The US Unemployment Rate: What happened in the Obama years? | Entropy | Poverty & Homelessness

The US Unemployment Rate What happened in the Obama Years?

Or Did NOT Need?
Four years after President Obama campaigned on the promise of change, more than half of Americans disapprove of the changes the President has made. See http://slatest.slate.com/posts/2012/07/10/hill_poll_majority_think_obama_changed_country _for_worse_.html Photo by Jeff Fusco/Getty Images.

Country for Worse
The negative perception is shared by 1 in 5 Democrats.
By Elizabeth Hewitt | Posted Tuesday, July 10, 2012, at 12:17 PM ET

Also, see link below for the remarks by then President-elect Obama, after the BIG spike in the number of unemployed (533,000 jobs in a month) immediately after his election in November 2008. http://change.gov/newsroom/entry/president_elect_barack_obamas_statement _on_rising_unemployment_rates/

P. S. This is motivated by PURE research interests.
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§ 1. Summary
The unemployment rate is the ratio y/x where x the labor force and y is the number of unemployed workers. Although large volumes of tables of both x and y, which include monthly, quarterly, and annual data, are available, the focus has always been on the ratio y/x rather than the underlying x-y graphs. The following are the main findings of this study which is aimed at a fuller understanding of the nature of this fundamental x-y relation. 1. The labor force x, which was growing slowly during the 2008 Presidential campaign, from Jan 2008 to Oct 2008, stopped growing suddenly and actually began shrinking. The number of unemployed y increased rapidly in Nov 2008 and Dec 2008, even before President Obama was sworn in office. 2. During Obama’s first full year in office, the labor force continued to shrink and the number of unemployed jumped dramatically, from 8.924 million in 2008 to 14.265 in 2009, an increase of 5.341 million. The US economy had literally made a U-turn, as can be seen on the graph of unemployed y versus labor force x, and was heading in the WRONG direction. 3. The number of unemployed reached a peak value of 15.421 million in October 2009 and has since been coming down slowly, with a simultaneous increase in the labor force. The number unemployed was 12.75 million in June 2012. While this trend (2Q 2009 to 2Q 2012) is a favorable one, the unemployed are still too high compared to the 8 million levels of 2005-2008. 4. A simple linear law y = hx + c seems to relate the general trends revealed in the x-y graphs of labor force versus the number of unemployed. Of great fundamental interest is the fact that the US economy seems to be operating on essentially parallel tracks, moving up and down parallel lines when the number of unemployed was going up and then coming down, with a decrease and then an increase in the labor force. 5. Certain fundamental aspects of the highest unemployment levels recorded in the US (in 1941, in 1982 and 1983, and now in 2009-2011) that have been observed historically will be discussed in a companion article, to be published shortly.

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§ 2. Introduction
Understanding a problem is the first step towards solving the problem. So, here’s a simple graph that I have prepared based on unemployment data that is published (on a monthly basis, first Friday of each month) by the Bureau of Labor Statistics (BLS). I have just tried to present to you, the reader, what the problem is, without offering any solutions. Let us first agree on what the problem is. This is probably the hottest topic right now and I really shouldn’t be touching this subject with a 20 foot pole (double the usual size recommended) or even a 100 foot pole (ok, let’s make it 10 times bigger!). But let me stick my neck out like that poor baby raccoon, who was recently found with his neck stuck in the most unusual of places in Downtown Detroit. (Luckily, he was spotted and rescued!)
This raccoon did not look too happy after getting its head stuck in a sewer drain in downtown Detroit. Read more: http://www.dailymail.co.uk/news/article2164969/Baby-raccoon-gets-head-stuckstorm-drain.html#ixzz201m6tiei

We are NOT going to argue here about the validity of the numbers compiled by the Department of Labor, Bureau of Labor Statistics (BLS). This is a BIG problem in any civil discourse. We start denying the numbers themselves. All I want to do is to prepare a simple graph to show what has happened since President Obama took office. Here it is in Figure 1. Then, let us try to dig a bit deeper to see how we got here. This is not about being a Democrat or a Republican. This is simply about being a concerned citizen. If you care, read on.

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16.0

Unemployed, y [millions]

14.0 12.0 10.0

2010 2009 2011 June 2012 2008

2005
8.0 6.0 4.0 2.0 0.0 149.0

150.0

151.0

152.0

153.0

154.0

155.0

156.0

Labor Force, x [millions]
Labor force decreased because of discouraged workers who moved into the “not in labor force” column from the “unemployed column”. Such discouraged workers also contribute to an increase in the unemployment rate, now being measured by the ratio y/x. The denominator goes down, instead of numerator going up.

Figure 1: The trajectory of the unemployed in the Obama years. The number of unemployed suddenly “jumped”, by 5.341 million, from 8.924 million in 2008 to 14.265 million in 2009 and has stayed near these record high levels since then. The “jump” occurred AFTER Obama was elected, during his first full year in office. Over the last 12 months, there has been an improvement for the better and the number of unemployed has dropped to 12.75 million in June 2012 but that is still well above the 8 million levels in 2005-2008. In the second Clinton term the number of unemployed kept decreasing and reached a low of 5.692 million in 2000 before President George Bush Jr. took office, see Figures 2 and 3. That should have served as the template for Obama’s first term and certainly must be the template for the next President of the United
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States. The absolute number of unemployeds is still too high. This is our real problem and why millions see only a bleak future ahead.

