As more Americans quit looking for work to enroll in the disability program, can't help but think about the profound socio-economic impact the financial crisis is having on what used to be the envy of the world.
The civilian labor force shrank in April by 342,000 workers, and remains below where it stood when the economic recovery started 34 months ago, according to data released Friday by the Bureau of Labor Statistics. Had the labor force not declined, unemployment would have been 8.3% in April, instead of the 8.1% reported.
That same month, more than 225,000 workers applied for Social Security disability benefits, and nearly 90,000 were enrolled, according to new data from the Social Security Administration.
Compared with June 2009, the month the economic recovery officially started, the labor force has shrunk by 365,000, a trend that has never occurred in any post World War II recovery. Those saw the labor force climb by the millions by this point in their recoveries, even as unemployment rates were driven down.
The decline in the workforce combined with the growing population has pushed the labor force participation rate — which compares those working or looking for a job the working age population — fell again in April to 63.6%. That's down from 65.7% in mid-2009, and is the lowest it's been since 1981.
Economists note that the shrinking labor force has masked the true size of the unemployment problem, since people who quit looking for a job are no longer counted as unemployed.
In fact, had the labor force participation rate had stayed where it was in June 2009, the unemployment rate would be around 11%.
Many of those who've quit looking have instead signed up for disability benefits.
So far this year, nearly 1 million workers have applied to get on the disability program. According to the Social Security Administration, more than a third will eventually be enrolled in the program.
Almost 90,000 workers enrolled the program in April, pushing the total for new enrollees over 333,000 in the first four months of the year.
If you add in spouses and dependents, the number of beneficiaries added to the program so far this year climbs to 539,000.
As IBD reported recently, more than 5 million workers and their families have enrolled in the disability program since Obama took office.
A report last fall from the Obama administration's economic advisers warns that the mass exodus of workers who can't find a job onto the disability rolls poses a long-term risk to the economy, since once enrolled, these workers almost never return to the active workforce. This can, the report said, result "in a loss to society of the economic contribution those workers could have made."
Nonetheless, I'm still bullish on America and see positive trends ahead as the global game changer takes hold, but the U.S. and the developed world haven't addressed the unemployment crisis in a forceful manner and this, not the 'debt crisis', will ultimately pose the biggest threat to global prosperity and security.
Last Friday, I posted Parts 1 & 2 of a special four-hour PBS FRONTLINE investigation on Money, Power and Wall Street. Below, watch Parts 3 & 4 (all four parts are available here). It's an in-depth coverage of the struggles to rescue and repair a shattered economy, exploring key decisions, missed opportunities, and the unprecedented and uneasy partnership between government leaders and titans of finance that affects the fortunes of millions of people around the world.
After watching the third episode, kept thinking that Lawrence Summers, arguably the most brilliant economist/ policymaker who served in both the Clinton and Obama Administrations, was right to argue against Timothy Geithner on taking a harder stance on banks after the crisis broke out (Summers made his share of mistakes too, like repealing Glass-Steagall).
Unfortunately, we live in a world where banksters take it all. That's why I tell people to remain bullish on big banks as they will always profit off money for nothing and risk for free. Same goes for elite hedge funds except unlike banks, they have skin in the game.
But while the financial plutocrats get richer, far too many on Main Street are falling through the cracks and risk being permanently unemployed, collecting disability and food stamps. If this continues, the long-term social and economic costs to the American economy will be devastating. It will tear apart the social fabric that made America great.
And as we await results from the French and Greek elections on Sunday, European leaders better read Larry Summers' latest comment on why austerity has brought Europe to the brink again. Summers doesn't mince his words: "Only if growth is restored can the euro endure and European financial problems be resolved. If there was ever a situation that called for a collective response, this is it."
I think it's high time the "power elite" stop schmoozing at Davos, roll up their sleeves and realize that the biggest threat to the global economy remains the lack of jobs, especially among our youth. If policymakers continue with the destructive path of savage austerity, the ranks of those enrolling on disability programs will swell, shattering the hopes, dreams and aspirations of our future generations.
Below, listen to Cathy O'Neil, a former quant at DE Shaw, an elite hedge fund (Part 4). Apart from admitting that some hedge funds (like her former employer) "frontrun pensions," she's absolutely right, those in finance "don't understand how the system works" and 'Occupyers' should be appreciated because even though they don't understand how the system works, they realize the "system isn't working."