Posts Tagged ‘residential mortgages’

The Dirty Secret About Our Unemployment Rate

January 9, 2010

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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