Jul 02 2010

Obamanomics Is Stifling Recovery

Deficit spending through the bloated and lethargic federal bureaucracy never creates economic stimulus or growth. Government has and always will be a mechanism to either tamp down economic gyrations (best case) or drag down economies as they suck the life blood out of the private sector (worst case). Not enough controls and market cycles create damage. Too much micromanagement and then the innovation and inspiration dry up and the whole thing collapses.  There is no real life scenario where government creates wealth and jobs – that is naive and best left to kiddy shows.

Under Obama and the liberals in Congress we are tipping way too close to the worst case side of the equation. The stimulus package was all a waste and simply prolonged the suffering for over a year longer than necessary (just like their response to the Gulf Oil spill wasted critical time and let things run amok). Instead of sowing hope and energy they have reaped despair and surrender. While the June Unemployment rate looks at a  glance like improvement, the math is much more brutal:

Over all, the nation lost 125,000 jobs, according to the monthly snapshot of the job market released by the Labor Department on Friday. Most of the lost jobs came as temporary workers hired by the federal government to help with the census exited their jobs. The unemployment rate, based on a different survey, declined to 9.5 percent in June from the previous 9.7 percent. This decline came only because the nation’s labor force shrank by 652,000 jobs.

Just as last month’s government job report appeared deceptively robust, as it was swollen by 411,000 workers hired by the federal government to help with the census, so the June report appears deceptively anemic, as the government shedding many of those same temporary census workers.

The problem with the normally reported unemployment rate figure (called U3) is it is incomplete. It computes the number of people on unemployment benefits as a percentage of people working. But what about the people who have given up working and on unemployment? What about those who just walked away from both? There is another factor the government tracks called “discouraged workers”. If you combine the number of people in U3 with discouraged workers you would get something the government calls U4 (Unemployed + Discouraged). This figure is the actual unemployment rate, and it tells a different story right now (click to enlarge):

As can be seen the U4 rate is 10.3%, which has been stubbornly steady for the last 12 months. The stimulus money has done nothing to ‘bend the curve’. And once the one time census jobs haze is removed from the picture we will be right were we have been. Stuck with stupid liberal fantasies, awaiting the needed tax cuts and roll back of federal spending and regulations which ALWAYS result in releasing the energies and innovations of Americans – the real stimulus behind our world class economy.

15 responses so far

15 Responses to “Obamanomics Is Stifling Recovery”

  1. […] This post was mentioned on Twitter by mikepfs, AJ Strata. AJ Strata said: new: Obamanomics Is Stifling Recovery http://strata-sphere.com/blog/index.php/archives/13688 […]

  2. chemman says:

    Even U4 doesn’t tell the real story. How many self-employed people have lost their businesses and weren’t eligible for unemployment benefits and are therefore not counted in terms of unemployment.

  3. Wilbur Post says:

    U3: Official unemployment rate per ILO definition (widely-quoted rate)
    U4: U3 + “discouraged workers”, or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
    U5: U4 + other “marginally attached workers”, or “loosely attached workers”, or those who “would like” and are able to work, but have not looked for work recently.
    U6: U5 + Part time workers who want to work full time, but cannot due to economic reasons

    The current U6 value is about 16-17%.

    The BLS changed the official umployment rate to be the U3 one in 1994. It used to be the U5 or U6 one. These various definitions did not exist in the 1930s but one pro forma estimate I’ve seen is that we are about 1/2 the 1930s peak unemployment rate.

  4. dhunter says:

    “During the Presidential campaign of 1976, Democratic candidate Jimmy Carter made frequent references to the Misery Index, which by the summer of 1976 was at 13.57%. Carter stated that no man responsible for giving a country a misery index that high had a right to even ask to be President. Carter won the 1976 election. However, by 1980, when President Carter was running for re-election against Ronald Reagan, the Misery Index had reached an all-time high of 21.98%. Carter lost the election to Reagan.”

    Using numbers used during Carter years then U6 16.5% + inflation rate May 2010 2.02% = Obama Misery index 18.52%

    18.52% I guess Jiminy Carter would say YOUR FIRED!

    Jiminey has to be the happiest man in America!

  5. garrettc says:

    You should also include the growing number of people who have retirered early, even though they know that they will never be able to pay off the remainder of their house morgtage on SS and savings. It is another invisible increment to the un-employed. Not large, mind you, but significant enough that I know three.

