The Unemployment Rate: the Economy is NOT improving…
August 8, 2009Some have heralded the “good news” that the Unemployment rate has dropped from a horrific 9.5% all the way down to 9.4% (tongue planted firmly in cheek). This, according to the Obamanauts, shows us that things are turning around.
Bullsh*t. All those loveley orange signs heralding the “American Reinvestment and Recovery Act” Projects seem to be posted over strangely silent activities.
In fact, the economy *LOST* an additional 247,000 jobs. So why has the Unemployment rate has dropped?
Two reasons:
1) The Unemployment rate is the percent of Americans who are out of work AND ACTIVELY SEEKING work. After 18 months of recession, many Americans have given up for the time being. They have adjusted to life at home, or life off the books, or a single-income in a formerly two-wage earner home. Accordingly, they are no longer considered in the work force, and no longer counted in the Unemployment figures. So, if there are 100 people in the ‘labor force,’ and 10 are out of work, that’s a 10% Unemployment rate. If 5 of those people out of work give up looking, the Unemployment rate is calculated to be 5 unemployed out of 95 in the labor force, which is only a 5.2% rate. Voila! A lowered rate – even though the same number of people are out of work. Similarly, the homeless – which have grown under the foreclosure spate in the last 18 months – are *NOT* considered “Unemployed” because they are no longer considered in the Labor Force. When they lost their job, they were unemployed. When they lost their home and began life in their cars or on the street, they were magically removed from the Unemployment figures.
2) In order to be counted as “Unemployed,” an individual must have *no job at all.* That means that when a middle-aged, middle-level manager making $50,000/year loses his job, he is unemployed. 8 months later, when the bank is threatening foreclosure, and the credit card companies are hounding him with dinnertime phone calls, and the kids’ tuition is due, and the electric company is threatening to turn off the lights, he takes *anything* he can get…so he takes a part-time job, 20 hours a week at $8.50/hour, cleaning fast food restaurants after they close at night.
Guess what? According to Unemployment calculations, he is no longer Unemployed! He has a Job, even if its part-time! Voila! The rate goes down.
In other words, the longer the recession, the worse things get, the more desperate people become…the better the rate will look.
And that is what is happening under Obama’s “Recovery.”
Dennis Acton
Aug 8, 2009
The other factor is the booming federal government. Obama’s “stimulus” package calls for hiring an additional 200,000 federal workers over the next three years. This shows how completely disingenuous Obama is when he claims the economy is improving. All we are doing is maxing out the credit cards as we slide toward national insolvency!
http://career-advice.monster.com/job-search/Company-Industry-Research/stimulus-jobs-government-overview/article.aspx
the grand vizier
Aug 9, 2009
So, after eight years of failed economic policies, which drove the world economy into a ditch, you would like to blame Obama for not solving the problem in seven months. Partisanship is one thing, ignorance is something else. Go read an Economics 101 textbook and then come back when you know what you are talking about. By the way, is it not true that President Bush left a trillion dollar deficit as well, but still had nothing to show for it?
Thom Simmons
Aug 9, 2009
LOL! I really don’t need to read Economics 101, unless you mean proof-read, as I wrote it. Along with three other textbooks. I am an Economics Professor, and the Chair of the Business Department at Greenfield Community College. I know Economics, trust me.
I ask you, vizier, the same question I ask all those who insist that Bush drove the economy into a ditch: Please tell me, precisely, which policies or actions drove the economy into a ditch. Very precisely.
I only ask because both George “W” Bush and Obama are Fiscal Keynesians, so I’d like to know the differnences between them.
the grand vizier
Aug 9, 2009
Sorry to dare challenge your credentials, but many intelligent people are tripped up by ideology. Might that include you, Professor? I should have known better, since Greenfield CC is well known as a bastion of economic thought. With that said, why don’t we begin with the deficit. Did “W” take a surplus and turn it into a deficit? Did “W” pay for the Iraq war off the books, thus hiding it from the people? Did “W” run up the deficit by providing mass tax cuts for the most well to do, thus repeating the mistakes of the Reagan presidency that the rising tide lifts all boats? Did the Bush administration all but eliminate any oversight of the wall street abuses now well known? I believe the answer to the above questions is yes. But I digress. Your original premise is that the unemployment figures do not indicate a “turnaround”. What’s more, you claim the “Obamanauts” are making that claim. As in your own words Bulls##t! The President has made no such claim. He merely says that the economic downturn has slowed and he sees improvement near. Not bad for 7 months, huh bushie? As to the orange signs. I don’t know whether you ever leave your ivory tower, but I drive around 35K miles per year, all over New England and New York, and there are dozens of infrastructure projects all over the region that would not be occurring without stimulus dollars. So, with all due respect to your erudition, you unfortunately are blinded by your ideology. Good day, sir.