§ 3. Analysis of Unemployment Data
Table 1: Unemployment data compiled from Bureau of Labor Statistics.
Year Population millions 2004 2005 2006 2007 2008 2009 2010 2011 223.357 226.082 228.815 231.867 233.788 235.801 237.83 239.618 Not in labor force 75.956 76.761 77.387 78.742 79.502 81.659 83.941 86.002 Labor force, x 147.401 149.321 151.428 153.125 154.286 154.142 153.889 153.616 Employed Unemployed, y 8.149 7.591 7.001 7.078 8.924 14.265 14.825 13.747 Unemployment Rate, 100(y/x) 5.53 5.08 4.62 4.62 5.78 9.25 9.63 8.94

139.252 141.730 144.427 146.047 145.362 139.877 139.064 139.869

Second term of President Bush II and the Obama years. The table above is prepared using data published by the Bureau of Labor Statistics, see http://www.bls.gov/cps/cps_htgm.htm for more information. The second column gives the population in millions (it is called non-institutional, whatever that means). This is made up of those not in the labor force and those who are in the labor force. Not in labor force, could include children, seniors who have retired and those who have chosen not to work (like many happy home-makers). The labor force, we will call this x, is made up of those who are employed and those who are unemployed. Remember that according to these government stats, anyone who is not working and who is not looking for work (discouraged workers, as has happened in these tough times) is NO LONGER counted as being part of the labor force. The unemployed person, who has chosen not to work for a job, has joined the numbers in “not in labor force”. If you do not like this definition, well, too bad, but those are the “rules” here!

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Actually, that definition is a good one and it is the way it should be. Remember, the unemployment rate has labor force x in the denominator. If the labor force shrinks, the unemployment rate goes up! So, the discouraged worker has actually contributed to an increase in the unemployment rate. That person now appears in the “not in labor force” column, instead of the “unemployed” column. Now look at the table and see what happened between 2008, when the BIG economic meltdown occurred, and 2009, after Obama started his term as President. The unemployed jumped from 8.924 to 14.265 million and the unemployment rate went up from 5.78% to 9.25%. The labor force had been increasing (since 2005) but the economy was essentially stagnating with no real job creation. What happened after President Obama took office? The unemployed number went up in 2010 to 14.825 million and has come down to 13.747 million in 2011 and to 12.75 million in June 2012. Yes, the numbers are coming down but they are nowhere near where they were BEFORE Obama took office and where they really should be in a healthy economy. The data compiled in Table 2 also gives us a “standard of excellence” that seems to have escaped attention to date. We can judge the performance of the US economy during this 1996-2000 time period using two pretty figures. The figure captions are self-explanatory. Table 2: Unemployment data compiled from Bureau of Labor Statistics.
Year Population millions 1996 1997 1998 1999 2000 200.591 203.133 205.22 207.753 212.577 Not in labor force 66.647 66.836 67.547 68.385 69.994 Labor force, x 133.944 136.297 137.673 139.368 142.583 Employed Unemployed, y 7.236 6.739 6.210 5.880 5.692 Unemployment Rate, 100(y/x) 5.402 4.944 4.511 4.219 3.992

126.708 129.558 131.463 133.488 136.891

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Second term of President Clinton going to President Bush II election. The number of unemployed was 5.692 million in the year 2000, the lowest since 1996 and the unemployment rate was 4%, also the lowest since 1996.

140.0

E = 1.179x – 31.175 = kx + A Slope k = 1.179 > 1

Employed, E [millions]

135.0

130.0

125.0

The GOLD Standard for the US Economy for 2012-2016
125.0 130.0 135.0 140.0 145.0 150.0

120.0 120.0

Labor Force, x [millions]
Figure 2: Between 1996-2000, the US labor force increased, as we see here but the number of employed (let us call this E) also increased. In fact, the graph shows a nice linear relation E = kx + A = 1.179x – 31.175. Since, the graph is being described using mathematical equations there is no question of any distortions of scale. It is truly amazing that the slope k > 1 during the second Clinton term. The labor increased by an amount ∆x = 8.639 between 1996 and 2000 and the number of employed increased by an amount ∆E = 10.183. Hence, the slope k = ∆E/∆x = 10.183/8.369 = 1.179 > 1. This is a truly amazing rate of jobs creation! Everyone, especially our business leaders need to look back and think about what they did

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during this period. Some theoretical justification for this linear law can be provided as discussed briefly in Appendix 1.
10.0 9.0

Unemployed, y [millions]

