I love graphs as much as the next guy, but I’ve squished what you need to know about the labor market into three graphs, courtesy of the St. Louis Fed’s FRED database.

I’ve said before that it annoys me when the single piece of data the news media uses to assess the economy is the unemployment rate, which is subject to misinterpretation, misunderstanding, and survey error. Much better to look at real (and per capita) GDP, net private investment, the inventory-to-sales ratio, or even basic indicators like the Conference Board’s Leading Economic Index. These all reflect actual business activity of production and sales.

It needs to be constantly stressed that jobs are the result of economic activity, not the cause. If we wanted to put people to work it would be extraordinarily easy: instead of yard guys using riding mowers, string trimmers, and blowers, use scissors and brooms. “But,” you say, “they wouldn’t get as much done!” Ah, true, but to maintain the same amount of business the company would have to hire a lot more workers, right?

So, our priority should not be on whatever policy or program will increase jobs, but on what will increase economic activity and entrepreneurship. Do that, and the jobs will come.

But, it’s useful to watch the labor market as a lagging indicator of the economy, so here are my promised three graphs:

1: Population & Labor Force. Over the past decade, the US population (blue line, left axis) has steadily increased as expected. In an economy operating normally, the number of people willing and able to work (the labor force, red line/right axis) would increase at a similar rate. But, as you can see, since the recession (gray area) began around 2008 the number in the labor force has stalled. In other words, an increasing number of people in the population are deciding (whether they want to or not) to not look for work. (It is possible that an increasing number of people in the population are not able to work too.) This is verified by

2: Labor Force Participation Rate & Not in the Labor Force. The participation rate (green line, right axis) is the percent of the civilian noninstitutional population that is in the labor force. It has tumbled about three percentage points and doesn’t appear to be turning up. This means that more people are out of the labor force (red=men, blue=women, left axis; FRED doesn’t have total not in the labor force), which can be seen by the increased rates of the red and blue lines. Why are people leaving the labor force? They could be retiring, they could be choosing not to work because a spouse has a steady job and they are satisfied with a single income, or (as is more likely) they could have given up looking for a job. In which case, they drop out of the labor force.

Be aware that the unemployment rate only reflects people in the labor force; it is the percent of people in the labor force who are not working for pay at least one hour a week. If a bunch of people decide that their job prospects are so crummy that they stop looking, they stop being unemployed and they stop being in the labor force. So what about the number of people remaining in the labor force? Graph #3 tells the story:

3: Total Nonfarm Employees & Total Unemployed. In my above example where unemployed people leave the labor force, the unemployment rate would actually decrease (usually indicating good times) since the drop in the numerator (# unemployed) would be relatively larger than the drop in the denominator (# in labor force). So, this percentage can move in unusual ways and should be interpreted with caution. For a clearer picture, we can look at the actual numbers of people employed and unemployed.

Doing that, we see that the number of employees (blue line, left axis) is about 4.5 million below the 2008 peak. While it took two years for employment to fall 9 million, the following two years have only made up half of the drop. The total number of unemployed people (red line, right axis) has risen from its past-decade low of about 6.7 million in Oct. 2006 (and stayed around 7 million until Dec. 2007) to about 15.4 million three years later, and stands at about 12 million in Sep. 2012. While it took three years for the number of unemployed to increase about 8.7 million, in the following three years it only dropped about 3.4 million.

Say what you will about the present administration inheriting a recession (one fueled in part by government policies strong-arming banks to increase homeownership rates, hence loosening lending requirements) of which it had no part; the evidence strongly suggests that it has done little to boost the labor market even after the recession bottomed out. You might cut a President some slack in letting unwise investments get liquidated and the recession to run its course, but the test of an administration’s economic policies should then be judged by the pace of the recovery.

Let me be clear: there is precious little that President Obama or a President Romney can do to “fix” the economy other than to get out of the way. Programs, special favors, cheap shots at China, none of those things accomplish anything of substance other than to shuffle jobs around. Jobs are created after business activity is encouraged, which itself is done by reforming institutions to better favor economic growth. The recipe for success isn’t difficult, either:

In the last 10 years, both African and formerly Communist nations—such as Rwanda, Malawi, and Ghana, and Romania, Bulgaria, and Albania—show the largest increases in economic freedom. Countries showing the biggest declines since 2000 include Venezuela, Argentina, Iceland, and the United States.

Economic Freedom falling in the US

The Catholic Church confirms Pope Benedict XVI will visit Cuba in the spring. http://cvote.to/9g

The mitts come off: Romney slams Gingrich for attacking Paul Ryan’s Medicare reforms. http://cvote.to/9h

Mitt Romney now says he wouldn’t recommend other states adopt Romneycare. That’s a shift from what he said in 2008. (Go figure, he changed his position.) http://cvote.to/9i

Nancy Pelosi refers to our Catholic bishops as ‘lobbyists.’ http://cvote.to/9j  

Catholic universities see the value of single-sex housing. http://cvote.to/9k

As Congress debates extending unemployment benefits, they should make those who receive benefits also do volunteer work in the community, says commentator Nolan Finley. http://cvote.to/9l 

Happy Feast of the Immaculate Conception, Patroness of the United States! Today is a holy day of obligation, but don’t simply go because you must. Go willingly and with great joy! And ask Holy Mary to bless “the land of our birth.”

