The University of Maine student newspaper since 1875
Sunday, April 19, 11:08 p.m.

Unemployment rate still too high, despite reports to contrary

Last Friday’s drop in unemployment will undoubtedly be used as a gambit by Democrats in the fiscal cliff negotiations. Obama will tout it as the first “baby step” toward full recovery from the 2008 financial collapse that’s supposedly been ongoing for the past four years. This is why we need more stimulus spending and tax increases, he’ll say, in that slightly condescending tone he adopts when explaining things to the American people.

“A decrease in unemployment is a sign the economy is recovering, right?” he’ll ask.


Let’s look at a breakdown of the unemployment rate.

According to the Bureau of Labor Statistics, the workforce added 146,000 new jobs last month.

The biggest addition was retail, which unsurprisingly added 53,000 jobs to keep up with the demand caused by holiday shopping and sales.

However, the number of people who are unemployed, which is 12 million, has remained largely unchanged.

This is because the labor force actually shrunk by approximately 350,000 jobs last month because the government, in all its infinite wisdom, stops counting people as jobless after 27 weeks.

Aside from this, manufacturing jobs fell by 7,000 last month.

The government added 35,000 new jobs last month and has accounted for 73 percent of job creation over the past five months. Among government workers, the unemployment rate fell to below 3.8 percent, which is considered full employment.

But in the public sector, the labor force participation rate is 63.6 percent — the same as in September when the unemployment rate was 7.8 percent.

Long-term unemployment, individuals who have been jobless for 27 weeks or more, accounts for 40.1 percent of unemployment — that’s 8.2 million people. Again, that number remained unchanged this month.

Clearly, the only reason the unemployment rate fell is because the workforce shrunk.

And let’s remember, Obama promised us that the passage of the 2009 stimulus package would result in a current unemployment rate just above 5 percent.

Yet, we’ve had two stimulus packages, plus talk of another one, while unemployment is two points higher than he predicted.

But what do you expect from someone who tells business owners that they owe their to success to “investment” in roads and bridges?

First of all, there were successful businesses before the federal highway system.

Second, an investment is made with the promise of future return. There’s no return in roads and bridges, only more costs, spurred by the need for maintenance. And the people who are “investing” in them are taxpayers.

Even famed economist John Maynard Keynes understood that government stimulus has to be limited.

Most stimulus spending, particularly the kind Obama touts — infrastructure and energy — is infrastructure. That’s mostly construction and maintenance jobs, which are temporary jobs.

The real unemployment rate, which looks solely at the number of unemployed individuals regardless of how long they’ve been jobless, is somewhere around 14.4 percent.

When this number, the number of long-term unemployed individuals starts to decrease, maybe then we can start talking about a real economic recovery, but not before them.

The idea that any elected official would tout this number shows a fundamental lack of understanding in how markets work, as does the insistence that throwing government funds at areas that don’t necessarily have a demand can stimulate growth.

The real solution, cut spending and taxes, thus lowering the cost of business and let markets dictate growth.