8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 120.0 125.0 130.0

1996

The GOLD Standard for the US Economy 2012-2016

2000

y = hx + c = -0.25x + 40.72 y/x = h + (c/x) = - 0.25 + 40.72/x

135.0

140.0

145.0

150.0

155.0

Labor Force, x [millions]
Figure 3: Between 1996-2000, the US labor force increased, but the number of unemployed decreased, again following a nice linear relation y = hx + c where the constant h and c were determined using the (x, y) pairs for 1996 and 1999. As can be seen, there was a slight upward deviation of unemployed number in 2000. The unemployment rate, as defined now, is the ratio y/x (converted into a percent). On a straight line with a negative slope, the ratio y/x will keep on decreasing as x increases and we move down the line. Our business leaders, need to look back and think about what they did during this period. The slope chosen here is, quite intentionally, the highest slope consistent with the data, rather than a slope determined via linear regression or other statistical arguments. This is a Line of Excellence (LOE) for the US economy.
Data source: Unemployment Statistics Household data Employment Status of Civilian Noninstitutional Poplulation, 1941 to date
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How did we get to where we are in June 20120?
The monthly data, starting Jan 2008 to Jun 2012, has been compiled to show how absolute levels of the unemployed and the labor force have changed during Obama’s first term.

Table 2: Monthly data compiled from BLS website
Month Labor force, x millions
154.075 153.648 153.925 153.761 154.325 154.316 154.480 154.646 154.559 154.875 154.622 154.626 153.454 153.704 153.964 154.528 154.216 153.653 153.478 154.073 153.918 153.709 154.041 153.613 154.395 154.871 154.707 154.365 155.007 155.163

Unemployed, y millions
7.678 7.491 7.816 7.631 8.395 8.578 8.950 9.450 9.501 10.083 10.544 11.299 14.953 15.039 15.128 15.221 14.876 14.517 14.609 14.735 14.574 14.636 15.104 14.393 12.758 12.806 12.673 12.500 12.720 12.749

Month

Labor force, x millions
154.236 154.521 154.143 154.450 154.800 154.730 154.538 154.319 153.786 153.822 153.833 153.091 153.250 153.302 153.392 153.420 153.700 153.409 153.358 153.674 154.004 154.057 153.937 153.887

Unemployed, y millions
12.049 12.860 13.389 13.796 14.505 14.727 14.646 14.861 15.012 15.421 15.227 15.124 13.919 13.751 13.628 13.792 13.892 14.024 13.908 13.920 13.897 13.759 13.323 13.097

Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12

Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11

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The above data was obtained from the BLS website. The raw data obtained from the query is included at the end. All values here are seasonally adjusted values. The figures that follow, with brief captions, are self-explanatory.
12.0

Unemployed, y [millions]

11.0

12/08 11/08

10.0

10/08
9.0 8.0 7.0 6.0 5.0 153.4

y = hx + c = 2.387x – 359.5 = h(x – x0) = 2.387 (x – 150.65) Election year 2008
153.6 153.8 154.0 154.2 154.4 154.6 154.8 155.0

Labor Force, x [millions]
Figure 4: Obama wins the nomination after a hard primary campaign in 2008, promising Hope and Change, and is elected President in November 2008. The labor force was increasing but the number of unemployed was also increasing. This is the opposite of the trend observed during the second Clinton term. The general trend can be described by the upward sloping line, y = hx + c = 2.387x – 359.5 = 2.387 (x – x0) = 2.387 (x -150.65). The slope h > 0 and intercept c <0. The numerical value of x0 = 150.65 million means that the number unemployed would go to zero if the labor force were 150.65 million. (A rigorous linear regression equation, which will only change h, c and x0 slightly, can be derived but this does not seem important to illustrate the general ideas.) As we see, the labor force was higher than this cut-off level and the US economy was not creating the jobs needed - no jobs with plenty of job seekers! The labor force had its highest value in October 2008 and promptly shrank in Nov 2008 and Dec 2008, with unemployed
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going up as well, giving the two points that rise above the line (joined by the dashed “swooshing” curve). The meltdown of the US economy and the near total financial collapse was beginning to have its toll on the number of unemployed which started spiking after the Nov 08 election.

The US Economy makes a U-turn in the wrong direction in Obama’s first full year in office.
18.0

Unemployed, y [millions]

16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 153.0

153.5

154.0

154.5

155.0

Labor Force, x [millions]
Figure 5: Obama’s first full year in office. The labor force seems to have literally stopped growing immediately after Obama was elected President. And before he was sworn into office in Jan 2009, the number of unemployed started rising and continued to rise reaching historical levels – the highest value in October 2009 was 15.4 million unemployed. The labor force also shrank as the long term unemployed literally disappeared and moved from the “unemployed” column to the “not in labor force” column. The economic devastation that is still being felt had begun in full force in 2009. The “jump” in the unemployed we see on this
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graph, from Jan 2008 to Dec 2009 was 7.444 million. No jobs were being created, the number of unemployed jumped dramatically and the labor force decreased, the opposite of what we saw in 2008. The US economy had literally made a U-turn, but was heading in the WRONG DIRECTION!
16.0

Oct 09

Aug 09

Unemployed, y [millions]

15.0

Dec 09
14.0 13.0 12.0 11.0 10.0

Oct 08
9.0 8.0 153.0

153.5

154.0

154.5

155.0

Labor Force, x [millions]
Figure 6a: Obama years: October 2008 to Feb 2010. The deterioration of the US economy is revealed during the time period chosen here. The labor force had its highest value in Oct 2008, just before the 2008 Presidential election, with the unemployment level at 10.083 million, see (x, y) pair at the bottom right of the graph. The unemployed levels started climbing rapidly following the election in Nov 08, month and after month. The labor force was also shrinking. The 15 million mark (the unemployment level) was reached in Sep 09 with a peak of 15.421 million unemployed in Oct 2009. The labor force reached its lowest level in Dec 2009, see (x, y) pair near the top left of the graph. This is the troubling report card for the first full year of the Obama presidency. The overall trends in 2009 can be described by the two straight lines with a negative slope, see Figure 6b. The only
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problem is that direction in which the US economy was moving was the exact opposite of what was going on during the second Clinton term.

