Wards Auto. Some foreign automakers saw even stronger gains, including 13 percent for Toyota and 16 percent for Honda. In fact, the auto market has now completed its long slog back to pre-recession levels. Americans bought cars and trucks at a 15.6 million annual rate in July, a bit below June and about the level of December 2007, when the recession began, and up from a low of 9 million in early 2009." Neil Irwin in The Washington Post.
The industrial recovery may be rebooting. "The Institute for Supply Management said on Thursday that its index of factory activity jumped to 55.4 percent in July from 50.9 percent in June. A reading above 50 percent indicates growth. The I.S.M. is a trade group of purchasing managers. A gauge of production soared 11.6 points to 65 percent, the highest reading since May 2004. And a measure of hiring at factories rose to its best level in a year — the latest of several encouraging signs ahead of the July employment report, which will be released on Friday." The Associated Press.
Explainer: This graph calls the entire economic recovery into question. Ezra Klein in The Washington Post.
New business formation bounces back; posts first increase since the recession. "After several consecutive years of decline, the country’s rate of new business births has started rising again, as has the number of jobs those start-ups are creating, according to an analysis of new Census data released on Wednesday...[J]ob creation by those new firms jumped 4.3 percent after dropping 31.7 percent in the previous four years, according to the report. Among the smallest of new businesses, ones with between one and four workers, the employment jump was even higher, at 5.9 percent over 2010." J.D. Harrison in The Washington Post.
The ratings agencies may be back at it again. "S.& P. has been giving higher grades than its big rivals to certain mortgage-backed securities just as Wall Street is eagerly trying to revive the market for these investments, according to an analysis conducted for The New York Times by Commercial Mortgage Alert, which collects data on the industry...Banks have shown a new willingness to hire S.& P. to rate their bonds, tripling its market share in the first half of 2013. Its biggest rivals have been much less likely to give higher ratings." Nathaniel Popper in The New York Times.
A court ruled swipe fees are still too high. But they’re probably going away anyway. "The credit card companies lost a round in the payment wars on Wednesday: A judge ruled that the Federal Reserve’s 21-cent cap on swipe fees for debit card transactions was too high, and should be reconsidered. The retail industry cheered, since it either has to eat the cost of those fees or pass them on to consumers. But here’s the question: If swipe fees are such a burden on merchants, why are they still paying them?" Lydia DePillis in The Washington Post.
U.S. oil reserves rise to highest level since 1985. "The picture of U.S. future energy supplies looked brighter Thursday after the federal Energy Information Administration said U.S. oil reserves grew by a record amount, driven by new shale discoveries...The EIA report said that “proved” oil reserves — oil that can be extracted and marketed under current conditions — grew by 15 percent, or almost 3.8 billion barrels, the second straight record year of increases. That brought U.S. proved oil reserves to the highest level since 1985. The agency said that U.S. proved reserves of natural gas jumped 10 percent, the second-largest annual increase since 1977." Steven Mufson in The Washington Post.
Low wages work against labor-market optimism. "Unfortunately, the aggregate wages that go with those jobs leave something to be desired. Since the recession ended, real wage disbursements have increased by just 1% annualized and disposable personal income by a bit less. Even amid the recent pickup in hiring, the actual money in Americans' pockets isn't increasing all that quickly...Daniel Alpert, a managing partner at Westwood Capital, pointed out in a note last week that nearly 70% of jobs created during the second quarter were in the lowest-paying sectors or subsectors such as retail trade or leisure and hospitality." Spencer Jakab in The Wall Street Journal.
And you thought you had seen it all interlude: How to fail your driver's test in under ten seconds (flip the car as you're pulling out).
3) Should you burn your Obamacare draft card?
Inside the Obamacare resistance. "Dean Clancy wants you to burn your Obamacare draft card. That there’s no such thing as an Obamacare draft card is, at best, only a small problem. Clancy is a vice president at FreedomWorks, where he has spent years fighting President Obama’s health-care law. But now, with a Supreme Court case and presidential election both lost, he and his allies are banking on a last-ditch campaign to undermine Obamacare: convince Americans to ignore it altogether." Sarah Kliff in The Washington Post.
Republicans refuel efforts to cripple Obamacare. "Why do Republicans persist in their so-far futile efforts? Democrats have many theories. Republicans, they suggest, care little about the uninsured. Many, they say, dislike Mr. Obama and want him to fail...Republicans say they persist because the law is an example of government overreach and is proving unworkable. For many elected in the 2010 Republican wave, their opposition to the law is the reason they are in Congress. And, they say, voting to repeal the law is good politics, as it remains extremely unpopular among Republican voters." Robert Pear in The New York Times.
Theory on pain is driving rules for abortions. "It challenges four decades of constitutional doctrine and is based on disputed scientific theories. Yet a push to ban abortion at 20 weeks after conception, on the theory that the fetus can feel pain at that point, has emerged as a potent new tactic of the anti-abortion movement. Advocates saw the potential of such a measure because it taps into public concern about late-stage abortions, appears to alter the rules only incrementally, and claims to be rooted in science." Erik Eckholm in The New York Times.
