Unemployment rising
On the Wall Street TV shows the talking heads agree that “the worst is over” as stock markets recover from the global financial crash. Their conventional wisdom is, now is a good time to get back into the market. Housing prices may be nearing a bottom, and manufacturing and trade are picking up again. The stimulus is working, and the Fed may soon raise interest rates and let the markets work unsupported from here.
NWOU is not in the business of economic forecasting, but we are smart enough to take a look at some of the negative indicators and case studies. Those of you who suspect the conventional wisdom might be wrong this time will be interested in the following stories.
Spain’s economy is forecast to fall into Depression, with unemployment hitting 25 percent.
In France and Germany, the recent slight uptick in GDP was financed by deficit spending for job creation. The Forecast: declines in consumer spending and increases in the unemployment rate will keep France and Germany from any robust recovery. Plant and machinery orders are down over 40 percent, year over year. Corporate profit reports look OK because firms are cutting jobs. Unemployment statistics look better than they really are because Europe is counting part-time workers as fully employed. Still, the unemployment rate for the Eurozone is around 10 percent and growing. Dreams of tax cuts and spending cuts are dying because of low tax revenues, high unemployment, lack of credit demand, and lack of business formation.
Edward Hugh notes in this article the threat of the generational time-bomb: An increasingly elderly population expects its health and pension promises to be kept by a younger generation that is poorly educated, overly unemployed, and saddled with a growing debt burden from socialist subsidy and bailout policies.
Every politician is aware of this calculus, but no national leader is willing to come forward and challenge his nation with choices that can solve the problem. This would involve funding for particular high-priority underfunded welfare programs while reducing and eliminating other programs. Instead Europe and America are acting more or less in lockstep, allocating funds to bank bailouts, new globalist financial initiatives, and employment subsidies.
Every nation faces the same set of problems, it is just a matter of degree of crisis. Now that all national leaders subscribe to free trade plus socialism, they uniformly believe that the ideal solution for each nation is to gear up industrial production for export and hope that consumers in other countries will buy enough to keep their GDP growing and their employment rates rising so that taxes will increase enough to stabilize or lower national debt payments. Since every country is trying the same export strategy, each nation’s central bank wants to keep its currency low relative to the others. This leads to a global war to destroy the value of each nation’s currency. That is why market-based currency exchanges around the world accelerate based on small news stories. Currency flows are fueled by a large, nervous market of global speculators.
Nakedcapitalism has a piece on the war between UK bankers and France and Germany.
In the United States, The New York Times observes that uncertainty about the Democrats’ healthcare takeover is keeping many companies from hiring.
Washington has a long piece on unemployment, including a look at commercial real estate problems and long-term demographic trends. Why the TARP and stimulus spending don’t create jobs.
“The U.S. economy has lost 6.9 million jobs since the recession started in December 2007, the most of any downturn since the Great Depression.”
If the national economy does not recover robustly, observers fear a fall in commercial real estate prices mirroring the fall in housing prices.
Bloomberg reports on higher unemployment rates in California, Nevada, and 25 other states. Remember, the U-6 unemployment measure is twice the reported rate, that is, the unemployed plus part-time employed plus too-discouraged-to-look-for-work rate is twice the reported unemployment rate. The national unemployment rate is really 20 percent, not 10 percent.
Edward Hugh looks at unemployment in Japan and Germany. Government subsidy payments to the employed create a “hidden jobless” component of the workforce. In other words, welfare payments (now usually called “stimulus”) mask the real rate of unemployment. Hugh believes the German government can only afford to subsidize its Kurzarbeit workers for another 18 months, and German corporate restructuring will force the unemployment rate higher in coming months.
Hugh tries to interpret Spain’s funny unemployment reporting.
The Wall Street Journal wonders how you can have a recovery with unemployment at high levels. Actually, you can have a “jobless recovery” if by recovery you mean higher corporate profits caused by layoffs and cost-cutting. Financial TV talkers like to focus on the corporate profits and dismiss unemployment as a “lagging indicator,” as if we should be rooting for corporations over people. Corporate profits are not the measure of an economy’s health.
