The Dirty Secret About Our Unemployment Rate

First of all, did Obama’s stimulus create jobs and help the economy?  I put it this way the other day, while writing an article about how ObamaCare amounts to a profoundly dishonest and secretive scheme to hijack one-sixth of the economy:

It’s rather like the stimulus.  Obama fearmongered the economy to get his $3.27 trillion stimulus-porkulus through Congress.  Obama falsely promised that unemployment wouldn’t go above 8% if it passed.  The legislation was raced through so quickly that no one could have even possibly read it.  Obama has said it was a success, citing the never-before-in-history-seen category of “created or saved jobs.”  But even then, he had to resort to a series of galling lies to sell his giant failed stimulus.  Not only were jobs created out of thin air (Obama claimed that a single lawnmower created 50 jobs through his website!!!) to fraudulently make a failed stimulus appear successful, but phantom congressional districts and even zip codes that don’t exist began to collect huge sums of stimulus money.  Meanwhile, the thoroughly dishonest Obama administration transformed their stimulus into a gigantic Democrat slush fund, with double the money going to Democrat districts and with no regard to unemployment.

The answer is readily obvious.  No, the stimulus didn’t help the economy.  As a solid plurality of Americans now rightly believe, the stimulus HURT the economy.

And they are right.  What we find out when we look at the economies of countries that either had or did not have stimulus packages is that the countries with huge stimulus packages (like the U.S.) had much more unemployment than the countries that didn’t:

As President Obama and other Democrats have correctly pointed out many times, this has been a worldwide recession. But if Summers and Biden are right in their assessment of the stimulus measures, one would think that the U.S. economy should be recovering better the many other countries, countries not wise enough to follow Obama’s lead of an extraordinary $787 billion increase in government spending.  It is also particularly timely to evaluate the spending since Christina Romer, the chairwoman of President Obama’s Council of Economic Advisers, told Congress today that the stimulus had already had most of its impact on the economy. [...]

But it is not just Canada where the unemployed are faring better. Other countries, too, decided against a massive stimulus plan. In March, with German Chancellor Angela Merkel nodding in agreement at his side, French President Nicolas Sarkozy declared: “the problem is not about spending more.” Later that month, the president of the European Union, Prime Minister Mirek Topolanek of the Czech Republic, castigated the Obama administration’s deficit spending and bank bailouts as “a road to hell.” The Washington Post wrote that there was a “fundamental divide that persists between the United States and many European countries over the best way to respond to the global financial crisis.”

The unemployment rate in the European Union was higher than in the United States to begin with even before the Obama administration’s spending. By January, the EU unemployment rate stood at 8.5 percent — almost a whole percentage point higher than ours.  So what has happened since the big U.S. stimulus spending spree was passed? We more than caught up with the EU’s high unemployment rate.  By August, the last month data is available for the EU, the U.S.’s unemployment rate slightly exceeded the EU’s — 9.7 versus 9.6 percent.

Germany has particularly been out front resisting the call for more public spending.  Yet, from January through September, the German unemployment rate only rose slightly, from 7.9 to 8.2 percent.

Data on unemployment rates from 27 countries from Japan and South Korea to Brazil and other South American countries to Europe shows that from January to August display the same consistent pattern.  Even in the EU it isn’t just a few countries that are driving the relatively small increase they have experienced.  The U.S. had a larger increase in unemployment than 22 countries — that is, 81 percent of the countries had a smaller increase in unemployment this year than the United States. Unemployment in some major countries such as Brazil and Russia has actually fallen since January (see Table here).  Other countries, from France to Mexico to Australia to Switzerland, have seen unemployment increase by only about half the amount of the U.S. rate. Indeed, the average increase in unemployment for the 27 countries is slightly less than half the US increase.

The article should be read in its entirety to see just how powerful the evidence is that the stimulus failed.

In other words, to the extent that there has been any improvement in the economy, it has been in spite of – and VERY CLEARLY NOT because of – the stimulus.

And one of the most frightening things we have in the wake of the failed Obama stimulus is shockingly high unemployment levels.  The Obama White House said that if Obama’s stimulus wasn’t passed unemployment would rise to 9% (it was 7.6% when Obama took office; and the Obama White house said it would remain under 8% if the stimulus was passed).  But it didn’t, did it?

Thus we come to Obama’s dirty little secret of unemployment:

Unemployment: The Dirty Little Secret Everyone’s Ignoring

By John Lott – FOXNews.com

The problem of people getting discouraged and giving up looking for work is ballooning.