16.0 15.0

10/2009 05/2009 09/2009

Unemployed, y [millions]

14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0

11/2008

y = hx + c = -5.34x + 836.92

6.0 153.6

153.8

154.0

154.2

154.4

154.6

154.8

155.0

Labor Force, x [millions]
Figure 6b: Obama years: Jan 2009 to Dec 2009. In October 2009, the number unemployed rose to 15.421 million the highest recorded in the BLS database. The two straight lines superimposed on to the graph have the mathematical equations y = hx + c = -5.34x + 836.92 (Nov 08 to Sep 09, blue) and y = -0.937x + 159.49 (May 09 to Oct 09, red). The slope of the graph on such an unemployment diagram is actually a simple numerical measure of the health of the economy. The economy was sending out conflicting signals, via the unemployment data, as seen by the huge difference between the two slopes (although both are negative).

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15.6

Net result: Close to a million jobs gained. A small expansion of the labor force. Dec 09 Apr 10

Unemployed, y [millions]

15.2

Jan 10
14.8

14.4

Jun 11
14.0

May 11
13.6

Mar 11
13.2 153.0 153.2 153.4 153.6 153.8 154.0 154.2 154.4 154.6

Labor Force, x [millions]
Figure 7a: Obama years: Dec 2009 to June 2011. The recovery phase of the US economy after reaching the highest unemployment level (15.421 million) in Oct 09 and the lowest labor force level (153.091 million) in Dec 09. Then the recovery began, during the period covered here, but the dynamics of this recovery and the path taken was just as “chaotic” as the deterioration. In the first sign of a recovery, the unemployment level dropped and the labor force increased between Dec 09 and Jan 10. There is clearly a socio-cultural component at work here. Perhaps, after the Christmas and New Year celebrations, with new hope following the New Year resolutions, some employers decide to hire and even the discouraged workers return to the labor force. This leads to the expansion of the labor force, with little reduction in the unemployment levels, between Jan 2010 and April 2010. The downward trending of the unemployment levels, unfortunately with reduction in the labor force, then begins. The start and end points, Dec 2009 and Jun 2011, are highlighted by the dashed arrow, with the economy performing a number of complicated maneuvers (often referred to in the sciences as the random walk, or the drunkard’s walk) to get from point A to point B.
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15.4 15.2

A B

Unemployed, y [millions]

15.0 14.8 14.6 14.4 14.2 14.0 13.8 13.6 13.4 153.0 153.2 153.4 153.6

Line A: y = 1.903x – 277.41 Line B: y = 1.907x – 279.21
153.8 154.0 154.2 154.4 154.6

Labor Force, x [millions]
Figure 7b: Obama years: Jan 2010 to June 2011. When the labor force started growing again (e.g., the discouraged but unemployed returning to seek jobs again actively, new college graduates entering the labor force) to the earlier levels in the period Jan 2010 to Jun 2011, considered above, the number of unemployed just kept on going up and reached its highest level of 15.221 million in April 2010 (the previous high being 15.421 million in Oct 09). The data seem to fall between the set of parallel lines with a positive slope, superimposed on to the data set. Now, for the real good news! WE DO HAVE IT! Things have actually begun to get better, slowly in the last full year (June 2011 to June 2012) as seen by the downward trend in the number of unemployed, even as the labor force has continued to increase. This is NOT yet like the GOLD standard of the second Clinton term, but has a similar trend, see Figures 8 and 9.

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14.4

Unemployed, y [millions]

June 2011
14.0

PRETTIEST GRAPH OF ALL! Decreasing Unemployed Increasing Labor force

13.6

13.2

12.8

June 2012
12.4 153.0 153.5 154.0 154.5 155.0 155.5

Labor Force, x [millions]
Figure 8a: Obama years from June 2011to June 2012: This is the PRETTIEST graph of all, showing a real recovery of the economy – an expansion in the labor force x accompanied by a reduction in the unemployment level y, during the course of the past full year starting June 2011. The unemployment level has fallen from the 14 million in June 2011 to 12.75 million in June 2012, although following a chaotic path, see Figure 9. However, the unemployment level is still too high and the jobs gained (1.275 million) are more than compensated by the expansion in the labor force (1.75 million). The overall slope h = ∆y/∆x = -1.275/1.75 = - 0.727 and is less than the minimum h = -1 required for a healthy recovery to proceed and the unemployment levels to go down to the 8 million levels in 2005-2008. Is this possible? YES, YES, YES!!!

