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by Don Azarias
December 10, 2010
Just when the American public is starting to think that the economy is starting to turn around, came a surprising setback: The nation’s unemployment rate rose to 9.8 percent in November up from 9.6 percent. Wall Street economists were expecting, at least, 150,000 jobs created for November but, instead, the employers only added 39,000 jobs in the economy. The jobless rate has now topped 9 percent for 19 straight months, the longest stretch on record.
Government report indicates that weakness in hiring was widespread. Retailers, factories, construction companies, financial firms and the government all cut jobs last month. The economists are still unable to explain what really happened to their bright employment outlook that they had predicted.
According to the Labor Department, there were 15.1 unemployed workers in November. Adding those unemployed people to others who are working part time but would prefer full-time jobs and those who have given up looking for work, 17 percent of the labor force is “underemployed.” That was the same as October. Still, the figure remains close to a record high set last year. The report also mentioned that there was a record 1.3 million “discouraged” workers in November. Those are persons not currently looking for work because they believe no jobs are available to them.
Personally, I cringe when some people who, probably, didn’t have their facts straight or were reliant on inaccurate data make bold pronouncement that the economy is now in a complete self-sustaining recovery. It’s not. Even Federal Reserve chairman, Ben Bernanke, in his recent interview with CBS’ 60 Minutes, disproved it. I had always adhered to this simple theory: “The economy is going nowhere, unless companies start to boost hiring.” And let’s face it, they are not. I had always subscribed to the following equation: “Employment means income and income means money and money means ability to buy goods and services that leads to production and production means creation of jobs and robust hiring by big and small companies and that all translate to a humming and strong economy.” And, like the line in the song “Love and Marriage”, you can’t have one without the other. That’s the reason why I’m having the most difficult time trying to understand other people’s basis for their optimism about the economy knowing that, as long as the rate of unemployment remains high, there will be no economic recovery.
To soften the blow, I’m willing to accept the notion that it’s also possible that the economic recovery is proceeding more slowly than many economists had expected. But the November unemployment report is a solid proof that it is not the case. Unless companies start a robust hiring, there will be no meaningful growth in the U.S. economy, period! Private companies created only 50,000 jobs. That was down significantly from the 160,000 jobs created by private companies in October and was the smallest gain since January. With hiring so weak, how could anybody translate that into a growing economy? Some economists are even saying that it could take until near the end this decade to drop the unemployment rate to a more normal 6 percent. So whoever says that the economy is in a self-sustaining mode, I believe, is mistaken.
Another factor that some people may have failed to consider is the declining value in the prices of homes. That can thwart chances for an economic recovery, because when home prices fall, people’s wealth falls with it. That causes them to scale back spending which, in turn, hurts the economy as a whole.
The U.S. economy is stuck. It’s caught between the proverbial rock and a hard place. Even if it wanted to, the United States, because of it’s large foreign debts and budget deficits, may not have the means, at this critical time, to provide the needed jolt to unstuck it. And the biggest problem is that China might not be in the mood to lend us more money.