Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Unemployment claims Have Fallen But the Economy is Stagnating. What we need to do.
The economy is stagnating, growing at a very low rate. This was borne out by recent GDP data which showed that economic growth fell to .4 of a percent in the 4th quarter of 2010 and rose to only 1.4 percent in the 1st quarter of 2011. In the 2nd quarter 2011, GDP rose only one percent. Those are poor numbers especially after 2 ½ years of Keynesian policies to promote recovery. Employment has been increasing but at a very slow rate that barely covers new entrants into the labor force. Unemployment claims have fallen over the past year.
During the past few weeks, we’ve called attention to our readers that the US Bureau of Labor Statistics (BLS) in reporting initial unemployment claims during the preceding week was issuing a questionable statistic called “seasonally adjusted” initial claims. It is true that in the past, there were seasonal variations in the number of claims filed, for example, auto makers closed plants in the summer for the preparation of new models and in the fall retailers hired workers for expected increased sales before Christmas. To give the BLS credit, it also reports the actual number of initial claims. Due to laziness apparently, the media never report anything except the seasonally adjusted figure, which is a statistician’s estimate of what the claims would have been if you did not count the seasonal changes.
Last Thursday, August 25, 2011, the media reported that the initial figure of seasonal adjusted initial claims during the week ending August 20, 2011 was 417,000, an increase of 5,000 from the previous week’s revised figure of 412,000. The increase of 5,000 was interpreted by the securities markets as negative news, a worsening of the employment picture. CNBC, Bloomberg Financial, and Fox News business reported the same figure. Even the Wall Street Journal on 8/26/11 on its front page used that number. It was bad news and contributed to the fall in stock markets.
The BLS reported the actual data in the second paragraph of its report. It reported that the actual number of initial claims totaled 341,436 , not 417,000, a decrease of 4,536 from the previous week. The BLS also reported that the number of persons receiving unemployment insurance benefits in state programs totaled 3,452,004, a decrease of 101,224 from the preceding week. A year earlier, the number was 4,219,639. The BLS also reported that the actual number of persons receiving unemployment compensation last week was 3,641,000, a decrease from the previous week’s revised number of 3,720,750.
The government estimate of the number seeking work, which does not include those employed part-time and those who have stopped looking for work, remains above 9.1 percent. At full employment, the percentage would be about 4 or 4.5 percent, the number of workers in-between jobs. That was the number we reached in 2007 before the onset of this recession. We have no policies in place to create economic growth.
This recession’s immediate cause was the collapse of the housing boom. Millions of houses remain to be foreclosed. There will be little investment in housing until most of the foreclosed properties have new owners. So the housing sector is expected to be depressed for several years, making little or no contribution to growth. The government's policy is to prevent foreclosures by gettng the banks to voluntarily reduce mortgages and payments. In our view, this prevents a final resolution of the mortrgage crisis.
Another major cause was the outsourcing of American manufacturing. Companies like Apple, Hewlett-Packard, Dell, and many others are manufacturing their products abroad and exporting them to the U.S. Andy Grove, a founder of Intel and its former CEO, estimated that “ for every Apple worker in the U.S. there are 10 people in China working on iMacs, iPods and iPhones. The same roughly 10-to-1 relationship holds for Dell, disk-drive maker Seagate Technology, and other U.S. tech companies.” Again, we are doing nothing that would end outsourcing or attract more investment in plant and equipment here at home.
Pres. Obama’s major constituency, the “ban carbon emissions” lobby, has been doing everything in its power to get the President to prohibit the production and development of relatively cheap oil and coal and natural gas and spend hundreds of billions of dollars subsidizing wind and solar energy plants and subsidizing the purchase of hybrid and electric vehicles. Just this week, research conducted at CERN, Europe’s leading nuclear research institution, on the causes of climate change cast doubt on the whole theory of anthropogenic (man-made) climate change that former V-P Al Gore said was accepted by all scientists, which was a lie. Danish scientists and thousands of physicists around the world challenged the theory from the word go. The hundreds of billions we are spending is not creating sustainable employment. To the contrary, it is costing us jobs as Spain and Italy can testify, by raising electricity prices.
The 4th major foolish policy, whose proponents include leaders of both political parties, is the ideology of free trade. For free trade to be a sound policy requires freedom of movement of labor, capital, and goods. The fact is that many of our trading partners, including Japan, China, and Germany and the OPRC countries have mercantilist policies (policies that favor exports and impede imports) to get and maintain an artificial trade advantage. In 2008, the trade deficit on goods and services reached $698 billion. Had the goods we imported been produced here, they would have given employment to 5 - 8 million workers. For all practical purposes, we administration has no policy to balance trade. As our reader knows, we have advocated the use of single-country-scaled tariffs which would compel our trading partners to import as much from us as they export to us.
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