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16.0

Dec 2009

Unemployed, y [millions]

15.0

14.0

13.0

Jun 2012

12.0

11.0

y = hx + c = -1.146x + 190.6 = -1.146 (x – 166.29)
153.0 153.5 154.0 154.5 155.0 155.5 156.0 156.5

10.0 152.5

Labor Force, x [millions]
Figure 8b: Obama years from June 2009 to June 2012: We consider here the performance of the US economy on the jobs creation front, over the three year period June 2009 to June 2012. The situation is similar to what we saw in Figure 3 during the second Clinton term. The straight line joining the two extreme points (Dec 09 and Jun 12) is taken as a good description of the overall trend. The number of unemployed is going down with an expanding labor force. Considering the large scatter in this data, it is not necessary to attempt a linear regression analysis to determine the slope h of a “best-fit” line. As we learn from calculus, the slope of a line (or a curve) is the measure of the “rate of change”. It can be used to make short term predictions, with confidence. If the speed of a moving vehicle (slope of distance time graph) is 60 mph, we can say with confidence that it will be located at a distance of 1 mile, from its current location, in 1 minute (assuming constant driving conditions). If good temperature measurements indicate that water in a vessel is heating at a rate 10 degrees per minute, we can confidently predict when it will start boiling (assuming again constant conditions). Likewise, the slope h on this x-y graph is the real measure of
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the rate at which the number of unemployed y decrease in the near future, even with an expanding labor force, x. This is also the reason why the ratio y/x, which is taken as the unemployment rate, is actually a misleading indicator of the health of the economy on the jobs creation front.
14.2

Unemployed, y [millions]

14.0 13.8 13.6 13.4 13.2 13.0 12.8 12.6 12.4 153.0

Jun 2011, y = 14.02

Jun 2012 y = 12.75

153.5

154.0

154.5

155.0

155.5

Labor Force, x [millions]
Figure 9: Obama years from June 2011 to June 2012: The labor force has grown again during the past year, from 153.653 million to 155.163 million, an increase of about 1.5 million in the workforce. The number of unemployed has also decreased during this time, from 14.52 million in June 2011 to 12.75 million in June 2012, a decrease of 1.768 million. Although the signs are encouraging, the reduction in the unemployed (or job creation numbers) is barely keeping pace with the increase in the labor force. It must be appreciated that the ratio y/x is a constant only if the straight line passes through the origin (0,0), i.e., if the constant c = 0 in the linear law y = hx + c. If c is nonzero, as is the case here, the ratio y/x can vary erratically going up or down as x increases. This is a fundamental mathematical property

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of a straight line, often overlooked in what is known as ratio analysis (computing various simple ratios to reveal underlying confusing trends).

16.0

Unemployed, y [millions]

15.0

Q22009
14.0

Q22011
13.0

12.0
11.0 10.0

Q22012

153.0

153.5

154.0

154.5

155.0

Labor Force, x [millions]
Figure 10: Quarterly data obtained from BLS for the period Q22009 to Q22012. The quarterly data are available for the period Q22009 to Q22012, see Table E-1 at http://www.bls.gov/web/empsit/cpsee_e01.pdf . The data for earlier quarters is not readily available. Nonetheless, the same back and forth movement is again observed here. The labor force shrank and the number of unemployed went up, see red line. This line joins the Q22009 and Q42009 data and has the equation y = hx + c = -0.848x + 145.5. This negative trend (hence, the red line) then reversed itself and the labor force started growing again with decrease in the number unemployed (hence, the blue line). This joins the Q22011 and Q42012 data and has the equation y = hx + c = -0.934x + 157.3. Again, the economy seems to be moving back and forth along nearly parallel tracks since the numerical value for the slopes of these two lines is roughly the same.
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144.0

Employed, E [millions]

143.0 142.0 141.0 140.0

E = kx + A = 2.075 -179.06 = 2.075 (x – 86.31)

139.0 138.0 137.0 136.0 152.5

E = kx + A = 2.112 -186.34 = 2.112 (x – 88.22)

