A 9.9% Unemployment Rate!

I think most economists would agree that the overall economy has stabilized. We've hit the bottom and we are now profitably operating along that bottom. But, real job creating growth is another thing. For sure, a continued and rising unemployment rate can have a debilitating effect. Psychologically, it can cause people to be nervous about their own jobs. This, then, can cause a slowdown in consumer spending; an activity that is responsible for 70% of our economy.

This morning's Unemployment Report was only superficially a fairly good report. But, in reality, the internal numbers paint a much different picture. The most disturbing number out of this month's report was the rise of the unemployment rate from 9.7% to 9.9%. That's the headline number that is bound to scare people and, which may cause them to hold back on what had been an increase in their personal spending. Furthermore, the actual number of unemployed grew to 15.2 million and the real unemployment rate, which includes discouraged workers, increased from 16.9% to 17.1%. So, in reality, we continue a march towards a level where 2 out of every 10 Americans are unemployed.

The jump in the "for-publication unemployment rate" is because you have a number of discouraged workers who re-entered the job market and, obviously, didn't find a job. This "inclusion" actually resulted in a bigger job's pool with less people employed; and, thus the unemployment rate went up. Anyone who reads this blog knows that I have never been a fan of shrinking the workforce by literally "plucking" discouraged workers out of the system; as if they are totally non-existent. It artificially makes the unemployment situation look better than it really is and, politically, is just sweeping the dirt under the carpet. The downside of doing this is what happened this morning: the unemployment rate jumps and that's what most people actually care about. Only economists get excited over balance of trade, GDP, and other reports. The average Joe on the street, only cares about the job's number because that's his world that he has to worry about.

I am concerned that if we continue to have the 2.25 million "discouraged workers" come back into the job market, looking for work and not finding it, and the unemployment rate keep rising, our economy could stall for the lack of consumer spending. That's why, I think, no "real" economist is willing to "call" an end to this recession.