In 2014, Congress gets Obamacare. Here’s how they’ll pay for it. "Starting in 2014, members of Congress and their staffs will have to get their health insurance through Obamacare’s insurance marketplaces. But according to a regulation that the Obama administration’s Office of Personnel Management plans to announce on Friday and release next week, the federal government can continue to contribute toward the cost of their health plans. The regulation comes after months of worry on Capitol Hill. The Affordable Care Act includes a provision, first proposed by Sen. Chuck Grassley (R-Iowa), forcing members of Congress and their staffs to buy insurance through Obamacare. But it didn’t provide a clear mechanism for them to do so." Ezra Klein in The Washington Post.
OFA launches ‘Truth Team’ to defend Obamacare, other White House policies. "The non-profit associated with President Obama has established a separate Facebook and Twitter account, that will provide its self-described “truth tellers” with statistics and background they can use to tout Obamacare’s benefits. While the campaign is launching during the August recess, the aides said, it would continue beyond that." Juliet Eilperin in The Washington Post.
Oh my god this is so great interlude: A glossary of gestures for critical discussion.
Bill to fund transportation, housing fails in the Senate. "Congress's reeling budget process stumbled again Thursday as the Democratic-controlled Senate failed to advance a bill to increase spending for transportation and housing programs. The vote came one day after a companion bill to cut spending for those programs collapsed in the Republican-controlled House because of a lack of support. The twin failures show the struggle leaders of each chamber face in moving legislation, and the distance between the parties in reaching agreement on spending bills needed to keep the government operating. The vote on the Senate transportation and housing bill was 54-43, short of the 60 votes needed to cut off GOP delaying tactics and bring the bill to a final vote." Janet Hook and Corey Boles in The Wall Street Journal.
Republicans need a budget deal. They need a budget deal badly. "The House’s bill to fund transportation, housing, and urban development (THUD) was pulled from the floor on Wednesday. Thursday, the Senate bill failed to clear a filibuster as Mitch McConnell mounted an aggressive, last-ditch effort to give House Republicans cover. Absent that sudden and overwhelming political imperative, the legislation likely would’ve passed. But amidst all these failures, something actually is changing, and very much for the better: Republicans are coming to realize that sequestration is both a political and policy disaster for them, and they need a deal that replaces it." Ezra Klein in The Washington Post.
...But a budget truce seems out of reach as congressional recess looms. "The House bill would have embraced the sequester, deep automatic budget cuts designed to shrink the federal government. The Senate bill would have ended it, restoring billions of dollars for housing, roads and bridges. This week, congressional Republicans tacitly rejected both approaches to next year’s budget, leaving frustrated lawmakers wondering how they will manage to keep the government open past September." Lori Montgomery in The Washington Post.
...And intra-Republican rifts make it worse. ""The group of eight lawmakers headed to the White House to find a way forward after Senate Republicans filibustered a housing and transportation spending measure, saying it violated a spending deal struck two years ago. The blockade of the Senate bill came after House Republican leaders on Wednesday gave up on a more austere version of the bill when moderate Republicans balked and said the cuts in the House measure were too deep. For more than two and a half hours, the group met with the White House chief of staff, Denis R. McDonough, senior budget officials and, for nearly an hour, with President Obama. They emerged to say they would meet again at least once during the August recess." Jonathan Weisman and Jackie Calmes in The New York Times.
Why the House GOP’s cuts to housing and transportation were so unpopular. "Community Development Block Grant funding was cut to $1.6 billion, or 47 percent below the post-sequestration 2013 level of $3 billion. By most accounts, this was the cut that doomed the bill, repelling Democrats and some moderate Republicans." Brad Plumer in The Washington Post.
House Republicans take another bite at the farm bill. "House Republicans are proposing to double their food stamp savings to nearly $40 billion by rolling back waivers for able-bodied adults and targeting funds to states that are willing to impose greater work requirements on the parents of young children. The prime mover is Majority Leader Eric Cantor (R-Va.) who helped jettison the nutrition title from the House farm bill last month and is now trying to write his own version before the House goes to conference with the Senate." David Rogers in Politico.
NYC interlude: 100 ways to improve the subway, on a Tumblr blog.
5) UN is no longer Power-less
Samantha Power approved by Senate as ambassador to United Nations. "The Senate approved President Obama’s pick for ambassador to the United Nations, Samantha Power, by a vote of 87 to 10 Thursday afternoon. Power is a former foreign correspondent and foreign policy columnist who has written at length about human rights issues, genocide and war. She is the author of four books, one of which was awarded a Pulitzer Prize, and has worked as the founding executive director of the Carr Center for Human Rights Policy at Harvard University. She was an early supporter of Obama and has been a White House adviser" Jenna Johnson in The Washington Post.
Obama picks restructuring expert John Koskinen to head IRS. "Koskinen oversaw the government’s preparations for the year 2000 and helped lead Freddie Mac out of its financial crisis. If confirmed by the Senate, part of Koskinen’s task will be to restore confidence in the IRS, which is recovering from recent scandals involving inappropriate behavior toward tax-exemption applicants and lavish spending on a conference in Anaheim, Calif." Josh Hicks in The Washington Post.
Reading material interlude: The best sentences Wonkblog read today.
Inside the Obamacare resistance. Sarah Kliff.
Forget Larry Summers. What if Roger Ferguson took over the Fed? Dylan Matthews.
The WSJ's interview with Sen. Harry Reid. Corey Boles in The Wall Street Journal.
Democratic divide over NSA could pose problem for Obama. Aaron Blake and Scott Wilson in The Washington Post.
FBI: We couldn't have averted the Boston attack. Michael S. Schmidt in The New York Times.
Wonkbook is produced with help from Michelle Williams.