The Biden-Harris “Strong” Economy Claim Gives The Notion of Humbug A Bad Name, Part 2

A goodly part of the “strong” economy illusion derives from cherry-picking the hideously misleading numbers contained in the BLS establishment survey’s monthly “jobs” count. As we noted in Part 1, for instance, the index of hours worked in the high-pay, high-productivity goods-producing sector has actually contracted by 18% since peaking way back in 1978, but that has purportedly been more than off-set by a 128% rise in the hours index for the Leisure & Hospitality (L&H) sector, of which 75% is attributable to bars, restaurants and other food service operations.

Alas, however, what might be termed the “great jobs replacement” caper was not remotely a case of apples-to-apples. As we also showed in Part 1, the typical part-time, near minimum wage “job” in the L&H sector pays the equivalent $24,400 per year or just 37% of the $66,000 annual equivalent for goods-producing jobs. So in terms of economic throw-weight, or the implied market value of output and income, we have been replacing prime labor force players with what amounts to third-stringers on waivers.

But in some cases, it may actually be even worse than that. To wit, neither the BLS employment data nor the GDP accounts are without systematic bias owing to the fact that they were designed and institutionalized mainly by Keynesian economists on the government payroll.  The latter naturally equated economic output and jobs with that which their data framework measured—even as such macro-data was mainly of importance to Keynesian policy makers fiddling with the Washington-based fiscal and monetary dials in an attempt to enhance the greater economic good.

Accordingly, the Keynesian fathers of our contemporary economic data dumps didn’t care much about vast sections of the non-monetized economy including household labor, self-service activities (i.e. doing your own driving, shopping and lawn mowing) and the so-called underground economy conducted in cash and away from the tax collectors, regulators and law-enforcers.

The problem, of course, is that when economic activity migrates from the informal and underground economy to the monetized economy it gets recorded as additional output, jobs and income in our Keynesian labor and GDP accounts. In many such cases, however, no new output or income is actually being generated; it’s just being newly recorded.

For instance, between 2014 and 2023 the number of US taxi and limo drivers more than doubled from 131,800 to 264,600. But we do not believe that activity and employment in this sector actually grew at the implied 8.1% per annum rate. What happened is that the explosion of Uber and Lyft services caused many traditional self-drivers to leave their cars in the garage, and to utilize for-hire drivers instead—even, perhaps, as they played video games on their iPhones in the back seat.

Nor is this illustration a trivial matter. The chart below, in fact, tracks a huge movement of un-measured household activity that has migrated into the monetized and BLS-counted economy since the peak of goods-producing employment back in 1978.

To wit, the employment rate (purple line) for the prime working age female population (25-54 years) rose from 56.5% in Q1 1978 to 75.4% in Q2 2024. Accordingly, the work of nearly one-fifth of the prime age female population moved from the uncounted household economy into the monetized economy during that 46-year span. Self-evidently, however that did not represent new output or jobs but merely the monetization of what was already there.