Vis Unita Fortior
Aug 10, 2009
Mistakes Bush made do not make anything that the Obama administration has said true.
The president himself is talking about these numbers indicating recovery and I’m sure that his fans are saying the same thing exaggerated. On the front page of WhiteHouse.gov there’s a story that in its lede says, “These numbers are a promising indication that we are on the road to recovery…” though curiously if you click on the link that sentence is not in the article itself.
For that matter, the related bills have names like “The Recovery Act”. That’s counting your chickens before they’re hatched and it’s as much of a spin-ful title as “The Patriot Act” was.
Thom Simmons
Aug 10, 2009
vizier, you’re definitely barking up the wrong tree with me. I was not only NOT a fan of Bush, I called for him impeachmnet in my blog. You might want to figure out who it is you’re talking to before let loose a tirade of ad hominems.
You poke fun at GCC (knowing knothing, I suspect of its – or my -reputation), but then refer inthe end to the ivory tower…so which is it? And I must say I am writing from the road, I do travel (in NYC right now), and most of the projects I passed on 91 and 95 were in the works long before the ARRA was passed. Nice try.
As I expected, you take the standard Obamanaut line:
Bush – Deficits – Bad!
Obama – Deficits – Good!
I’ve never quite figured out that dichotomy.
I see we can agree on the role of the “Wall Street Abuses,” though I bet your pot-shot is based more on a desire for class warfare than actual facts. However, the integration of financing, banking, and insurance mechanisms through the deregulation that was sought by, and signed by Democratic President Bill Clinton in 1999, certainly did contribute to the credit crisis. And the requirement that banks loan to the less-creditworthy, enacted by Democratic President Jimmy Carter and enforced by Democrtaic Bill Clnton, certainly made that a recipe for disaster. No wonder Obama pointed fellow Democratic partisans and wall street operatives Timothy Geithner and the Goldman Sachs crew to run the TARP and Czar Programs.
the grand vizier
Aug 10, 2009
Let me back track a bit, I was a little too sarcastic in my previous reply and it was not really called for. I may have been your opening with the LOL comment and the waving of your credentials in my face (so to speak), that got my back up.
You’re right, I’m new to this site and am not familiar with previous posts which may or may not give me perspective with whom I am dealing. So let me explain some of my positions in greater detail. I do not deny that many road or other infrastructure projects were underway prior to ARRA, however they were not necessarily funded to completion. Many would have been abandoned due to state cutbacks, but are now continued with the stim. money. Other projects, which were “shovel ready” but would not have been started were it not for the stim are now underway. You may disagree, but there’s ample evidence that numerous projects currently underway throughout the US are directly as a result of the stim. We can get into an argument about the legitimacy of such spending, but I come down on the side of the FDR model. In a depression/recession, the government can either. A, do nothing and let nature take its course (Hoover?), or B. inject money into the economy to ameliorate the situation to a greater or lesser degree (depending on the size of the injection) (FDR/Obama). That is a legitimate ideological argument. I don’t see Bush as Keynsian; he was a laissez faire/Arthur Laffer disciple.
I certainly agree that Bush should have been impeached, and that, even now, the DOJ should be investigating the entire Bush administration for myriad violations of law.
I don’t like deficits either. In fact, I foresee runaway inflation staring us in the face once the recovery really gets underway, but I don’t see any alternative, given the current situation. Again, my sentiments are with the effort to ease the depth of the trough, rather than let those who are “underwater” drown.
The reason I blame Bush for the current economic situation is the The Wall Street Abuses. It has nothing to do with class warfare, merely a nod to the reality of human nature. Leave a bunch of white collar capitalists alone in a room with lots of money and they’re going to take it, simple as that. The SEC,FDIC and numerous other agencies exist, in theory, for the purpose of limiting the pendulum swings in a market economy. You know this. The Bush administration did nothing while the bubble got larger and larger. Their friends and contributors were getting rich and would be safely out of the way when the sh#t hit the fan.