However, this recession has been long enough that employment should be rising by now. The weekly unemployment increases are getting attention. Commentators are beginning to focus once again on the failure of the Democrats’ stimulus bill to stimulate. The Democrats know this and are responding exactly the wrong way again, with another stimulus proposal.
The Wall Street Journal evaluates government subsidy programs promising job creation in Michigan and finds such programs do not create any jobs. Subsidy money down a rathole. Raising taxes to pay for job creation programs is Marxist insanity. Marxist governors such as Jennifer Granholm are simply imitating the Democrats’ federal policies on a state level. But the states are failing badly and ruining their economies by pursuing socialist economics. The Democrats’ job subsidy programs may at best create short-term “statistical jobs.” But these programs come at a greater opportunity cost, real job creation through small business formation.
Remember, big corporations have not created job 1 in the United States for many years. Big corporations ship U.S. jobs overseas.
Mish links high unemployment with a low level of business creation. The lack of any incentives to small businesses in the Democrats’ stimulus bill is the fatal flaw. By now it should be obvious that the Democrats, and more generally the Europeans, have pursued wasteful and ineffective economic policies. They are locked into big government socialism, wasteful spending, and free trade policies that send jobs to the low-cost producing countries. Their “best idea” is to raise taxes.
Our best idea is to end free trade agreements, establish tariffs for threatened industries, encourage wage and salary cuts, focus on credit availability for small businesses, break up the big banks, restrict corporate investment to the nation of origin, cut taxes, restrict further access to welfare programs, downsize government bureaucracies at all levels, end immigration, and build a national economy that benefits the American people rather than the big bankers and the big corporations. Instead we have skyrocketing debt and government by lobbyists.
What is really amazing about the current situation is how few voices there are advocating sound economics in the age of crisis.
Each of the economic schools has its own particular weaknesses, and the corruption of the economists by the Federal Reserve further exacerbates a bad situation.
We hope that by now you have grasped the insanity of Democratic economics and the lies of globalism. Today we want you to add the following building blocks to your knowledge of economics.
Howard Katz offers a longish post on unemployment at Timmins Gold. We want to get you past the falling dollar discussion and the history discussion to the main point: In times of falling employment, wages do not fall fast enough. As prices fall, the workers’ real wage rises. The worker gains excess purchasing power simply by holding his wage steady. Employers recognize they are paying wages that are too high, but workers hold on to their wage rates because they believe the nominal wage is the real wage. Workers resist wage cuts during recessions, but they should embrace this “re-leveling” of wages to align with price deflation. All workers should take wage cuts. This action preserves jobs and stimulates new job creation. Any artificial (government) fiddling with subsidies for workers prevents this adjustment and makes unemployment worse. Supporting union labor wage rates is exactly the opposite of what the government should do. The Left always makes everything worse, and this is an even more severe problem during recessions.
“Far from encouraging discrimination, the free market leads to social harmony as people view each other not as members of disparate groups with hostile intentions, but instead as individuals providing products and services that improve one another’s lives.”
Glenn Jacobs explains why “equal pay for equal work” is Marxist economics. Jacobs defends the freedom of contract between employer and employee as the foundation of good economics. Minimum wage laws and unionized labor distort wage rates and thereby increase unemployment.
We are unable to link immigration to unemployment rates in Europe, but the BNP notices that about half of all murders in England are committed by foreigners or the children of foreigners.
Ty Andros analyzes markets and ties the trends together in a Negative Big Picture Scenario, for those of you who are very pessimistic. We are not predicting the Greatest Depression in history. We are predicting the greatest Socialist Takeover in history, accompanied by the worst economic policies you can possibly imagine.
We understand why the big banks and the big corporations love the present policies, but we fail to understand how the workers can be enthusiastic about free trade agreements that ship their jobs overseas and big welfare programs that promise to enslave them for the rest of their lives. The only answer we can come up with is, the masses are so saturated with socialist slogans and false promises that they have lost the capacity to think.
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In truth, immediately i didn’t understand the essence. But after re-reading all at once became clear.