Friday, September 4, 2009

A 9.7% Unemployment Rate

But we only lost 216K jobs in August. For football fans the jobs data over the last 3 months has been akin to a team going 2-14 last season and now playing at about a 4-12 or a 5-11 level this season. It is still awful, the schedule was soft because you were a losing team starting in a depressed position, but you have a few guys who can play so that it's not a total collapse.

Looking beyond the clutter and in the details of the BLS report that monitors job losses, there are two very alarming trends. First, the total raw number of unemployed persons actually rose by 466K and employment fell by 392K. Second, another 143K people dropped out of the labor force. These are in Table A in the following link.

The "unemployment" line and the "not in labor force" line tend to go in different directions. In August the unemployment line went up significantly, which means that people are looking for jobs and not finding much. If they go back to leaving the labor force that's bad too, although the rate wouldn't top 10 or go up much. It's a case the unemployed being hopeful in August and that's why the rate went up significantly. More people are counted in the unemployment rate in August.

All in all, we are still akin to a 5-11 team. Looking ahead you don't necessarily see the makings of a good team because there are still a bunch of weak players such as Obama, a Democratic Congress, etc. plus you have fundamentals such as low interest rates, coming tax increases, looming bank failures, a debt problem, a ridiculous healthcare agenda, stimulus pork that isn't working, and a Fed that can't pump money into the well forever. It's one thing to go from 2-14 to 5-11. We may even go to 7-9 at some point this year. It's quite another thing though to go to 12-4 and contending for a title. With a president and congressional leaders and current economic policymaking that doesn't understand basic free markets, incentives, and business cycles, I have a hard time believing we're going to be making a championship run anytime for at least several years when we get a new administration who hopefully understands how to build a team. Although that's not inevitable because you do have teams that lose for decades. I hope that's not the case for America.

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