Mitt Romney and Rick Perry scrapped just hours before the GOP debate in Orlando tonight on Fox News at 9 pm ET. Picking up on the concern that Perry might have a tough time winning suburban voters, Tim Pawlenty wrote an op-ed for Politico with the not-so-subtle title: “Romney is electable.” http://cvote.to/4C It’s still early, but Mitt Romney is running away with it in New Hampshire with a commanding 41%, with Ron Paul in second place at 14%, Jon Huntsman in third at 10%, and Perry in fourth with 8%. http://cvote.to/4D The margin of error on the poll is +/- 4.9%. But in Florida, Rick Perry is on top with 31% to Romney’s 22%. Then it’s Gingrich and Cain each at 8%, with Bachmann at fifth with 7%. http://cvote.to/4E Kansas Gov. Sam Brownback will be Rick Perry’s guest at the debate tonight. Brownback, a convert to Catholicism, endorsed Perry this morning. http://cvote.to/4F

The heavily-gerrymandered new Congressional map drawn up by the Illinois Legislature and signed into law by Democrat Gov. Pat Quinn is now under attack by three black Democratic Congressmen. Reps. Jesse Jackson Jr., Bobby Rush, and Danny Davis have concerns that the new map does not adequately adhere to the Voting Rights Act, which prevents large ethnic populations from being splintered in many different districts through the creation of majority-minority districts. Under the new map, there are three districts which have a black majority, but only one district that is majority Hispanic. This despite the fact that there are more Latinos in Illinois than blacks. One remedy would be the addition of another Latino-majority district. Republicans would support that plan because they believe it would help them keep suburban districts. If the current plan remains unchanged, the GOP could lose as many as five seats in Illinois. http://cvote.to/4G

Pope Benedict XVI returns to his native Germany. If you do nothing else, quickly read his speech to the German Parliament. Quick excerpt: “Unlike other great religions, Christianity has never proposed a revealed body of law to the State and to society, that is to say a juridical order derived from revelation. Instead, it has pointed to nature and reason as the true sources of law – and to the harmony of objective and subjective reason, which naturally presupposes that both spheres are rooted in the creative reason of God.” I thank God every day he is our Shepherd. http://cvote.to/4H

Other articles of interest:

A state-by-state analysis of how unemployment might affect the presidential race in 2012. http://cvote.to/4I

A limited, means-tested voucher bill passed the Ohio Senate last night 12-10, setting the stage for a full House vote this fall. If the measure passes the House, Republican Gov. John Kasich is expected to sign the bill into law. http://cvote.to/4J

Read a great profile on Father Robert Barron’s exciting new DVD series “Catholicism” by Tim Drake over at the National Catholic Register. http://cvote.to/4K

Former employees of the now bankrupt Solyndra say the company went hog wild on spending as soon as they received $535 million grant from the Obama administration. http://cvote.to/4L

A human rights activist is glad that Congress is holding hearings on how China’s one-child policy is brutally enforced. http://cvote.to/4M

Great news from the Granite State: Pro-abortion Democrat John Lynch, who professes to be Catholic, won’t seek re-election to a fifth two-year term as governor of New Hampshire. His decision opens the race for governor wide open. Pro-life Catholic Ovide Lamontagne, who lost to (now Senator) Kelly Ayotte, is running for the GOP nomination. http://cvote.to/3Q

The Pennsylvania GOP (which controls the Legislature and Governor’s mansion) is considering changing the distribution of electoral college votes in the Keystone state from the current winner-take-all to allocating them by Congressional district. http://cvote.to/3R While considered a swing state, Democrats have won the state every presidential election since 1988. No Democrat has won a presidential election without Pennsylvania in over 60 years. If the proposal becomes law, Obama will have a tougher time reaching 270 votes. But Pennsylvania Republicans might face a backlash from independent voters that put them in control of the Legislature in 2010.

Republicans in the Wisconsin Legislature are considering a proposal that would ban the research use of cells derived from fetal tissue in Wisconsin. Joel Schmidt, a biochemist and Catholic blogger has more details. http://cvote.to/3S

In Michigan, Republican legislators have submitted six different bills to increase school choice, including lifting the cap on the number of charter schools. http://cvote.to/3T

Other articles of interest:

Bad news for Obama administration: The Treasury Department has joined in the investigation of Solyndra, the now bankrupt company that was a touted as a model of President Obama’s green energy program. http://cvote.to/3U

Your tax dollars at “work”: Almost $19 billion in state unemployment benefits were paid in error over the last three years, according to data from the Labor Department. http://cvote.to/3V

Requests for unemployment benefits last week jumped to the highest level in three months, a sign that layoffs could be increasing. http://cvote.to/3W

Behold the reason there are no jobs: imported wood on Gibson guitars.