153

153.5

154

154.5

155

155.5

156

Figure 11: Obama years Q2 2009 to Q2 2012: Quarterly data for the EMPLOYED (as opposed to Unemployed) for the period Q2 2009 to Q2 2012, see http://www.bls.gov/web/empsit/cpsee_e01.pdf .The number Employed is increasing with an increasing labor force (as in Figure 2 earlier, during the second Clinton term). It is also of interest to note that, as with the data for the Unemployed in Figure 10, it appears that the data set can again be described by a set of parallels sweeping across the graph. The intercept made by the graph is like Einstein’s work function in the photoelectric law (see discussion of this point in Appendix 1). The upper blue line E = 0.207 (x – 86.31) joins Q3 2011 and Q4 2012 (increasing Employed) whereas the lower line joins Q2 2009 and Q3 2009 (Employed decreasing, hence red line). Since the slopes are the same, chronological order in which the (x, y) pair is observed determines if the Labor force is increasing or decreasing and the number of Employed is, correspondingly, increasing or decreasing. A fundamental reassessment is required by all: business and political leaders, at all levels of government, to put the US economy on a healthy road to recover. While the downward trend in the number of unemployed is encouraging, that number should be less than one-half the levels that we see here.
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This is a truly coming from a non-politician and non-partisan - from someone who has been interested in studying how individual companies, big and small, within our economy operate and what makes them successful. Several articles posted on this website deal with this interest. I have been doing this so we can understand how successful companies operate to produce profits consistently. If we can learn some lessons, all companies could become the job creating machines. After all, no company can prosper and produce profits without its employees. It is in this context also that this brief overview of the trends in the unemployment data during the Obama years, using very similar analytical methods, is being presented. The health of the economy was again a topic of discussion following the (not too encouraging) news from the BLS just before the July 4th Holiday celebrations. We clearly need a new VISION. Everyone including the next POTUS has the responsibility, for our own sake and for the sake of future generations to take a hard look and re-examine why we have become so dysfunctional at every level of government. We must ask ourselves what is prompting us to take all these hardline and uncompromising positions while the country as a whole is languishing and crying for leadership. Is anything to be gained by letting millions stay home without a real job? Is there not enough to do to rebuild our economy and the crumbling infrastructure? Now, here is the summary graph that contains all of the data from Jan 2008 to Jun 2012 that we have discussed so far in small sections. This is the full story of the Obama years and its impact on the US economy in terms of the devastating job losses and essentially zero, if not, negative growth of jobs. I already hear rumors about Hillary being drafted for President in 2016! Cheers!

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18.0 16.0 Dec 09

Unemployed, y [millions]

14.0 12.0 Dec 08 10.0 8.0 6.0 4.0 2.0 0.0 152.5 Jan 08 Oct 08 Jun 12

153.0

153.5

154.0

154.5

155.0

155.5

Labor Force, x [millions]
Figure 12: Summary graph with all the monthly data from January 2008 to June 2012. The US economy literally made a WRONG U-TURN during Obama’s first year in office and is beginning to turn around. The labor force was growing, with the unemployed increasing, during the 2008 Presidential campaign up until the election of November 2008. The labor force then literally STOPPED GROWING starting Oct 2008 and shrank to its lowest level, with a sudden “jump” in the number of unemployed from 10.5 million in November 2008 to 15 million by October 2009. It reached a peak of 15.42 million unemployed. The workforce has started growing again and the number of unemployed has decreased to 12.75 million in June 2012, but this number is still too high and should be one-half the levels that we see today (July 8, 2012). The increase in the labor force is higher than the reduction in the number of unemployed.

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Appendix 1 Theoretical justification for the simple linear laws
The linear law observed in Figures 2 and 3, for the Clinton second term, can be readily justified as follows. The total labor force (say L) is the sum of those who are unemployed (say U) and those who are employed (say E). Thus, Labor force Or, L=U+E U=L–E

…………(1)

But the number employed E will always be some fraction of L, say kL, plus some unknown constant which must be introduced in any such complex problem, see also the graphs in Figure 2 and 11. Such an unknown constant was introduced, for example, by Einstein in his photoelectric law to explain how a photon of energy E will produce an electron of energy K when it (the photon) strikes the surface of a metal. What is the relationship between E and K? Electrons are bound to the metal by complex electromagnetic forces. Hence, work must be done to overcome these forces and remove the electron from within the metal. To address this difficult problem Einstein proposed a very simple solution. Let W denote the work that must be done to overcome these force to produce the electron. This is the energy that must be given up to produce the electron. Hence, the maximum kinetic energy of the electron K = E – W. This, indeed, is the mathematical statement of Einstein’s photoelectric law (which actually fetched him the Nobel Prize in Physics). Einstein refers to the unknown W as the work function of a metal. This must be determined experimentally for each metal. There is no theory that can be used to derive the value of W which will vary from one metal to another. Likewise, in order to develop his famous equations of quantum physics (to explain the radiation spectrum of a heated body), Planck starts with the following expression for the entropy S of a system of N oscillators (microscopic entities
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which are supposed to be located within the heated body and which emit the radiation as they vibrate about some mean position). Planck states that the entropy S = k ln Ω + S0 where S0 is an unknown constant and k is the Boltzmann constant, which was named after Ludwig Boltzmann who formulated the relation (used by Planck to develop quantum theory) for the entropy S of a system having N different entities (which have the property called energy whose distribution was of interest to Planck). In quantum physics, Ω refers to the number of ways some fixed total energy can be distributed among the N oscillators. The higher the value of Ω, the higher will be the entropy S. The relationship involves the natural logarithm of Ω. If there is only one way, Ω = 1 and ln Ω = 0 and S = 0? Or, is there an S0, the unknown constant? The main point here is the recognition of an unknown constant (like S0 or W) even if a simple linear relation is observed between any two variables of interest. (We can extend Planck’s basic ideas, via a generalization of the concept of entropy. Instead of distribution of energy among N oscillators, we can distribute some property U of interest to us, among N entities, using the entropy formulation used by Planck. This has been discussed in several articles posted on this website. The generalized form of Planck’s radiation law can thus be used to understand many complex problems, outside the realm of physics, like the functioning of the financial system, or the US economy, using simple mathematical formulations.) We do not know when S goes to zero, exactly. Likewise, K is never equal to E in Einstein’s law. In the same way, in the problem of interest to us, the number of employed E = kL + A. Or, we write this as E = kx + A where x is used for the labor force. When labor force x, or L, goes to zero E = A, which is unknown. Is A = 0? If so, why? If not, why not? The empirical observations in Figures 2 and 11 reveal a nonzero value for A. This line of reasoning yields the following simple expression for U. U = L – E = (1 – k)L - A …………(2)