The unemployment rate might be stuck at 10 percent, but the more detailed numbers in the Department of Labor’s Household survey data paint a more dire picture. The number of people with a job fell by 589,000 in December. Even worse, the number of people not in the labor force grew by an astounding 843,000 during just the last month. The Household survey data is what is used to measure the unemployment rate.

To get an idea of the size of this increase in the number of people not in the labor force, since February, when the stimulus package was passed, I repeat, the number of people not in the labor force has grown by 3.2 million. But the number for December represents 26 percent of the entire increase over that period of time. The problem of people getting discouraged and giving up looking for work is ballooning. Of course, they have had good reasons to be discouraged. Similarly since February, the total number of people employed has fallen by 4 million.

In September, Larry Summers, President Obama’s top economic adviser, claimed: “We have walked a substantial distance back from the economic abyss and are on the path toward economic recovery. Most importantly, we have seen a substantial change in the trend of job loss.” Christina Romer, the chair of President Obama’s Council of Economic Advisers, made a similar statement today. While conceding that the December numbers were a “slight setback,” she argued: “In a broad sense the trend toward moderating job loss is continuing, consistent with the gradual labor market stabilization we have been seeing over the last several months.”

The growth in the U.S. unemployment rate has continued to outpace the rest of the world. Since February, the average unemployment rate for the European Union has grown by 1.2 percentage points. By contrast, the US unemployment rate has grown by 1.9 percentage points — a 58 percent greater increase. Nor does the rate look particularly strong compared to what economists were predicting at the beginning of the year. Back in mid-January, business economists and forecasters surveyed by The Wall Street Journal expected the December unemployment rate to be at 8.6 percent.

Unemployment should start to improve, but the numbers indicate that the improvement in unemployment that economists and forecasters were predicting has occurred much more slowly than was expected at the beginning of 2009. By moving huge amounts of money from one industry to another, the stimulus as well as all the regulatory changes have caused a lot of churning in the labor market — movement of people from one job to another than has caused temporary unemployment. Unfortunately, the huge number of people who have withdrawn from the labor force represent a big hangover that will make reducing unemployment a slow process.

The “unexpected” (the lamestream media always naively expects good news when Democrats are in charge) and disappointing December job numbers released yesterday have more economists worrying about a double-dip recession.  We lost jobs even during the Christmas temp hiring frenzy, which will force the federal reserve to keep interest rates artificially low, which will have a negative impact on our economy down the road.

Obama could care less about the millions of workers who have despaired of finding a job to the point where they don’t even bother to look for work any more, because those people fall off out of the measurement categories.  If you consider them, unemployment is now at 17.3%.

Let me introduce you to an economist who – unlike so many others – was correct in her prediction of the economic meltdown: Meredith Whitney.

Unemployment is likely to rise to 13 percent or higher and will weigh on the economy for several years, countering government efforts to stabilize the banking industry, analyst Meredith Whitney told CNBC. [...]

“We underestimate how much the whole economy is dependent on the mortgage industry, and that has to change,” Whitney said. “This is what happens when you delay the inevitable. We’re buying time here, but we’re not restructuring the economy.”

Not only has Obama failed to improve the mortgage industry, but what he has done has actually made the system WORSE, even according to the left.  I mean, even the New York Times has said Obama’s solutions are adding to the housing woes.  The first paragraph of their article said:

The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.

To serve as an ironic reminder of Obama’s message of “hope and change,” here’s a recent Business Insider article entitled, “How Obama’s Mortgage Modifications Are Making Things Worse By Giving Desperate Homeowners A False Sense Of Hope.”

Well, Obama promised hope.  If you were dumb enough to believe his promises had any reality, then doom on you.

And it isn’t any better for residential mortgages:

(June 9) – Commercial real estate mortgage defaults are at a 15-year high and will more than double by the end of 2010, according to a new report from research firm Real Estate Econometrics (REE).

And again:

NEW YORK, Jan 7 (Reuters) – U.S. commercial mortgage-backed bond defaults may more than double this year as the economic recession hurts office building, retail store and multifamily housing assets, Fitch Ratings said on Wednesday.

It was the mortgage industry – imploded by Democrats – that caused the economic implosion of 2008.  And our failure-in-chief hasn’t done a damned thing to make that industry better.  All he’s given, characteristic of his entire presidency, is false hope.

And now we’re looking at a double dip for the housing and mortgage industries, as well.

