Posted on 07/06/2009 5:35:14 AM PDT by SeekAndFind
The June "Jobs" report issued by the Bureau of Labor Statistics (BLS) on July 2 caused shock and dismay. Payrolls declined by 467,000 jobs, more than the 345,000 lost in May, and much more than the 363,000 that economists had predicted. The only reason that the reported unemployment rate rose by only 0.1 percentage points (to 9.5%) in June was that many jobless people became discouraged and stopped looking for work.
As bad as the BLS report was, it should not have come as a surprise. The deteriorating employment situation could have been predicted as early as April 29, when the "Gross Domestic Product: First Quarter 2009 (Advance)" report was issued by the Bureau of Economic Analysis (BEA).
The BEA numbers (which were revised slightly on June 25) show an accelerating decline in "real nonresidential fixed investment". This measure decreased 37.3 percent in the first quarter of 2009, compared with a fall of 21.7 percent in the fourth quarter of 2008. Given that employment is a direct, linear function of private business investment (PBI), unemployment can be expected to rise much farther in the months ahead.
Here's why. Because a lot of PBI goes toward offsetting depreciation and increasing productivity, it takes a 5% year-over-year increase in PBI to produce a 1% increase in the number of jobs. Correspondingly, a 5% decrease in PBI will yield a 1% reduction in total employment.
The unemployment rate a year ago was 5.5%. Because the potential labor force is growing, we need employment to increase by 1% annually to keep the unemployment rate from going up. The 37.9% investment decline reported by the BEA can be expected to eventually produce a reduction in total employment of about 8.5%. Accordingly, we can expect unemployment to rise to about 14% within a year unless the downward slide of PBI is reversed.
The current 9.5% unemployment rate is causing great economic pain, and life with a 14% jobless rate would be much, much worse. Unfortunately, almost everything that the government has done or is proposing to do to right the economy is actually counterproductive.
Like the Bush administration before it, the Obama team is pinning its hope for economic recovery on "stimulus". Despite the fact that Bush's $168 billion stimulus package in early 2008 had no impact at all, Obama rammed a $787 billion stimulus bill through Congress in January. Now the administration is waiting anxiously for the "stimulus" to take effect. It should not hold its (collective) breath.
"Stimulus" is based upon the superstition that government borrowing and spending creates "demand". In reality, it does no such thing. "Stimulus" is like trying to raise the level of the Hudson River by dipping out a bucket of water, walking five feet downstream, and pouring it back in. The only difference between the Bush and Obama plans is that Obama's bucket is bigger (and will create more debt). Ironically, the July 2 jobs report prompted calls from leftist economists for Obama to go back to the river with an even bigger bucket.
While doing nothing to boost demand, Obama's "stimulus" will depress PBI, and therefore employment. This is because the "stimulus" plan requires selling an additional $787 billion in government bonds. The money to buy these bonds will have to come from somewhere, and much of it will come from people who would otherwise invest in starting or expanding businesses. Indeed, the bonds will have to be priced so that this risk-free investment is more attractive to investors than their other alternatives.
In the fourth quarter of 2008, the Federal government ran a deficit of $303 billion (and therefore had to sell $303 billion of new bonds) and business investment fell by 21.7%. In the first quarter of 2009, the Federal deficit was $650 billion and business investment fell by 37.3%. The economy is being forced to invest in Barack's Bailout Bonds rather than in businesses that create jobs.
Virtually everything the Obama administration wants to do will have the effect of increasing unemployment. As bad as joblessness is now, be prepared for it to get much, much worse.
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Louis Woodhill (louis@woodhill.com), an engineer and software entrepreneur, is on the Leadership Council of the Club for Growth. SE
Imagine your garden requiring a 24 X 7 armed guard.....
I think I might have had a hand in that term, hh.
:)
I heard they were talking about sneaking that into an unrelated bill, as they typically do.
Here in SW Washington, unemployment hit 13.5% in May, and there is no telling what it is right now. It’s bad, getting worse, and i really don’t see an end in sight given the three ring circus that continues to play up on Capitol Hill.
These schmucks....
grrrr :(
?
How about Detroit, Chicago, Toledo, Gary, Lowell, Fall River, Bridgeport, Newark, Oakland, East St. Louis, Michigan, New York, California.....
Here it is...
http://bearcreekledger.com/2009/05/23/3-year-unemployment-benefits-tucked-into-cap-and-trade-bill/
And thanks to the progressive (discriminatory) income tax, tax receipts drop even faster than the economy as a whole.
The Revenge of the Rich! Bwahahahaha!
Bump.
Bump.
I’ll read the whole thing tomorrow; I’m getting too aggravated.
Pond scum. All of them.
You’re right! How embarrassing...
hh
You might want to think about being in an area with good hunting/fishing close by.
A garden is seasonal, but, if you don't care about seasons, hunting and fishing is year round.
Just wait until the govt starts issuing IOU’s like Kalifornia. The natives are gonna freak when there is no welfare money. That is when the rubber is going to meet the road.
This loser administration better hurry up and admit its a depression so that they can still blame Bush for it. Wait a minute, 4 years from now they’ll still blame Bush. Never mind.
The ability to blame Bush was ceded this weekend when Joe Biden when he said they underestimated the seriousness of the downturn. They own this mess now.
the Bureau of Labor Statistics reports in Table A-12:
—the underemployment rate—is 16.5
http://www.bls.gov/news.release/empsit.t12.htm
Alternative measures of labor underutilization that “total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers”
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