If you think you know the full story about the unemployment problem, think again. The media has yet to really put the extent of the problem into perspective. To be fair, some of the blame must go to the methods of measurement and political distortions that cloud conventional logic. Where are our “job creators”? The preservation of the tax cuts was supposed to loosen the floodgates of new jobs. They have had 4 years to make it happen. So where are we now?
The noted author, economist, Nobel Prize winner, and professor of Economics and International Affairs at Princeton University, Paul Krugman thinks that Washington has lost focus on the biggest issue we face and that we are, in fact, not on the way to a recovery. In an article for the New York Times, he says that government officials are in denial about what is obviously not the result of a natural disaster or economic debacle in Europe but an emergency in our own country. Washington created a firestorm over the deficit and cutting spending ? an easy diversion that people relate to in our current state of affairs ? while solving the unemployment problem is much more urgent and could solve both problems at the same time. When people have jobs they grow the economy, make money to pay bills, pay taxes and purchase goods. More revenue reduces the deficit and results in real growth.
The Fed has been of little help, distracted by the possibility of inflation as opposed to the reality of unemployment. Now Bernanke, chairman of the Federal Reserve, has declared a two year moratorium on any increase in interest rates. Some could construe that as a way to encourage more money to flow into the stock market but it has signaled to the world a lack of confidence in our country’s ability to turn things around any time soon. Businesses get mixed messages from Washington. It is no wonder they cannot make a decision on how to proceed – to grow or to stay in a holding pattern.
Chris Isidore in an article for CNNMoney.com quantifies the problem. The unemployment rate reportedly fell from 10.1% in October 2009 to 9.1% currently. Those numbers do not include the number of discouraged people who have dropped out of the workforce. A better gauge of employment according to some economists is the employment-population ratio or “e-pop”. Last month 58.1% of Americans 16 and over were employed ? less than before the recession and the lowest since 1983. The Labor Department estimates 6.6 million people have left the labor force, an increase of 1.9 million since the start of the recession. College students are staying in school longer and some baby boomers are retiring from the workforce.
Many of those who have stopped looking for work were collecting unemployment benefits or disability benefits. Once the money ran out so did the incentive to look for a job. The workforce is shrinking. A 9.1% unemployment rate is realistically understated. Yet Washington continues a preoccupation with further contracting the economy and cannot focus on an effective policy to create jobs and stick with it.
Until there is a change in the policies on all fronts, consumers are left with no alternative than to preserve what they have and hope for better leadership in the future.
Page Perry, is an Atlanta-based law firm with over 125 years of collective experience representing investors in securities-related litigation and arbitration. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.