No New Jobs but the Unemployment Rate Falls. Strange.
Unemployment fell a huge 0.4 percent. All by adding 36,000 jobs (see Santelli Slams CNBC Panelists for Spinning Jobs Report by Julia A. Seymour posted 2/4/2011 on Business & Media Institute).
Jobs are heading up and down at the same time. The Bureau of Labor Statistics announced the morning of Feb. 4 that only 36,000 jobs were added in the month of January, but the unemployment rate dropped from 9.4 percent to 9.0 percent.
To be frank, there is no way 36,000 new jobs could move the unemployment rate 0.4 percent. So this official unemployment rate (U3) is not giving the full picture. It only measures the number of people without jobs who’ve looked for work within the past four weeks. U6 would give a better measure of the economy. This unemployment rate includes U3 plus those underemployed (i.e., working somewhere where they are overqualified) and those who have quit looking. Because the economy is just in the toilet. This number (U6) also went down. But only from 16.7% to 16.1%. Which means that the real unemployment out there is almost twice the actual number the government is reporting.
Cooking the Books on Unemployment
So how can they report the ‘official’ unemployment rate so much lower than actual unemployment? Easy. You just don’t count as many unemployed people (see Missing Workers: 4.9 Million Out Of Work And Forgotten by Lila Shapiro posted 2/4/2011 on The Huffington Post).
Over the last three years, nearly 5 million U.S. workers have effectively gone missing.
You won’t find their photos on the backs of milk cartons. The Coast Guard isn’t out looking for them. No missing-persons reports have been filed. These are jobless Americans who have grown so discouraged by their unsuccessful searches for work that they have simply given up the hunt. They are no longer counted among the 14.5 million Americans officially considered unemployed as of the end of last year, according to the Department of Labor.
You see, if you want to have a lower unemployment number, all you have to do is exclude a lot of the unemployed from the equation. Of course, the question everyone must be asking is why? Why would the government do this? Well, there is a presidential election in less than 2 years. And presidents find it very difficult to win reelection if you have an unemployment rate greater than 8%. Especially when you spent a lot of money on bailouts and stimulus spending to keep the unemployment rate under 8%. And the unemployment rate goes up instead of down.
The Ronald Reagan way was the Better Way
The Obama administration took a shellacking at the 2010 midterm elections. Everything they’ve done to fix the economy has failed. So Obama has been trying to go Ronald Reagan. To make that connection to the American people. So he can win reelection and keep pushing the same failing policies.
The urge to become a Ronald Reagan is understandable. He was great. And when you’re not it’s natural to aspire to be someone who is. The problem is, President Obama is no Ronald Reagan (see Morning Bell: The Reagan Recovery vs The Obama Recovery by Conn Carroll posted 2/4/2011 on Heritage’s The Foundry).
According to the National Bureau of Economic Research, our most recent recession began in December 2007, lasted 18 months, and ended in June 2009. The last recession that lasted this long began in July 1981, lasted 16 months, and ended in November 1982. In his 1983 State of the Union Address, President Reagan described an economic situation that mirrored our own today: “The problems we inherited were far worse than most inside and out of government had expected; the recession was deeper than most inside and out of government had predicted. Curing those problems has taken more time and a higher toll than any of us wanted. Unemployment is far too high.” But where President Obama responded to an economic recession with a bigger than $2 trillion expansion of government (more than $1 trillion on health care and almost $1 trillion in economic stimulus), President Reagan passed the Economic Recovery Tax Act of 1981, which cut marginal income tax rates across the board permanently. And the differences don’t end there.
Where President Obama promised government action that was “bold and swift,” President Reagan said: “The permanent recovery in employment, production, and investment we seek won’t come in a sharp, short spurt.” Where President Obama used tax credits, subsidies, and bailouts to perpetuate industries in need of adjustment, President Reagan said: “Quick fixes and artificial stimulants repeatedly applied over decades are what brought us the inflationary disorders that we’ve now paid such a heavy price to cure.”
Reagan cut taxes. Obama spent money. And how do these actions compare?
According to the National Bureau of Economic Research, our most recent recession ended in June 2009, which means we are now in month 19 of the Obama Recovery. Today’s 9 percent unemployment rate marks the 21st consecutive month of unemployment at or above 9 percent, a post–World War II record. Unemployment is only 0.4 percentage points lower today than when the Obama Recovery began. Contrast those results with the Reagan recovery: 19 months into the Reagan recovery, in June 1984, unemployment stood at 7.2 percent. That is a full 3.6 points lower than when the Reagan Recovery began.
Well, the solution to our economic woes is simple. Stop being Barack Obama. And start being Ronald Reagan. Because Reagan knew that government wasn’t the solution. It was the problem. And the sooner Obama learns this the better our economy will be. And this isn’t theory. It’s just history.
Tags: cut marginal income tax rates, cut taxes, economy, fix the economy, government wasn't the solution, Obama Recovery, Reagan Recovery, recession, Ronald Reagan, U3, U6, unemployed people, unemployment, unemployment rate