Conservative Political Commentary

...usually with an attempt at historical and economic context

Saturday, July 9, 2011

Unemployment Up! What a Surprise! But Why Is It Surprising?

Dreamstime.com
Economists were reportedly taken by surprise when the June unemployment figures showed 9.2 per cent unemployment, with only 18,000 jobs added. May’s figures were revised downward from 54,000 jobs added to only 25,000. Bureau of Labor Statistics figures show 14.1 million people unemployed, including 6.3 million unemployed for 27 weeks or more, and 982,000 discouraged workers among 2.7 million “marginally attached” to the labor force, people who wanted and were available for work, but not counted as unemployed because they had not looked for work in the 4 weeks preceding the BLS survey. Another 8.6 million were working part time when they would prefer to work full-time.


For an article on comparatively rosy expectations, see this.


The New York Times reports as follows:

Economists were stunned. They had been expecting job growth to strengthen in June as oil prices eased and supply disruptions caused by the Japanese tsunami and earthquake receded. Instead, the government’s monthly snapshot of the labor market showed that several industries, including construction, finance and temporary services, shrank. At the same time, leading indicators like wages and the length of the average workweek, which tend to grow before employers begin adding more jobs, actually contracted. [1]

Of course, these days, analysts always seem surprised at unfavorable economic news, perhaps still waiting for good results from Obama’s “stimulus,” and when the results don’t come, some complain that it’s because the stimulus was too small. Anyway, they don’t want us to cut spending any time soon.

The reasons for the unfavorable unemployment picture and its continuation are not that difficult to understand. The Heritage Foundation’s Morning Bell blog article of July 8 sums it pretty well. Mike Brownfield explains that in order to keep up with population growth, 100,000 to 125,000 new jobs are needed each month. Also, he quotes Rep. Paul Ryan and comments as follows:

“Investors and businesses make decisions on a forward-looking basis. They know that today’s large debt levels are simply tomorrow’s tax hikes, interest rate increases, or inflation – and they act accordingly.” [– Ryan]

It is this “debt overhang,” and the President’s threatened tax hikes, Obamacare, his incessant meddling in business (whether through the EPA or the NLRB) and the uncertainty those actions generate that are weighing on U.S. growth, investment and job creation today. [2]

The article contains some interesting insights, and I recommend reading the whole piece.

At best, business is risky, and when government adds threats of higher taxes, publishes new and invasive, costly regulations, and takes on ever-increasing debt, these things add to the already substantial market risks and can hardly help but slow things down. Everything we buy has been produced and sold by businesses, who have seen to it that we have stores (or website warehouses) filled with merchandise. Merchants are trying to put on the market the things that people want, in spite of all government’s efforts to stop innovation, competition, and profitability, and punish success. We should appreciate the fact that in order to have job growth, there must be profits and expansion. For some good information on the nature of business, see this.


The result of Obama’s economic activities will be to further slow or reverse economic growth unless serious changes are made. The Administration shows no inclination toward a pro-growth approach, but instead wants more spending and more taxes.


[1] Motoko Rich, “Job Growth Falters Badly, Clouding Hope for Recovery,” 07/08/2011, The New York Times.


[2] Mike Brownfield, “Morning Bell: An Economy in Panic,” 07/08/2011, The Foundry blog at The Heritage Foundation.


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