Classical economics and the unemployment rate in the United States

As anyone who understands classical economic theory would understand – which might include around half a dozen people across the world today – “demand for commodities is not demand for labour”. That is John Stuart Mill’s Fourth Fundamental Proposition on Capital. The number of jobs in an economy is unrelated to the level of aggregate demand. This, I need hardly tell you, is in direct contradiction of the whole of modern macroeconomic theory. Which brings us to the latest jobs report in the United States. U.S. Economy Adds Record 2.5 Million Jobs in May, Unemployment Rate Falls to 13.3%.

The U.S. Bureau of Labor Statistics (BLS) reported the U.S. economy added 2.5 million jobs, the largest gain ever recorded and the unemployment rate fell to 13.3 in May.

Well economic good news of such a colossal dimension cannot be allowed to stand on its own so this is what the media reported on instead: Fake News: Media Rush to Decry Trump Quote on George Floyd During Jobs Report Presser – Except He Didn’t Say It

President Trump held a press conference/signing ceremony today at the Rose Garden where he talked about the good news revealed by the BLS’s report before signing a bill that will “give recipients of government small business loans during the coronavirus more flexibility in how they spend the money.”

During the speech he gave before signing the bill, Trump also talked about a number of issues including racial equality in the context of the death of George Floyd last Monday, which happened after Minneapolis police officer Derek Chauvin had his knee on Floyd’s neck for nearly 9 minutes.

CBS News is one of the few news outlets that actually reported Trump’s comments accurately while providing some context:

But black unemployment rose slightly from 16.7% in April to 16.8% in May, in a month the president declared a “tribute to equality” as the nation protests racial discrimination and police brutality. Mr. Trump also seemed to declare success after a week of protests that swept the nation.

“Equal justice under the law must mean that every American receives equal treatment in every encounter with law enforcement, regardless of race, color, gender or creed, they have to receive fair treatment from law enforcement,” the president said. “They have to receive it. We all saw what happened last week. We can’t let that happen. Hopefully, George is looking down right now and saying this is a great thing that’s happening for our country. This is a great day for him, it’s a great day for everybody. This is a great day for everybody. This is a great, great day in terms of equality.”

See for yourself.

Wouldn’t have mentioned it except this media lie was the first thing said to me by my wife this morning.

For added pleasure, you might also wish to read this as well: Paul Krugman Caught in Hilarious Self-Own After Furiously Spinning Conspiracy Theories About Good Jobs Report.

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14 Responses to Classical economics and the unemployment rate in the United States

  1. Iampeter

    You can’t be a classic economist and a Trump supporter, Steve.

  2. JC

    Who was the dude in the middle of the first video going on about medical leave? Did he just argue for the statistics?

  3. New Chum

    S&P 500 US 5/6/19 2826.15
    US 5/6/20 3193.93
    up 13.01%
    at PJ Media Rasmussen: Black Voter Approval for Trump Has Surged to Over 40 Percent
    Trump looks a winner to me.

  4. John Bayley

    Trump looks a winner to me.

    Right. Let’s see:

    You call the stockmarket ‘a big ugly bubble’ before getting elected.
    Once you’re in,with the market having risen by some 35%, on the background of the weakest economic recovery in history and at the most nose-bleeding valuations ever recorded, it becomes ‘the best market ever!’ and of course it’s all due to your great work.

    You have the Fed print $4 trillion in 4 weeks and you run a trillion dollar deficit in a month.
    Not satisfied with that, you demand they (Fed) should introduce negative interest rates.
    Clearly that’s just all ‘MAGA’!

    You have employment participation rates at levels comparable to early 1970s, when most women weren’t even in the work force, but ‘it’s beautiful numbers and ‘best economy ever’ once again…
    The BLS, whose methodology you used to refer to as ‘Bureau of Lies & Scams’ is now beyond reproach.

    I don’t hate Trump.
    I’m just one of those, clearly few remaining, people who support free markets and small government – both of which, going by all the evidence available, he is on balance clearly against.

    The amount of adulation for a guy who is basically a prototype of a ‘big government conservative’ (and I’d use the word ‘conservative’ holding my nose in his case), at what is supposedly a libertarian site, really makes me wonder about just who contributes to the Cat these days.

  5. NoFixedAddress

    Steve

    Not sure if you caught this and it remains to be seen what actual changes will ensue but certainly appears to have the support of a lot of overseas regimes’ dissidents.

    Who knows, maybe real free trade could occur one day that will show up the to date ersatz global free trade world for what it really is!

    June 5, 2020
    Stunning explosion of cheers from Iran and China dissidents over booting of Obama holdovers at Voice of America
    By Monica Showalter

    President Trump was happy as heck at the news that Michael Pack, his choice for new director at the Voice of America, finally got confirmed by the Senate. It came as a sort of miracle, given the dirty, protracted battle from the Deep State’s Obama holdovers to keep him out. It was so underhanded that it involved a last-ditch Kavanaugh-style bid to smear Pack as corrupt if for nothing else than to delay his Senate confirmation to eternity. It was the Deep State at its worst, and it failed. Now, what’s probably the last solid Obama bastion of Deep State government has toppled.