One day, years from now, an honest Obama administration official (if there is one) will be saying something similar to FDR’s Treasury Secretary:

“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong… somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises… I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot!” – Henry Morganthau, FDR’s Treasury Secretary, May 1939

In April 1939, six years after FDR rolled out his failed New Deal, unemployment was still at 20.7%.

We are now only 3.4 percentage points away from Treasury Secretary Henry Morganthau’s moment of clarity.

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6 Responses to “The Dirty Secret About Our Unemployment Rate”

  1. Matthias Wayland Says:

    The way to expose the actual unemployment disguised by Obama’s fudged numbers is to just quit using them. Just go straight to the employment-to-population ratio. Then you’ll see that 1 out of 5 men between 25 and 54 is out of work.

  2. Richard Says:

    Michael,

    I stumbled across your blog and I have to say, you are dead on. I like what you say and the way that you say it. You certainly sound like the type of conservative that the blogosphere needs.

    Would you consider writing for the Conservative Alliance? We need more sane conservative voices who know what is important and who put substantive change over emotional rhetoric.

    Let me know. Drop by and check out our media site at http://media.conservativealliance.org. Let me know what you think.

    Regards,

    Richard Dean – ConservativeAlliance.org

  3. Michael Eden Says:

    The way that unemployment was calculated got changed during the Clinton administration (figures), and we’ve been using basically fudged numbers ever since.

    You’ve got your people who are unemployed, receiving unemployment benefits, and your people who are actively looking for work using the bureaus of employment. Those are the only ones being counted. Then there are the millions who have used their benefits and just given up – and that number is just going up and up and up. In addition to that are the millions who want to work full time, but can’t. And then there are millions who are underemployed (your people with MBAs working at McDonald’s).

    Thanks for all the hope and change, Obama.

    We’re no longer just talking about a double-dip recession (that’s like two scoops of recession); we’re talking about a lost decade like what they had in Japan. That’s where the government just keeps putting more and more money into the system, but nothing happens. And nothing happens because the government has hogged all the money in the system, so that businesses can’t do anything; and the government kept bailing out sick “too big to fail” businesses rather than letting them fail. Pretty much what Obama’s doing now – except Obama’s also creating such a climate of uncertainty that businesses would be afraid to hire even if everything else looked good (such as forcing them to pay for health insurance, and forcing them to unionize their employees).

  4. Michael Eden Says:

    Richard,
    I’ll be happy to look over your site and tell you what I think (although I’m a tad backlogged at the moment).

    But don’t think that I don’t have any “rhetoric,” cause I’ve got plenty. It’s just that what I try to do is provide the reasons and the substantiating documentation for all of my rants :)

  5. Pete Murphy Says:

    Unemployment, both in the U.S. and the world as a whole, marches ever higher because the field of economics doesn’t account for the relationship between population density and per capita consumption.

    Following the beating the field of economics took over the seeming failure of Malthus’ theory, economists adamantly refuse to ever again consider the effects of population growth. If they did, they might come to understand that once an optimum population density is breached, further over-crowding begins to erode per capita consumption and, consequently, per capita employment.

    And these effects of an excessive population density are actually imported when a nation like the U.S. attempts to trade freely with other nations much more densely populated – nations like China, Japan, Germany, Korea and a host of others. The result is an automatic trade deficit and loss of jobs – tantamount to economic suicide.

    Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!

    If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at http://PeteMurphy.wordpress.com.

    Pete Murphy
    Author, “Five Short Blasts”

  6. Michael Eden Says:

    Pete,
    I agree with the gist of what you’re saying, but just from reading your comment, I would get the sense that a nation’s economic system, regulation and taxation make absolutely no difference to its economic production. And of course they do.

    I would submit that some of the structural issues that you describe are very real – and we have to figure out how to adapt to these issues. But there is a lot more we can do to improve our economy.

    We need to pursue limited government, sane spending and sane fiscal policies, and create a climate favorable to economic growth by reducing all the burdens that make expansion of productivity possible and profitable.

    And THEN we need to deal with the structural issues you are talking about.

    I say that because the alternative is to pursue globalist one-world government – which many liberals want. The alternative is what SEIU president Andy Stern talked about when he said, “What we’re working toward is building a global organization. Because workers of the world unite? It’s not just a slogan any more; it’s a way we are going to have to do our work.”

    I say that because your own discussion forces the following point: if we pursue economic redistributionism with the global economy, what will happen to the American lifestyle? It’s going to go down FAST as we give our wealth away to all the less developed countries.

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