It’s All About Jobs!
Posted by Michael A. Kamperman on October 2, 2009
Today’s unemployment report was a cold slap in the face to those thinking the economy has turned the corner and an economic recovery is underway. The official unemployment report rose to 9.8% and the economy lost another 263,000 jobs. The real U-6 unemployment rate reached a stunning 17%. There are currently 6 times as many people unemployed as there are job openings. The work week fell again to 33 hours. Wages rose by only a penny. Once again the labor department reduced the number of people officially looking for work by over 500,000. Since the beginning of the summer the Labor Department has thrown 1.5 million people out of the Labor force because they are discouraged. If I were unemployed and had failingly searched in vain for a job for months and months I would be discouraged too. However, I would still be unemployed and should be counted in the statistics. Without these revisions the official unemployment rate would be 11%. The Department of Labor statisticians are providing cover to a weak kneed Congress and Whitehouse that want to continually insist all is well because of the stimulus plan. At this point even they don’t believe the spin they keep giving us. We need a real plan to create real jobs.
The key to creating jobs is to restore credit. In today’s Wall Street Journal influential banking analyst Meredith Whitney detailed how credit is tighter than ever to small businesses. According to Meredith the two key credit sources of small business creation are credit cards and home equity loans. Both have been slashed by the banks and Meredith contends the banks will cut credit card lending by well over another trillion dollars. Small businesses employ 50% of the workforce in the U.S. Additionally, they create most of the new jobs in America. We cannot restore the job creation machine until we fix the broken credit markets that provide credit to small businesses and consumers.
President Obama’s chief economic adviser is Lawrence Summers. Larry believes we have probably entered a recovery because that is what the vast majority of econometric forecasts are predicting. But these forecasts rely only on data inputs from the post World War II inflationary era and do not incorporate the economic data from the debt-induced deflationary depression of the 1930’s in their models. Hence, the models are unable to accurately predict the trajectory of the economy. We need an original thinker advising the President and not someone captivated by the tools of the modern day economist. The President’s other key adviser is Christina Romer. She is touting that the actions taken by the federal government to date have avoided the risk of entering a depression. Maybe she doesn’t bother to read the details of the unemployment report. Both of these individuals should be fired along with Treasury Secretary Timothy Geithner, who prefers smoke and mirrors like phony stress tests to concrete solutions like a “bad bank.” The President should hire Meredith Whitney. She may not know how to get us out of the depression, but at least she understands we are in one and understands why we are in one.