Equation 2 can be rewritten as y = hx + c where x is labor force and y the number of unemployed. Thus, the graph of U, the number of unemployed versus labor force x will be a straight line with a slope h = (1 –k) and a finite intercept c = - A. This is
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exactly analogous to Einstein’s photoelectric law and the unknown intercept plays the same role as the work function W does in physics. The US economy, like the photoelectric effect, can be described using a simple linear law y = hx + c. This also means that we might come across at three different types of straight lines depending on the numerical values of the constants h and c (positive and negative). 1. Case I: Positive h, negative c. 2. Case II: Negative h, positive c. 3. Case III: Positive h, positive c. As already discussed we have empirical evidence for Case I and Case II – linear laws with positive h and negative c (Figure 4 for the 2008 monthly data) and also with negative h and positive c (Figure 3, annual data for 1996-2000). We not yet encountered the third case, positive h and positive c. However, this too is observed if we consider all of the historical data (1941-2011) on unemployment statistics. It can be shown that the straight line joining the unemployment data for the years with the highest levels of unemployment follows Case III. The data is given below, for completeness, without further discussion. Year 1941 1982 1983 2009 2010 2011 Labor force, x (millions) 55.91 110.204 111.55 154.142 153.889 153.616 Unemployed, y (millions) 5.56 10.678 10.717 14.265 14.825 13.747

The x-y graph above can be shown to be perfectly linear. The straight line through the (x, y) pairs for 1941 and 2010, has the equation y = 0.096x + 0.2731. The significance of this is being discussed in a separate review of all the historical data.

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Databases, Tables & Calculators by Subject
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Change Output Options:
From: To:

include graphs Data extracted on: July 8, 2012 (2:32:50 PM) Labor Force Statistics from the Current Population Survey

Series Id: LNU01000000 Not Seasonally Adjusted Series title: (Unadj) Civilian Labor Force Level Labor force status: Civilian labor force Type of data: Number in thousands Age: 16 years and over

Download: Year Jan Feb 144266 145693 146154 147649 149686 151879 152503 153804 153194 152635 Mar 144334 145801 146525 147745 150027 152236 153135 153728 153660 153022 Apr 144158 145925 146260 148274 150209 151829 153208 153834 153911 152898 May 144527 146067 146659 148878 150696 152350 154003 154336 153866 153449 Jun 145940 148117 148478 150327 152557 154252 155582 155921 154767 154538 Jul Aug Sep Oct Nov Dec Annual

2002 143228 2003 145301(1) 2004 146068(1) 2005 147125(1) 2006 149090(1) 2007 151924(1) 2008 152828(1) 2009 153445(1) 2010 152957(1) 2011 152536(1)

146189 145565 145167 145320 144854 144807 144863 147822 146967 146166 146787 146969 146501 146510 149217 148166 147186 147978 148246 147877 147401 151122 150469 149838 150304 150239 149874 149320 153208 152465 151635 152397 152590 152571 151428 154871 153493 153400 153516 154035 153705 153124 156300 155387 154509 155012 154624 154349 154287 156255 154897 153617 153635 153539 152693 154142 155270 154678 153854 153652 153698 153156 153889 154812 154344 154022 154088 153683 153373 153617

2012 153485(1) 154114 154316 153905 154998 156385 1 : Data affected by changes in population controls.

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Series Id: Series title: Type of data: Age:

LNS11000000 (Seas) Civilian Labor Force Level

Seasonally Adjusted Labor force status: Civilian labor force
Number in thousands 16 years and over

Download:
Year Jan 2002 143883 2003 145937(1) 2004 146842(1) 2005 148029(1) 2006 150214(1) 2007 153144(1) 2008 154075(1) 2009 154236(1) 2010 153454(1) 2011 153250(1) 2012 154395(1) Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 144653 144481 144725 144938 144808 144803 145009 145552 145314 145041 145066 146100 146022 146474 146500 147056 146485 146445 146530 146716 147000 146729 146709 146944 146850 147065 147460 147692 147564 147415 147793 148162 148059 148364 148391 148926 149261 149238 149432 149779 149954 150001 150065 150030 150641 150813 150881 151069 151354 151377 151716 151662 152041 152406 152732 152983 153051 152435 152670 153041 153054 152749 153414 153183 153835 153918 153648 153925 153761 154325 154316 154480 154646 154559 154875 154622 154626 154521 154143 154450 154800 154730 154538 154319 153786 153822 153833 153091 153704 153964 154528 154216 153653 153748 154073 153918 153709 154041 153613 153302 153392 153420 153700 153409 153358 153674 154004 154057 153937 153887 154871 154707 154365 155007 155163 Annual

1 : Data affected by changes in population controls.

