The Growing Unemployment Problem
Posted by Ray on August 6, 2009 under Main | 
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At every turn we keep hearing that unemployment is “less bad” which is probably not exactly comforting for the 500K+ a week that are filing initial unemployment claims. We also keep hearing this nonsense about a “jobless” recovery which is an oxymoron to say the least. Our economy is driven by consumption and when you have large tranches of unemployed combined with lower incomes and dwindling savings consumption is going to take a significant hit.
There is simply no way that I can foresee a jobless recovery and, from my perspective, we have not seen top line growth of revenue from corporations. Even same store sales were terrible with ultra-low expectations. Regardless, the growing silent employment numbers are those who are seeking extended and emergency unemployment claims.
While the media is pointing out the growing ranks of the unemployed by telling you about the 9.5%, soon to be 9.6-9.7%, they are not giving you the full view of the plight of the unemployed. Once your initial unemployment benefits go away you are now eligible, if your state has a high unemployment rate, extended benefits and thanks to the stimulus, which I am sincere about, you can obtain emergency unemployment benefits.
Each of these areas of the unemployment sector has grown pretty substantially and show little sign of cooling in the near-term. Below you can see just how bad these claims have increased over the last 7 months. This is telling us that people are not finding a job which is just plain scary and I hope the best for them at this time.
It is highly unlikely that this number will turn around anytime soon, unless they find a new way to calculate the numbers. Until these numbers come down we are in for some tough times ahead and it will have an impact on GDP. Although, government spending and jobs will likely boost some aspects of GDP it is simply an artificial boost to the numbers and, in my opinion, one should discount the government’s intervention in GDP growth.
The government is hiring people for the sake of hiring people which means they will be less productive than in other areas of the economy. I view this as a malinvestment and an investment that the taxpayers will ultimately be paying for. The government might as well just give the money away since an unproductive job robs the economy of assets it could otherwise use in another productive manner. This is simply welfare for the working.
Either way, the problem is growing even with “less bad” data and we need to start reevaluating Keynesian economic theory as it was disproven years ago with stagflation and start moving in a more productive manner. If we do not then it is highly likely that we will see a repeat of the 1970’s at best or we could repeat the 1930’s at the worst. Either way our current path is not working and is doing much more damage than good, just look at the dollar for evidence of the damage.
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