By the way, I’m an Independent, and no friend of either major party. In my book, they are merely different shades of corruption. I agree with you partially about the deregulation of the financial industry, although it was equally a democrat/republican move. Finally, I also agree about Geithner/Summers/Bernanke. These are the foxes who were supposedly guarding the henhouse over this period. They are among the perpetrators of this debacle. And don’t leave Hank Paulsen out. The sweetheart deal he gave his former employer, Goldman Sachs just shows how you can screw the public right in front of their faces and get away with it.
There, that wasn’t too bad, was it?
erniegore
Aug 10, 2009
Having learned (once again) that neither party can reverse economic cycles, haven’t we learned at last that the best strategy is simply to let the free market forces work things out rather than tinker and make things worse.
Bush made things worse…
Obama has made things much worse…with a national debt that will bankrupt our children’s children…and probably destrong the country before the end of the century.
The clunker plan is the latest example. Children of people who have been responislbe (by driving high efficiency cars for years and years) will be paying off the credit cards of those irresponsible slobs who neendly burned gas for years and then were rewarded by Obamanomics. Just about the worst idea ever, but that’s what happens when govt interferes with the free enterprise cycle. It creates winners and losers just the opposite of who should really be winning and losing. It rewards sloth and incompetence, whether Dems like Obama or Reps like W and Juddhead are in control!
Grant Bosse
Aug 10, 2009
Hoover didn’t do nothing. Hoover imposed the largest trade barriers in American history, turning a downturn into a Depression.
Bush’s economic policies were quite successful early on. The tax cuts in 2001 and 2003 were targeted to generate capital and investment, and they did. In fact, federal revenues rose far beyond where they were projected to be before the tax cuts where put in place. Tax cuts don’t pay for themselves right away, but good tax policy does pay for itself in a handful of years.
Unfortunately, neither the President nor Congress, run by Republicans and then Democrats, did anything to control domestic spending in order to offset military spending; spending which was encourages and supported by majorities of both parties at the time.
The most recent and severe economic downturn came from the crunch in the housing sector, and spread into the financial sector. The bubble was fueled by lousy housing policy backed by political meddlers like Barney Frank, and fought strongest by John Sununu from when he was in the House.
Bush tried to repeal Frank’s awful policies at Fannie and Freddie. He could have and should have pushed harder.
When the bubble burst, Bush listened to a Wall Street crowd who thought loss of confidence in their companies was the same as a loss of confidence in the entire economy. TARP, supported by Senator Obama, Senator McCain, and both of our Republican Senators, was a bad idea. Obama’s followups to TARP were even worse, stacking bailouts and debt on top of a system burdened by mounting deficits and a falling dollar.
Throwing government money at this economy was a terrible idea. Job numbers are far worse than Obama’s projections of what would have happened without the stimulus, so either his plan backfired, or they didn’t know what they were talking about in the first place.
the grand vizier
Aug 10, 2009
Time will tell what the end result of Obama’s policies will be. But, if you recall, Reagan left a sizable debt and deficit at the end of his term and the deficit was turned into a surplus by the end of Clinton’s term. Of course the tech boom had a lot to do with it, but my point is that deficits, in the long run, matter less than one might think. I’m sorry, but I’m not going to turn up the pain of millions of people, especially children, for the purpose of “teaching them a lesson” about irresponsible behavior if I can do something about it. First of all, there was a good deal of irresponsible behavior conducted by the bankers, hedge fund managers, mortgage officers, et al that fueled this bubble. What was their outcome? They walked away with billions. So let’s blame the people caught in the machine. You can’t have it both ways; you want a consumer driven, free market economy? You’re going to get a lot of consumers, many of them naive, or just reaching for the “American Dream”. Screw them, huh? Serves ‘em right you say? That’s the kind of thinking that, justifiably or not, gives the Republican Party the reputation it has.