It’s no wonder unions are falling in influence and respect in this country when they’re led by people like James Hoffa. On CNN’s States of the Union show yesterday he said a number of things that belie a basic ignorance about how jobs actually are created.

A few items:

1) He suggested that American companies have an “obligation” to hire American workers, irrespective of the economic realities that may suggest otherwise. Corporations exist to generate a return on investments, not simply to hand out paychecks. The latter happens with the former, but doing too much of the latter without due diligence to the former brings about melt-downs like the evaporation of the U.S. steel industry.

2) In one breath he acknowledges that, “So far, what we’ve done [to reduce unemployment] hasn’t worked.” And then in the next breath he expects a bold plan from the President to change this. What we’ve done is a whole lot of deficit spending in true Keynesian fashion, and the President knows nothing but Keynesianism, so fat chance getting anything “bold.” But Keynesianism does not work because it cannot work: it ignores the realities of human motivations and activity, and assumes a greater degree of control on the part of the government leaders than they actually possess. So while Hoffa gets the first part right, his solution is the hair of the dog.

3) He laments that the folks in Washington are spending too much time on deficit reduction and not enough time on getting the economy going again, as though the two things are mutually exclusive. In fact the opposite is true: part of the chilling effect on U.S. economic development is government debt. Investors, domestic and foreign, would relish a sign that the federal government is serious about fiscal responsibility.

4) He bizarrely called for “increased pressure” on business, as though the reason businesses aren’t hiring is because the government is not breathing down their necks *enough.* What sort of pressure would compel businesses to hire? Greater taxation? Increased regulation? Persecution for not adhering to socialist/unionist diktats? More capricious enforcement of laws domestic or foreign? Any or all of those will most assuredly have the opposite effect, costing businesses more money for compliance or litigation, money which then cannot go to hiring new employees, or possibly to sustaining present levels of employment and profitability.

Businesses are not hiring because the conditions are not favorable to do so. Some don’t have the cash on hand or demand for their product to hire new employees, while others who have the cash are spooked and find it more prudent to sit on their cash until conditions improve.

Says the ever-perspicacious Victor Davis Hanson,

In the last 30 months, the Obama administration has created a psychological landscape that finally just seemed, whether fairly or not, too hostile to most employers to risk new hiring and buying. Each act, in and of itself, was irrelevant. Together they are proving catastrophic and doing the near impossible of turning a brief recovery into another recession.

Here is the lament I heard: the near $5 trillion in borrowing in just three years, the radical growth in the size of the federal government and its regulatory zeal, ObamaCare, the Boeing plant closure threat, the green jobs sweet-heart deals and Van Jones-like “Millions of Green Jobs” nonsense, the vast expansion in food stamps and unemployment pay-outs, the reversal of the Chrysler creditors, politically driven interference in the car industry, the failed efforts to get card check and cap and trade, the moratoria on new drilling in the Gulf, the general antipathy to new fossil fuel exploitation coupled with new finds of vast new reserves, the new financial regulations, an aggressive EPA oblivious to the effects of its advocacy on jobs, the threatened close-down of energy plants, the support for idling thousands of acres of irrigated farmland due to environmental regulations, the constant talk of higher taxes, the needlessly provocative rhetoric of “fat cat”, “millionaires and billionaires,” “corporate jet owners,” etc. juxtaposed, in hypocritical fashion, to Martha’s Vineyard, Costa del Sol, and Vail First Family getaways — all of these isolated strains finally are becoming a harrowing opera to business people.

Despite enormous opportunity for many cash-rich firms to take advantage of the down cycles (low interest, plentiful potential employees, discounted prices, etc.), they are taking a pass, almost as if to collectively sigh, “This bunch doesn’t like me much and I’m going to hunker down, hoard my cash, and sit out the next year and a half until they are gone.”

(A recent horror story Hanson does not invoke is the raid on the venerable Gibson Guitars for possibly,but not really, violating some laws on the books in India concerning use of certain kinds of imported wood. An official of the Department of Justice, apparently trying to be helpful, reportedly told the CEO of Gibson that he would avoid such legal issues if he moved his operation to Madagascar or India.)

Business growth and new hires implies risk and new investment. When the regulatory, enforcement, and taxation regimes are both negative and in flux, why on earth would businesses take risks, invest, and, yes, hire new people?

But Hoffa and so many others just see bogey men in the corporate suites and expect the solutions to come from Washington.

Hoffa is looking for a “bold plan” from the President on the jobs front. At this point, a bold plan would look more like what Jon Hunstman just proposed: a massive overhaul of the tax regime, elimination of many loopholes, elimination of taxes that needlessly increase the cost of doing business, and significant regulatory reform/reduction.

In short, the “bold” move would be for government to get largely out of the way.