The Economy is Even Worse Then You Think (from WSJ)
July 14, 2009
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There was a couple of good posts in the WSJ over the past two days that talked about future Unemployment and Underemployment. There are a lot of reasons why the official government employment numbers are worse then what is being reported and are likely to get worse not better in the near term. If you thought that Unemployment was measured by how many people are on the unemployment rolls you would be wrong as the Bureau of Labor Statistics only surveys a selected population of workers to get an estimate on the current status. It also fails to count people that are unemployed and have decided to stop looking for work, or had their hours reduced in the official tally.
Here are the articles
Mandating Unemployment by Editorial Staff, WSJ 13 JUL 2009
The Economy is Even Worse then You Think by Mortimer Zuckerman, WSJ 14 JUL 2009
There are some very real fears for me as far as where the U.S economy is going.
1. The third scheduled increase in the Minimum Wage on July 24th will accelerate the decline in jobs that had been slowing. I have plotted the minimum wage increases in respect to the monthly unemployment rate and the months following have shown an increase in the rate of new claims (data from 1993).
2. The defecit between Government Spending and Government Revenue will lead to higher taxes and therefore take even more private capital out of the market.
3. Despite what Ben Bernake says, the Fed will not be able to reverse its monetary policy in time to stop inflation and even if they are able to intervene at the correct time the raising of interest rates to constrict the money supply will result in unaffordable debt rates that Americans have been using to fund the growth through household debt.
4. Future government intervention, CAP and TRADE, Health Care, Second Stimulus, Homeowner Bailouts, etc., are going to make things worse. The current year deficit has already reached 1 trillion dollars and the CBO is predicting the possibility of 1.845 Trillion by the end of the year. Throw in a natural disaster or two, a flare up somewhere in the world and you can completely throw that number out the window.
If you are not concerned about what our Federal Government is doing today, then you are probably not paying taxes, don't have children or have all your investments in gold bullion.
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