    But if you want to know who’s howlingly happy about this, maybe even happier than Trump, take a look at what the battered democratic freedom fighters in hellholes like China and Iran are saying about news of this U.S. government agency’s change of leadership.

    Who knew that was going on? Who knew that the reaction would be this intense? I barely scratched the surface in these tweets compared to all that is out there. It’s an absolute fire hose of cheer from the people who have to listen to Voice of America’s output and conveyed just how bad the whole thing has been up ’til now. It’s likely the sentiment on the ground. Dissidents, after all, need radio stations and look up to America. Imagine doing that and all you get is mullah propaganda. The bottom line, based on these tweets, is that something went very wrong at VOA. To have this many dissidents tweet this way is a huge unreported story.

    Read the whole article
    https://www.americanthinker.com/blog/2020/06/loud_cheers_from_iran_and_china_dissidents_on_booting_of_obama_holdovers_at_voice_of_america.html

  6. Zatara

    You call the stockmarket ‘a big ugly bubble’ before getting elected.

    Bullshit. He called the economy a bubble, he called the stock market the only good thing in it.

    You have the Fed print $4 trillion in 4 weeks and you run a trillion dollar deficit in a month.

    Which saved the US economy, and arguably the world’s.

    Not satisfied with that, you demand they (Fed) should introduce negative interest rates.

    Your turn, show us where he demanded negative interest rates. Or even requested them.

    You have employment participation rates at levels comparable to early 1970s, when most women weren’t even in the work force, but ‘it’s beautiful numbers and ‘best economy ever’ once again…

    Trump arrested the massive plunge in the US labor force participation rate driven by 8 years of Obama policy. Prior to COVID-19 it was increasing nicely and unemployment figures were the lowest they had been in 19 years. Oh, and the Dow closed today at 27,110. It was 17,816 before he became President three years ago.

    The BLS, whose methodology you used to refer to as ‘Bureau of Lies & Scams’ is now beyond reproach.

    Since you just attempted to cite BLS figures to support your argument I’d say that bites both ways.

    I don’t hate Trump.

    I’m sure he sleeps better knowing that.

  7. Watch Your Back

    I was expecting you to explain the rise in employment Steve. I am assuming this is due to businesses deciding to reopen, take staff back on and seek to generate income.

    This means that the private sector is able to expand once governments get out of the way. It also means the depression may be short. I also imagine the bounce back includes labour intensive industries and therefore to an extent the demand for goods and services includes demand for labour, at least in part. It also looks the case that there was no shortfall in ‘aggregate demand’ prior to the lockdowns.

    If true, then the best way to help the recovery along is to remove supply side barriers and cut corporation and payroll taxes. There is no need for large scale borrowing for ‘infrastructure’ projects, vanity schemes, bridges to nowhere and pork. And no need to socially engineer a Green New Deal, the route being discussed by the EU, Boris and Biden.

    I’m hopeful Trump knows this and Mr Morrison too. Just throw out a few bicycle lanes as scraps for the lefties.

    And get planners out of the way too.

  8. Mark M

    @johnbayley:

    President Trump may not be the perfect person, but he is not crooked Hillary or sleepy Joe.

    4 more years.

  9. Nob

    It’s not necessary to love Trump in order to think he’s the best available choice for America, ergo the world.

    Or “The Planet” if you’re under 25.

    Nor is it necessary to support him blindly to think that the media coverage is at best inaccurate and often deliberately misleading.

  10. Kneel

    “…the media coverage is at best inaccurate and often deliberately misleading.”

    Widely known.
    https://www.ipsos.com/en-au/australians-trust-media-less-ipsos-trust-media-study

    The study finds that people across 27 countries are divided on whether they trust traditional media (newspapers, magazines, TV, and radio). Globally, 49% trust TV and radio to be a reliable source of news and information, while 46% do not have much trust, or no trust at all. The picture is similar for newspapers and magazines – 47% trust them and 48% do not.

    Trust in traditional media in Australia is much greater than the global average. More than half of Australians (57%) trust television and radio, with the majority (46%) saying they have a ‘fair amount of trust’ while 11% say they have ‘a great deal of trust’ in TV and radio. Four in ten (38%) don’t trust television and radio. For newspapers and magazines, the figures are similar with just over half (54%) trusting those mediums. The same number (46%) have a ‘fair amount of trust’ while 8% have ‘a great deal of trust’. Again, four in ten (41%) don’t trust newspapers and magazines.

  11. Catcalling Inebriate

    Lies, damn lies, etc…. The US jobless claims continue to rack up, a slightly lower rate. Currently at about 30 million, the registrations have persisted in adding about 2m a week. https://www.dol.gov/ui/data.pdf
    The BLS market data cited is a survey and it noted that its sample was much lower than usual.
    Seems a bit hasty to be declaring victory.

  12. Chris M

    Steve what effect has there been from the (borrowed / printed) money poured into Wuhan Virus job protection and unemployment schemes in the US like the ppp (paycheck protection program)?

  13. Zatara

    US unemployment rate just jumped 2.5 million.

    Which has nothing to do with PPP or any other handout program.

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