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Mirage Of Lower Unemployment Numbers

Blog Mar 26, 2013

For all the optimistic talk regarding Unemployment and our economy in general, the U.S. is not progressing, and comparing this recession to previous recessions we appear to be going backwards, which is amazing considering the sheer amount of stimulus that has been pumped into the system.

We have witnessed the most aggressive monetary stimulation policy in American history which has increased the money supply by a trillion dollars and over the past three years. Instead of growing, the economy has been in contracting. The annual growth rate for gross domestic product in 2010 and 2011 was 2.4 percent. In 2012 that figure dropped to 1.5 percent. The collective growth for the last 12 quarters has been a mere 6.3 percent which makes it the weakest of the last 11 recession recoveries going back to the close of World War II.

Economic detractors are lined up in such a fashion as to hint that things will limp along for some time to come. The new health care tax will siphon $30 billion off of the economy. The 2% jump in payroll tax will affect around 160 million workers and remove $110 billion from their expendable incomes. The great sequestration will pull $600 billion out of government spending and the economy in the upcoming 10 years. The latest increase in gasoline prices of 50 cents per gallon will undoubtedly pull consumer discretionary income down further.

The February unemployment rate as seen in the press was 7.7%, a drop from 7.9% in January. But if you consider those who are left off the list, such as “discouraged workers” no longer looking for a job, or involuntary part-time workers and others who are “marginally attached” to the labor force—then the unemployment rate is between 14% and 15%.

The 236,000 net new jobs added to the economy in February is something less than the whole story. The gross number of new jobs included 340,000 that came from the part-time, low wage category. Many of these new jobs, rather than being taken by those who are unemployed, are going to people who are already working at second or third jobs.

The time to reach a new peak in employment after the onset of a recession, at least since World War II, has been 24 months. However, it has been over 60 months and we have still not seen that low water mark from 2007 on low unemployment.

Sources & References In This Article

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