By Jim Hoft
Guest post by Ed Butowsky
The U.S. Bureau of Labor Statistics released its monthly Employment Situation Summary on Friday, Sept 3 at 8:30 a.m. Eastern Time. Here’s the first paragraph, with a bit of editing on my part:
“Total nonfarm payroll employment rose by 235,000 in August, and the unemployment rate declined by 0.2 percentage point to 5.2 percent, the U.S. Bureau of Labor Statistics reported today. So far this year, monthly job growth has averaged 586,000. In August, notable job gains occurred in professional and business services, transportation and warehousing, private education, manufacturing, and other services. Employment in retail trade declined over the month.”
So once again, the monthly “Job Report” came out and the media did what the media always does: Regurgitate the press release and recite the numbers – the same old blah blah blah – without providing so much as a shred of context. Some know-nothing “experts” predicted a number of 720,000, so the media dutifully reported that the number of new jobs missed due to Covid 19. So overall GOOD NEWS!!!
That’s how it goes these days when it comes to economic news. The talking heads don’t understand any of it, so they just say the economy added blah blah blah jobs, and we the people nod our heads in approval. Jobs up, HOORAY! That’s all we need to know.
Well, not really all. Let’s dig a little deeper. Let’s put the “good” news into a framework that helps us understand what it all means.
Now pay attention, because here’s the key point you need to know about the monthly jobs report, the one the media doesn’t tell you, because it doesn’t get it:
America’s annual deficit – $3.1 trillion this year, give or take a couple of billion – is bleeding uncontrollably. And it’s the annual deficit – not the “experts” and not the talking heads – that dictates how many jobs the country needs to add each month.Another Look at the Monthly Jobs Report
Read that over a few times and keep it in mind, because now we’re going to figure out how many new full-time jobs we really need to overcome the deficit. And you can put away your calculator. It’s pretty easy arithmetic.
First of all, you need to know that half of America’s tax revenue – the money the country needs to stay afloat – comes from federal income taxes. So to overcome the deficit, no matter its size, we need to collect half our new money from the federal income taxes that will be paid by people who weren’t contributing before: the people in new jobs.
And that means:
America’s deficit stands at $3.1 trillion this year. Since half of the money we need to eradicate that will have to come from federal income taxes derived from new jobs …
That means we need $1.55 trillion from federal income taxes.
And we can’t come even close to that, because:
The average full-time job pays $50,000.
At a 25 percent federal income tax rate, each new full-time job will put $12,500 – one-quarter of $50,000 – into America’s bank account.
Let’s recap quickly: We need $1.55 trillion (half the $3.1 trillion deficit) in new income tax payments, and we’ll be collecting $12,500 from each new job.
Now, let’s do the math …
$1.55 trillion ÷ $12,500 = 124 million
That means we need to add 124 million new jobs this year to overcome the deficit. But there’s no need to panic because that’s 124 million in a year. The monthly figure is much lower:
124 million ÷ 12 = 10,333,333
OK, now you can panic. The formula establishes that we need to average 10.33 million new jobs per month to offset the half of the $3.1 trillion deficit that must be raised through income taxes.
No problem, except we’ve been averaging only 566,000 new jobs per month this year – and the year is almost over. And get this: Half of those jobs are part-time. That means our 566,000 jobs really add up to 283,000. We need to add 10,333,333 full-time jobs each month, and we’re actually adding only 283,000. That’s just 3 percent of what we need to pay our country’s bills. And if we can’t make up the other 97 percent, we’ll have to add the shortfall to the national debt.
The next jobs report will be released on October 1 at 8:30 a.m. Eastern. When it comes out, you can count on hearing a lot of the same blah blah blah.
Just don’t believe it. Because this “good” news has to be seen through a lens that shows not only how many new jobs have been added, but how many more new jobs needed to be added to offset our spending. We need to deal with the deficit, because failing to do so just adds to our national debt.