  6. MerlinOS2 says:

    Adding to what garrettc has said the Social Security System right now has a massive backload of applications for disability for those not yet at retirement age but old enough to realize they will not likely get a job back.

    They had kept working while they could to earn more than the disability will pay them but now they are looking at their unemployment (even extended) running out and see the disability route as their only hope.

  7. […] AJ Strata: Deficit spending through the bloated and lethargic federal bureaucracy never creates economic stimulus or growth. Government has and always will be a mechanism to either tamp down economic gyrations (best case) or drag down economies as they suck the life blood out of the private sector (worst case). Not enough controls and market cycles create damage. Too much micromanagement and then the innovation and inspiration dry up and the whole thing collapses.   […]

  8. Neo says:

    Perhaps, in a rare by required move, the Congress could complete a budget and the appropriations bills on time as required by the 1974 Congressional Budget Act.
    I know asking Congress to actually do their job is a lot to ask and doing so is such a long and boring endeavour, but we could have Michael Jackson’s doctor come in and pass out enough drugs so even the late Robert Byrd could still vote.

  9. crosspatch says:

    Bread and circuses.

  10. kathie says:

    I have an extra $10 in my wallet, do I spend it or save it? Do I know what my health insurance will cost? Do I know how much tax I’m going to pay? Do I know what the cost of gasoline to fill my car is going to be? Do I know if my job is secure? Do I know what Obama is going to think up next? I live in the real world where my bills need to be paid, some times I can be oh so virtuous, but mostly I have to do basic things or bad things happen to me or my family. So the answer to all the above questions is, I SAVE THE $10. 00 just in case Obama doesn’t come to his senses.

  11. crosspatch says:

    Oh, and America, don’t let this happen to you:


    Retirement: Argentina nationalized private pension funds in 2008 under the guise of shielding them from the economic meltdown. But the funds have been used by lawmakers. That couldn’t happen here, could it?

    Socialist President Cristina Fernandez de Kirchner said the state was protecting private retirement from “policies of plunder.” By moving tens of billions from the private sector and placing it in the public fisc, she claimed to be providing “an example” for others to follow as the global financial crisis heated up.

    The Argentine Congress, making a promise it didn’t intend to keep, said it would make sure the money would be used for pensions. Instead, it was used for government spending. Nearly $30 billion was stolen from the citizens of Argentina by the government that was supposed to protect them from thieves.

    Democrats have been casting a similar greedy eye on Americans’ pensions since at least the 1990s, though they typically kept their ambitions quiet. But in January, the lid on envy began to boil over.

    • Bloomberg reported that the Treasury and Labor departments were inviting public comment on ways to promote the conversion of 401(k) and individual retirement accounts into annuities or other steady payment streams.

    • A month later, former House Speaker Newt Gingrich and policy analyst Peter Ferrara, reacting to the appeal for public comment, warned in our On The Right column that “Washington is developing plans for your retirement savings.”

    • Then in May, based on what she had read in the Annual Report of the

  12. BarbaraS says:

    One thing that has not been addressed is that social security benefits are based on the last five working years before retirement. Anyone of retirement age can collect their benefits while still working and their benefits go up each year accordingly. I wonder if some of these people 62 and up who are laid off have elected reduced benefits. It would be best if they did so since unemployment funds do not count toward social security benefits and some older people must have lost a year or more of benefits. That zero of however many months or years out of work will be counted as part of the five years and will reduce social security benefits. Therefore, people need to check and see how they will come out best…waiting until retirement age or taking reduced benefits. Also take into accont the spouseal payment also. That will also be reduced if reduced benefits are taken.

  13. BarbaraS says:

    I should have said people laid off should check with their SS office to see which way is best.

    If anyone opts to continue working after retirement age and do not retire they can collect their benefits as if they had retired while still collecting their normal salaries and their benefits will level off when they do retire. The only problem with collecting and earning wages is that if you make over $25,000 in wages part of your ss is taxable. It is still a gain even paying taxes on these funds.

  14. […] bubble would not last more than a couple of months. We also knew that the U3 unemployment index was showing false-positive results (staying flat at 9.5%) since the labor force has been shrinking as people bale out for […]