The Economy Is Great (But It’s Not)

CNBC spoke with Chicago Fed President Charles Evans this morning about the Federal Reserve’s schedule for raising interest rates above zero percent. While Evans confirmed the official narrative that the United States economy is getting better and better, he still doesn’t think the Fed will raise rates until 2016. Even the CNBC anchors seem to be waking up to the obvious doublespeak of these government officials, asking the same question Peter Schiff has posed for months: “If the economy is so strong, why can’t it support rate hikes?”

Here’s what Evans had to say about the seemingly improving job markets:

Employment growth has been very good for quite a long time now, and that has been a very important criteria for us to judge success… We’ve seen [substantial improvement in the labor market outlook]… Good, good progress… That’s good. Economic activity seems to be strong, so I’m pretty confident about the outlook…”

Evans and CNBC paint a nice picture of the labor market, but the truth is that the headline employment numbers don’t accurately reflect the real state of the job market in America. The mainstream news doesn’t report on it, but economists are well aware that the labor force participation rate hasn’t been this low since the 1970s. In December, labor force participation stood at 62.7%, which we last saw in December of 1977.

Even politically “progressive” research shows that the labor market recovery from the Great Recession has been dismal. The Center for American Progress has a long report showing why the unemployment numbers don’t accurately reflect the state of American jobs, and why this can’t be blamed on aging baby boomers leaving the labor market.

Check out this chart, comparing employment growth following the beginning of recessions going back to 1973. The current “recovery” is the worst we’ve seen in decades, even by the standards of the official numbers lauded by the media. In fact, one study estimates that the US will not achieve its “former level of employment, when factoring in new labor-force entrants, until mid-2019.”

With these grim prospects for job hunters, we shouldn’t be surprised by the recent news that most Americans are living paycheck to paycheck. A story published by MarketWatch this week reports that nearly two-thirds of Americans have no emergency savings:

The findings are strikingly similar to a U.S. Federal Reserve survey of more than 4,000 adults released last year. ‘Savings are depleted for many households after the recession,’ it found. Among those who had savings prior to 2008, 57% said they’d used up some or all of their savings in the Great Recession and its aftermath. What’s more, only 39% of respondents reported having a ‘rainy day’ fund adequate to cover three months of expenses and only 48% of respondents said that they would completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money.”

If Charles Evans and other Fed officials wanted to be honest, they could point to all this data as the real reason why they’re not going to raise interest rates. But if they did that, they’d be admitting that the recovery is a failure, the US economy is heading back into a recession, and that all the Fed’s monetary manipulation was incapable of helping average Americans. Instead, Evans turns to the same “low inflation” bogeyman that Janet Yellen has been using as an excuse for months.

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