President Trump’s 2020 State of the Union address this past Tuesday led off by focusing on the economy. The most impactful economic claims centered around unemployment, particularly around minority unemployment. In addition, President Trump claimed that household income reached an all time high. We will examine these statements to determine if they are indeed true.
- Unemployment claims in the SOTU address are basically true
- Those claims are also very misleading on the true unemployment challenges that Americans face
- Where this matters is in anemic wage growth and rising income inequality in the US
The speech claimed that African American and Asian unemployment had reached all time lows. According to BLS data, this is basically correct as shown in the following charts. However, one could nitpick and say Asian unemployment is slightly higher than in 2006, though by only a small fraction.
Trump also claimed that women had the lowest unemployment rate in 70 years. Let’s take a look at that statistic. The first chart is unemployment for full time female workers, and the second is for part-time female workers. Note the BLS only had data available for the last 50 years.
Another interesting statistic mentioned during the speech was low unemployment for those with less than a high school diploma. This was part of the speech focusing on the lower end of the labor market which the speech claimed had strengthened during the current administration. Here are those with less than a high school diploma, aged 25 and older from the BLS. For the time frame available in the BLS tables, the claim appears also to be true.
What The Speech Missed on Unemployment
Government data suggests that unemployment, as measured by current methods, for minorities, women, and less than a high school diploma are at recorded lows. The administration has lauded this as a tremendous accomplishment in addressing at least part of the wealth disparity that we currently have in the US.
I will examine the validity of that stance using two angles: disparaged workers not measured in unemployment statistics, and the growing wealth gap between the rich and the poor. I will examine why both are true despite booms in the stock market and other positive economic indicators highlighted by the Republican establishment in the last several years.
Unemployment data, as discussed in my book, has been modified over time to drop discouraged, long term unemployed people from the data. See my book, chapter 2 (free read) for an extensive discussion on manipulated government statistics.
The other side of the coin on employment is to examine what percentage of the population actually has a job, which is what really matters both for economic health and wealth disparity among the population. Here is a chart from the BLS on percentage of population employed.
We can see that the ratio fell from highs in 2000 and has never recovered though the percentage is increasing modestly since 2010. There has been overall positive job creation in the last 10 years. But what quality of jobs are being created and are they the type that allows people to be self sufficient financially while depending less on government?
Part time employed people have risen dramatically according to BLS data compiled by Trading Economics. What we will see in the next two charts is that part time workers have increased about 250% while full time workers have increased by only double. The trend is for MORE part time workers, and less full time employment since 1968.
Wages and Income Inequality
What we gather from this is unemployment data is incomplete without an analysis of hours worked and incomes, which we look at next. The following table shows the anemic rises in weekly earnings of full time workers in the US, up only 12% in 35 years. I don’t care what inflation statistic you look at, the average full time worker cannot buy as much now as they did 35 years ago. That suggests rising wage inequality between the top and bottom rungs of earners should increase over this time period.
The St. Louis Fed provides a nice chart of real median household income. Note that median incomes have increased only 21% in 35 years. This statistic is different from the one above for full time workers, and includes ALL incomes within households.
Why would it rise more than the average of a single full time worker? Well, because we have more two income households where females are employed, AND we have more households with working children. While average full time wages have risen 12%, families haven been increasing the number of workers to make up the difference needed to deal with rising inflation rates and prices in the economy.
Digging deeper into the data suggests that Americans with higher wages have been accumulating wealth while the lower 20% are only able to tread water. We use data provided by Inequality.org as sourced from various government agencies.
The two reasons why incomes have increased for the top workers comes from both earned wages, AND subsequent investment returns from their higher level of disposable income. The following charts illustrate this phenomenon.
Lastly, we would like to note that this is not the fault of the average American worker who has increased productivity substantially while not receiving equivalent compensation for doing so. Part of the culprit is that inflation severely retarded bottom line corporate profit growth available to support rising wages, and that executive management is taking a higher percentage of wealth from corporate earnings.
The statistics cited in the SOTU speech by Trump on Tuesday night were misleading in regards to wage growth, income, and employment for Americans. Despite some improvement in certain macro statistics, a deeper dive into the data suggests that worker income is not growing substantially. Further, wealth generation, e.g. realizing the “American Dream”, is not happening for the vast majority of people.
These trends forecast a cultural war between the classes in the US is coming. How this war affects our society, and the political fallout that occurs, will shape our American experience in the next 10-20 years. One way you can address this dilemma is to pay off debt and invest in long term, stable assets such as precious metals. Now is always a good time to start. Click the subscribe button below if you agree.Subscribe To This Blog