Take the word of someone who’s been there; poor people buy and drive old, inefficient vehicles because THAT WHAT THEY CAN AFFORD, the cars and SUV’s being abandoned by the well off buying newer efficient vehicles. Such condescension is troubling to me. And please, Grant, we could spend all day on a see saw, each of us providing the name of a person or institution that contributed to the size and severity of the bubble. I don’t trust either party. Why stop at Barney Frank, why don’t we go back to the millions of lobbying dollars spent by Sanford Weil and Citi Bank in the 1990’s which led to the repeal of Glass-Steagel. That opened the door wide. And that was truly a bipartisan effort, both Dems and Reps. loved it for different reasons, but who cares. The bottom line is BOTH PARTIES S%^K.
And money is at the root of the problem. Anyone here want to support public financing of elections?
Thom Simmons
Aug 11, 2009
gv, I would have to disagree with your read of the Reagan years. The chickens from most spending policies, whether they be Fiscal (Demand-side) or Supply-Side, are only seen 7-10 years out. It takes that long for bureaucrats to write the regs that accompany the spending; for the spending to take place; for consumers and producers to believe its real and act on it in a long-term fashion; and for the multiplier effect throughout the economy to occur. The “stimulus” money that was earmarked for the U Mass system, for instance, is still sitting in an account as the Ivory Tower decides what to do with it. *Nothing* has been spent.
Accordingly, Reagan’s tax cuts and reduction of trade barriers bore their fruit during the Clinton administration (which is why Clinton wisely continued to press for the enactment of NAFTA, and continued to fund Transportation projects – he was a fortunate recipient of Reagan’s policies). Numerous incidents have come to light under the pre-Reagan reform whereby multinationals (including Citiback, first and foremost) logged their profits outside of the US in order to take advantage of healthier tax benefits; Reagan’s supply-side tax cuts resulted ina reversal of that trend, but that takes time. And I am at least consistent: the horrendous stagflation we witnessed under Jimmy Carter was really not his fault: it was the Nixon chickens coming home to roost.
RE: your comment that “poor people buy and drive old, inefficient vehicles,” allow me to extend that thought (And I agree with you, although I see it as a benefit of the market, not a problem: I am one of those clunker-drivers, and I would rather have access to a clunker I can afford than a shiny new car that is out of my reach.) My objection to the current cash-for-clunkers program (other than the brazen transfer of wealth from the taxpayers to a certain industry), is that those who really do own clunkers *can not afford to take advantage of the program.* Since one must buy a new car, it means you must *qualify* for credit for a vehicle that *still* will cost you five figures. So, the result of this theft is that those with the least income to spend are subsidizing those who who could otherwise afford to buy a new care anyway.
So much for helping the working poor.
Vis Unita Fortior
Aug 12, 2009
I agree that the Reagan administration were the ones responsible for fixing those economic problems but let’s not beat around the bush (tee hee) – he did it the same fashion as what’s going on right now, a bailout for the defense industry instead of the financial industry along with myriad other spending.
Especially since, in hindsight, Russia and China are still very substantial opponents that still dominate their spheres of influence, as in Georgia, and in fact it’s apparent that China is a more formidable opponent having been turned to capitalism – and it’s no coincidence that Deng Xiaoping’s southern “get rich” tour happened right on the heels of the Berlin Wall falling and the Soviet collapse. So the benefit of even the “defense” spending has evaporated much as the TARP funds have.
I’ll defer to your judgment, Thom, if you say it’s not going to work this time. But it’s difficult for me personally to be too critical of the current spending, particularly the prospective health care spending, since as you note “conservatives” of the past have at this point in history shown that they were in no way fiscally conservative. (I wish the past Republican administrations had come through on the promises of fiscal conservatism, so that there was some high ground to harangue the Dems from… but they were just crying wolf and that’s the legacy we’re left with to oppose any spending on liberal purposes.)
Thom Simmons
Aug 12, 2009
I am convinced that real prosperity does not come from a shot in the arm of Demand, but from increases in productivity. Much of the Obama spending is add-on office work and not increased productivity. If anything it will add to the cost of products…..and I have to say i agree with vizier on one important point: as i ‘place bets’ on where to place my money, I fully expect a difficult inflationary spiral in the years ahead. It will, unfortunately, be Bush’s and Obama’s faults, but it will come under some other poor soul’s administration…
Vis Unita Fortior
Aug 12, 2009
That’s interesting. How do you go about analyzing the productivity changes effected by TARP and other spending? If you have any links on that, or can recommend any books available through Google Books, I’d be keen to read them. (I should note that the last time I took a course in economics was in high school, although I do have half an undergrad degree in mathematics.)