Unemployment Reaches 10.2%, Highest Since 1983
Submitted by DeepDiveAdmin on Nov 6, 2009
The unemployment rate has surpassed 10 percent for the first time since
1983, and is likely to go higher. The AP's Mark Hamrick says this is
the 22nd month the economy has lost jobs, the longest on record.
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The media does such a poor job reporting news these days, particularly when it comes to the true state of the economy , anyone that considers it important information shouldn't waste a minute on the news, and rather go straight to the source:
http://www.bls.gov/news.release /pdf/empsit.pdf
The headline numbers reported by the media are the "seasonally adjusted", which are close to worthless as far as understanding the true picture is concerned. Not adjusted, unemployment has been flat at 9.5% for several months after peaking and drifting down earlier this year.
When all categories are included, that number is currently 16.3% and did increase in this report, after falling a tenth last month from the high of 16.2% the month before.
Where the nature of unemployment is especially grim is the length of time a worker stays unemployed after losing a job. Those numbers continue to grow every month.
Another gauge of length of time worth looking at is the new claims data released every Thursday:
http://www.workforcesecurity.doleta.gov/press/2009/110509.asp
Again, the unadjusted numbers are the ones to look at. With the recent extention approved by Congress, there is likely to be a big jump in those numbers in the next week or two, as those who exhausted their benefits while Congress was dinking around, will be added back in. Assuming it's done that way, the increase may provide some insight into how many people are running out of benefits each week, which is otherwise never reported.
Where the biggest bloodbath in layoffs takes place is roughly between December and February. Temporary holiday help are laid off, new construction falls off a cliff and manufacturing comes to a standstill as retailers ramp down post holiday inventories.
The "seasonal adjustment" factor tends to preload and backload the mass increase related to the holidays and construction. In other words, we won't really know the current situation until after the first part of next year.
It's certainly not good.
It's a good thing we had the stimulus package to prevent unemployment from reaching 8%, as Obama warned that it could.
What?
Oh, never mind.
I'm taking that comment and running with it since Obama annoyed me on this. He got those figure from his economic adviser Christina Romer. You can't hold her accountable for the projected unemployment number per-say. Throughout her analysis she repeated said that those numbers were very difficult to predict. Its much easier to predict the number of jobs the stimulus would create using multiplier theory and some versions of Okun's Law rather than the actual effects on the unemployment figure since that is very difficult to deduce. I suspect she said this and someone replied "get a number" and she low-balled the number without the stimulus due to the volatility of the figure (I thought it would peak at 11-12% without stimulus myself, but who am I?). All she could say with any confidence was this will create approximately X jobs, which would obviously reduce the unemployment number substantially from what it would be otherwise. That's all she could say with any confidence, but the administration demanding more (I believe).
However, even her numbers for job creation were off-the-mark from what Obama and Biden were citing because they used her analysis of a bill worth $775 billion worth of real stimulus, not random things that do nothing like business tax credits (whose multiplier is actually below 1) or the re-filling of food banks . The ARRA nominal value was about $787 billion, larger than the value analyzed by Romer; however, it wasn't $787 billion worth of stimulus like Romer's analysis of $775 billion of actual stimulus. While its a rough estimate, if I go line-by-line I found the true stimulus value of the ARRA was a measly nominal $593.4 billion with the rest going to things that are either ineffective (some business tax cuts) or have nothing to do with stimulating the economy . I'd argue that $150 million to fill food banks to help the homeless is a valid project on its own, but its not something that stimulates the economy. That number I give ($593.41 billion) does not even include things where the money allocation is technically stimulative, but its stimulus doesn't get a lot of bang for its buck - like $580 million to the National Institutes of Standards and Technology who employs only 3,000 people. So, the actual value is likely much lower than $593.41 billion that I cited. Compare this to many economists (with some notable exceptions like Robert Lucas, who turned out to be completely wrong about the Feds ability to fight the recession using monetary policy since he didn't recognize the liquidity trap, so I take his advice with a grain of salt) projections which thought the plan needed to be over $1 trillion (including Romer herself who wanted a $1.2 trillion package) of real stimulus. As a side note, a true stimulus worth $1.2 trillion would actually only cost the federal government $720 billion over 10 years due to the return on its investment and would actually get the economy going again - since if we do nothing, the long-term implications of waiting years for the economy to recover are significantly worse than any deficit concerns.
And yet we wonder why the bill has had only a slight impact on the unemployment figures. I don't consider 550,000 - 650,000 jobs created/saved (all things equal essentially) to be that great.
I think where Obama went wrong was he told the Congress to come up with something and they put countless different packages in it that were worthless and rather than saying it was unacceptable and a,b,c needed to go and d,e,f needed to be there, he just took what he got. He took the easy way out. Daron Acemoglu was against the ARRA, not because he thought a big stimulus wasn't appropriate; but because of some provisions being good, and some being worthless. He then made the suggestion that the package should have been in discrete units. One bill for infrastructure stimulus, one bill for individual tax stimulus etc so you could get the line-by-line discussion that should have been done. Have to say I agree with him.
Did the meager stimulus package help the economy? Yes, that's hard to argue with when you look at the numbers. But what it did was not nearly enough and great portions of it were just wasted money, and the blame squarely sits with Obama for this.