Series Id: LNU03000000 Not Seasonally Adjusted Series title: (Unadj) Unemployment Level Labor force status: Unemployed Type of data: Number in thousands Age: 16 years and over

Download: Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual 2002 9051 8823 8776 8255 7969 8758 8693 8271 7790 7769 8170 8209 8378 2003 9395 9260 9018 8501 8500 9649 9319 8830 8436 8169 8269 7945 8774 2004 9144 8770 8834 7837 7792 8616 8518 7940 7545 7531 7665 7599 8149 2005 8444 8549 7986 7335 7287 7870 7839 7327 7259 6964 7271 6956 7591 2006 7608 7692 7255 6804 6655 7341 7602 7086 6625 6272 6576 6491 7001 2007 7649 7400 6913 6532 6486 7295 7556 7088 6952 6773 6917 7371 7078 2008 8221 7953 8027 7287 8076 8933 9433 9479 9199 9469 10015 10999 8924 2009 13009 13699 13895 13248 13973 15095 15201 14823 14538 14547 14407 14740 14265 2010 16147 15991 15678 14609 14369 14885 15137 14759 14140 13903 14282 13997 14825
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Series Id: LNU03000000 Not Seasonally Adjusted Series title: (Unadj) Unemployment Level Labor force status: Unemployed Type of data: Number in thousands Age: 16 years and over

Download: Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual 2011 14937 14542 14060 13237 13421 14409 14428 14008 13520 13102 12613 12692 13747 2012 13541 13430 12904 11910 12271 13184

Series Id: Series title: Type of data: Age:

LNS13000000 (Seas) Unemployment Level

Seasonally Adjusted Labor force status: Unemployed
Number in thousands 16 years and over

Download: Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual 2002 8182 8215 8304 8599 8399 8393 8390 8304 8251 8307 8520 8640 2003 8520 8618 8588 8842 8957 9266 9011 8896 8921 8732 8576 8317 2004 8370 8167 8491 8170 8212 8286 8136 7990 7927 8061 7932 7934 2005 7784 7980 7737 7672 7651 7524 7406 7345 7553 7453 7566 7279 2006 7064 7184 7072 7120 6980 7001 7175 7091 6847 6727 6872 6762 2007 7116 6927 6731 6850 6766 6979 7149 7067 7170 7237 7240 7645 2008 7678 7491 7816 7631 8395 8578 8950 9450 9501 10083 10544 11299 2009 12049 12860 13389 13796 14505 14727 14646 14861 15012 15421 15227 15124 2010 14953 15039 15128 15221 14876 14517 14609 14735 14574 14636 15104 14393 2011 13919 13751 13628 13792 13892 14024 13908 13920 13897 13759 13323 13097 2012 12758 12806 12673 12500 12720 12749

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About the author V. Laxmanan, Sc. D.
The author obtained his Bachelor’s degree (B. E.) in Mechanical Engineering from the University of Poona and his Master’s degree (M. E.), also in Mechanical Engineering, from the Indian Institute of Science, Bangalore, followed by a Master’s (S. M.) and Doctoral (Sc. D.) degrees in Materials Engineering from the Massachusetts Institute of Technology, Cambridge, MA, USA. He then spent his entire professional career at leading US research institutions (MIT, Allied Chemical Corporate R & D, now part of Honeywell, NASA, Case Western Reserve University (CWRU), and General Motors Research and Development Center in Warren, MI). He holds four patents in materials processing, has co-authored two books and published several scientific papers in leading peer-reviewed international journals. His expertise includes developing simple mathematical models to explain the behavior of complex systems. While at NASA and CWRU, he was responsible for developing material processing experiments to be performed aboard the space shuttle and developed a simple mathematical model to explain the growth Christmas-tree, or snowflake, like structures (called dendrites) widely observed in many types of liquid-to-solid phase transformations (e.g., freezing of all commercial metals and alloys, freezing of water, and, yes, production of snowflakes!). This led to a simple model to explain the growth of dendritic structures in both the ground-based experiments and in the space shuttle experiments. More recently, he has been interested in the analysis of the large volumes of data from financial and economic systems and has developed what may be called the Quantum Business Model (QBM). This extends (to financial and economic systems) the mathematical arguments used by Max Planck to develop quantum physics using the analogy Energy = Money, i.e., energy in physics is like money in economics. Einstein applied Planck’s ideas to describe the photoelectric effect (by treating light as being composed of particles called photons, each with the fixed quantum of energy conceived by Planck). The mathematical law deduced by
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Planck, referred to here as the generalized power-exponential law, might actually have many applications far beyond blackbody radiation studies where it was first conceived. Einstein’s photoelectric law is a simple linear law, as we see here, and was deduced from Planck’s non-linear law for describing blackbody radiation. It appears that financial and economic systems can be modeled using a similar approach. Finance, business, economics and management sciences now essentially seem to operate like astronomy and physics before the advent of Kepler and Newton.

Cover page of AirTran 2000 Annual Report

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