One unemployment number doesn’t make a trend, but today’s was about as bad as they get. In a continuing trend since the economic stimulus was passed in February of 2009, unemployment is trending badly.
This number was outside the standard deviation of expectations. I really can’t stress how ugly it is. There is no way to sugarcoat it. The economic policies used since October of 2008 are an abject and total failure. Not only that, but they have put the finances of the country in a precarious position that was not unforeseen.
Table A-15 in the BLS report is really all you need to look at. There are no silver linings in this report. U-6 jumped by .4%. 16.2% of all Americans that want to find a job can’t. Those are Americans that are actually seeking work. Thousands have gotten frustrated and simply stopped looking and aren’t included in those numbers.
Table A-12 shows how bad it is. The mean time looking for work is 39.9 weeks, with a median duration of 22.5. Both numbers up from 39.7 and 22.0. There are only 52 weeks in a year, the average job hunt takes the better part of it. The labour force participation rate is at a 25 year low, 64.1%.
Progressive/Liberal/Keynesian Economists will call for more stimulus. This will make it worse. Government spending, and activist government policy at all levels are putting a choke hold on private expansion. The competition for an investment dollar between government and the private sector is being won by government. That’s why T-bill rates are so low.
QE3 will only make it worse. It will cause commodity inflation as the dollar declines in value. QE3 artificially will keep interest rates low, not allow prices to correct imbalances in the economy and cause more uncertainty to permeate economic decision making.
This number puts a huge focus and pressure on politicians debating the debt ceiling. What is obvious is that gridlock is not good. The other obvious point is that Keynesian economics is a total fail. Fred Barnes quoted FDR Treasury Secretary this morning in the WSJ
“In FDR’s time, a surge in spending by Washington was a cornerstone of New Deal efforts to lift the country out of the Depression. But unemployment never dropped below 14% in the 1930s and rose to 19% by the end of the decade. “Now, gentlemen, we have tried spending,” Henry Morgenthau, FDR’s Treasury secretary, confessed to House leaders in 1939. “We are spending more than we have ever spent before and it does not work.”
Combine that with James Pethokoukis column yesterday that lays out exactly how dire the future budgeting and debt of the US is and you have an actual, not manufactured, crisis that needs to get resolved today.
The economic environment requires the progressive wing to give up their reliance on theory that only works in a textbook. Economics is a social science and a study of human behaviour. Keynes postulated a theory and we have numerous empirical examples of that theory failing miserably. Einstein said the theory of insanity is doing the same thing over and over again, and expecting different results. There, my friends, is the core principle of Democratic policy. Insanity.
The Obama administration hasn’t killed the economy only via stimulus. There is a litany of aggressive actions to limit and enstrangle business activity through regulatory fiat. Virtually every US bureaucratic agency is on the march to write regulations that allow for virtual government control over all industry. The more government meddles, the worse it gets. Dodd-Frank and Obamacare are shining examples of how to screw up a free market economic system.
It’s time to think out of the box. Why can’t city bus service be privatized? Why can’t the federal government begin selling off acres and acres of private land? With the oil supply fixed, and demand rising, why can’t we explore for indigenous sources of oil? Why can’t federal agencies be streamlined and consolidated-with the requisite layoffs of government employees that must occur. Simply look at how we regulate banking to see how screwed up our bureaucratic system is. Banks have to report to no less than 10 regulators. Dodd-Frank will add even more layers of regulation. No wonder fees are going up, and private lending is down.
Many decry corporate expansion and jobs going overseas. Do you blame corporations? Or do you blame the disincentives set up by the Federal government? Aggressively high corporate tax rates, hugely expensive costs to employ even one more worker, reams of regulation. Corporations are making the easy choice. It’s cheaper to set up a supply chain and produce off shore than it is to produce in America. Then, their money stays off shore too. Other countries benefit.
Rahm Emanuel as Chief of Staff said, “Never waste a crisis.” Capitalists that reside in the terra cotta dome in Washington DC ought to heed those words. America is in an economic crisis handmade by American policies. It’s time to reset that policy. Unfortunately, the Obama administration has appointed neo-government ideologues that cannot go away until 2012.
The way out is through aggressive tax cuts, privatization of large swaths of all governments, and reform of benefits. Without it, we will go broke. The maths doesn’t add up.