Unemployment

“The best way to appreciate your job is to imagine yourself without one.”-Oscar Wilde

Here is some bad news from a WSJ article, The Economy Is Even Worse Than You Think, written by MORTIMER ZUCKERMAN, editor in chief of U.S. News & World Report.

The Bureau of Labor Statistics estimates that 7.2 million people have lost their jobs since the start of the recession. Job losses over six months are the worst since WWII. The total jobs lost are now equal to the jobs gained over the past nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

The WSJ gives reasons why unemployment is worse than the official rate of 9.5% with 7.2 million people:

• Many companies (and states like California) are asking employees to take unpaid leave. These people don't count on the unemployment roll.
  
• 1.4 million unemployed people were not counted because they did not look for work in the 4 weeks prior to the most recent government survey.
  
• The WSJ estimates that 25 million workers are under-employed. 9 million workers (5.8%) are “employed” in part-time jobs because they cannot find full-time jobs. Another 11% of the workforce had their working hours reduced. The average workweek has slipped to 33 hours, the lowest level in 45 years. Factories are running at an average of 65% capacity.
  
• The prospects for new job creation are dim. When the economy does pick up, it is cheaper to assign additional work to the underemployed until they are full-time again. For many large companies, job cuts are permanent as entire divisions and plants have been closed.
  
• The average length of unemployment has climbed to 24.5 weeks (again the highest since numbers were first tracked in 1948). My own unemployment was about 25 weeks.
  
• State budgets are doubly hit as tax revenue is down and expenses are up assisting the unemployed. State and local governments, representing about 15% of the economy, are beginning the worst contraction in postwar history.

Bottom Line

So how is the government responding to the failed stimulus plan and record unemployment?

Option 1. Spend yet more money on a second stimulus plan.
Obama recently declared that the first stimulus “has worked as intended.” But Republican Minority Whip Eric Cantor says, “Let’s remember the context that we took this so-called stimulus bill up in. It was passed almost in the dark of night, 1,100 pages. No one in the House read that bill because the urgency was such that the president said we had to act now and if we acted now, we would stave off job loss and we’d get America back to work. That hasn’t happened.” The whole point of spending a trillion dollars (with interest included) was to keep unemployment below 8% and now it’s 9.5% and climbing.

Option 2. Let’s save the environment now with a “Cap & Tax” bill that places new burdens on struggling factories. “Job losses are so certain under this new cap-and-tax plan that it includes a provision accommodating newly unemployed workers from the resulting dried-up energy sector, to the tune of $4.2 billion over eight years.”

Option 3. Raise taxes now to provide Health Care for everyone
Another editorial in the WSJ looks at the Rangel plan to pay for Health Care by taxing small businesses. It ignores the fact that, “A new study by the Kaufman Foundation finds that small business entrepreneurs have led America out of its last seven post-World War II recessions. They also generate about two of every three new jobs during a recovery.” The current chief White House economist once wrote, "tax increases appear to have a very large, sustained and highly significant negative impact on output." In other words, tax hikes are an antistimulus. If the plan were adopted as written, the U.S. would have close to the most punitive taxes on small business income anywhere on the globe. How's that for biting the hand that feeds you?

Take to heart President Obama’s own words from February: “I expect to be judged by results and … I’m not going to make any excuses. If stuff hasn’t worked and people don’t feel like I’ve led the country in the right direction, then — you’ll have a new president [in 2012].”