In the wake of the financial crisis and great recession, the U.S. unemployment rate has tumbled precipitously from 10.0% to 6.7% in just four years.
“Only three other times in the past six decades has the unemployment rate fallen this far this fast: in the early 1950s, when growth averaged 6.7% per annum; in the late 1970s when GDP growth averaged 4.8%, and in the mid-1980s when growth averaged 5.2%,” said Gluskin Sheff’s David Rosenberg to the U.S. Senate Budget Committee.
“Today we accomplished this feat with only 2.4% growth which is disturbing because it means that it is not taking much in the way of incremental economic activity to drain valuable resources out of the labour market.”
Much of the decline in the unemployment rate has been due to the drop in the labour force participation rate (LFPR). And the drop in the LFPR has been due to a combination of ageing demographics and an expanding group of discouraged workers walking away from the job market.
“One theory that deserves examination is that we may have an abundance of separate benefits programs that provide for the disenfranchised in a very piecemeal and inefficient manner that are also perhaps abused or overly relied upon by some, which may lead to a distortion of work incentives,” noted Rosenberg.
He’s talking about disability, food stamps, welfare, etc.
While these programs are largely being used by those in need, we can’t ignore the fact that many are taking advantage fraudulently.
Whether these programs are being used legitimately or fraudulently, it’s nevertheless stunning to see how much these programs have ballooned.