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Saturday, July 11, 2009

Back to the 1930's in more ways than one

The Obama administration isn't just taking us back to the 1930's in the foreign policy arena. According to this article that appeared in the JPost over the weekend, we could yet be headed for the 1930's 25% unemployment rate in the US.
The 467,000 Americans who lost their jobs last month brought the total number of layoffs since the crisis started to more than 6.5 million. The frightening unemployment rate now officially stands at 9.5 percent of the total labor force, but this figure hides an even more terrible truth. A broader unemployment rate called U-6, which includes people who have stopped looking for work or can't find full-time jobs, hit a record of 16.5% in June. That's more than 25 million people, a staggering number even for those who actually believe the official statistics provided by the US government. (I am definitely not one of them.)

It is true that since the month of January, when the labor market shed more 700,000 jobs, the pace of this massive job destruction has declined. But still, even in a "good" month like March, the US economy lost 320,000 jobs. Not to mention the fact that the American economy needs to generate 100,000 new jobs each month just to keep pace with the natural growth of the population. The sad news is that the trend is not about to reverse; the chances are it is about to worsen.


Paul Krugman, the leftist Nobel Prize winner and one of Obama's strongest supporters, has called for another immediate massive bailout plan, on top of the $800-billion scheme that was approved only four months ago. These statements clearly contradict the official White House and Fed stance that the crisis is now closer to its end and that America should now focus on restraining its huge deficit.

It is not important whether Krugman's idea about additional money printing is wrong or not, his pessimistic read of the current state of the economy is probably right. One of the differences people like to point out when comparing this crisis to the Great Depression is that we are no where near the 25% rate of unemployment that was recorded back then. Maybe that is true for 2008-2009, but what we learnt from June's jobs report is that even if the pace of layoffs slows down in the coming months, we are still getting very close to the frightening numbers seen in the 1930s.
You don't hear that U-6 number very often, but it includes people who have 'given up looking' as well as people who have been unemployed for so long that they are no longer counted in the ordinary rate. I have two good friends in the States (maybe more I don't know about) who have been out of work for eight months - professionals who have never been out of work before. I doubt these guys - both in their late 40's and early 50's - are counted in the unemployment statistics.

Here in Israel, the government safety net is stronger, but the recession in the US is definitely having an effect on us (and obviously, it's affecting me personally since much of my work comes from the US). I also don't know how the government measures unemployment here given that so many people don't work by design. Plus people like me - who are self-employed - don't get counted in any of the statistics (and there are a lot of self-employed people here - I suspect proportionately more than elsewhere).

What's different this time is that you can't look at it and say that it will end anytime soon. A scary prospect.

Recall that what brought the world economies out of the depression of the 1930's was World War II. I'd hate to think that something like that would have to happen to snap us out of this.


At 11:59 PM, Blogger Chrysler 300M said...

comparing todays crisis with the 1930s crisis is comparing apples with tomatoes. 1930s will simply not repeat since all concerned govĀ“ts have intervened and acted correctly. What we will get is a higher inflation rate for several years.
shavua tov

At 2:57 AM, Blogger Gail said...

As long as the spector of socialism hangs over the American economy the the markets will stay bottomed out. No one will invest. No one will spend.

Until the Stimulus, Omnibus and budget are rescinded and the budget replaced with a responsible one, this economy is dead in the water.

We the People need to act to restore the republic and to regain control of our out of control government.

Please help perfect and implement the Conservative Action Plan at http://backyardfence.wordpess.com

Best regards,
Gail S

At 6:16 AM, Blogger NormanF said...

The worst thing would be a return to the stagflation of the 1970s. Bring back Jimmy Carter and the "misery index!"

Hopenchange, any one?

At 7:38 AM, Anonymous Anonymous said...


you are a buisnessman...you didnt see the faltering economy all the way back since late 2007?

you honestly want to blame obama for the rapid fall we are now experiencing?

im sorry, but its taken almost 30 years of voodoo economics to come to this point

will the recent stimulus bill work? probably not...mostly because of the way government currently works.

what should have been proposed and passed was the wpa2 and an immediate reevaluation of all trade agreements.

but i know you believe that the new deal extended the great depression...

and i would tell you to cease reading revisionist tripe


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