CBO: Longest Period of High Unemployment Since Great Depression

By Alex M. Parker

February 16, 2012 RSS Feed Print

After three years with unemployment topping 8 percent, the U.S. has seen the longest period of high unemployment since the Great Depression, the Congressional Budget Office noted in a report issued today.

And, despite some recent good news on the economic front, the CBO is still predicting that unemployment will remain above 8 percent until 2014. The report also notes that, including those who haven’t sought work in the past four weeks and those who are working part-time but seeking full-time employment, the unemployment rate would be 15 percent.

The CBO made its comments in a report examining the long-term effects of joblessness, and possible policy options to boost employment, including unemployment insurance reforms and job training programs. The report came at the request of Democratic Michigan Rep. Sander Levin, but Republicans quickly jumped on the chance to bash President Obama’s stimulus program, which is also reaching its three-year anniversary today.

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via CBO: Longest Period of High Unemployment Since Great Depression – US News and World Report.

24% of Small Businesses Not Hiring Because They May Not Be In Business a Year From Now; 76% Simply Don’t Need More Employees

The question of the day is “Why Aren’t Small Businesses Hiring?” Most of the answers should be obvious, but let’s take a look at a recent Gallup Poll on Hiring to confirm.

85% of those surveyed — are most likely to say the reasons they are not doing so include not needing additional employees; worries about weak business conditions, including revenues; cash flow; and the overall U.S. economy. Additionally, nearly half of small-business owners point to potential healthcare costs (48%) and government regulations (46%) as reasons. One in four are not hiring because they worry they may not be in business in 12 months.

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via Mish’s Global Economic Trend Analysis: 24% of Small Businesses Not Hiring Because They May Not Be In Business a Year From Now; 76% Simply Don’t Need More Employees.

Recovery at risk as Americans raid savings

By Jilian Mincer

and Jonathan SpicerPosted 2012/01/17 at 12:13 am EST

NEW YORK, Jan. 17, 2012 (Reuters) — More than four years after the United States fell into recession, many Americans have resorted to raiding their savings to get them through the stop-start economic recovery.

Vernon Tites, an out-of-work contractor from San Francisco, looks for jobs online at the Employment Development Department of California service office in San Francisco January 6, 2012. In an ominous sign for America’s economic growth prospects, workers are paring back contributions to college funds and growing numbers are borrowing from their retirement accounts.

Some policymakers worry that a recent spike in credit card usage could mean that people, many of whom are struggling on incomes that have lagged inflation, are taking out new debt just to meet the costs of day-to-day living.

American households “have been spending recently in a way that did not seem in line with income growth. So somehow they’ve been doing that through perhaps additional credit card usage,” Chicago Federal Reserve President Charles Evans said on Friday.

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via NewsDaily: Insight: Recovery at risk as Americans raid savings.

via NewsDaily: Insight: Recovery at risk as Americans raid savings.

Permanent Keynesian Unemployment

hroughout the West, unemployment remains stubbornly high. Unemployment in these European nations ranges from 8.5% in Italy to over 20% in Spain.

For Europe as a whole, the figure is 10.3%. What is revealing is this: ever since 1995, it has been above 9% most of the time. Only in February 2008 did it fall to 7.3%. For workers under age 25, the figures are much worse. A generation of educated college graduates has become a lost generation.

Yet as the chart reveals, a few countries are doing far better. Netherlands, Austria, and Germany have rates from about 4.5% to 6.5%. These are nations noted for their comparative frugality.

For Europe as a whole, it has been 40 years of unemployment. It the 1960s, European employment was high. This changed in the 1970s. Keynesian economists seem baffled by this. Keynesian policies of government deficits were supposed to end unemployment. They haven’t in Europe.

The chart for the United States since 1965 is revealing. The unemployment rate climbs in recessions, then falls into the 4% to 6% range. Not this time. Since 2008, the rate has soared and has refused to come down. Use the interactive chart to select a base year.

All this is to say that the Keynesian system is unable to explain why unemployment should persist. The Keynesian tool kit has been available to national governments. The political leaders are disciples of Keynesianism. Their advisors are Keynesians. Yet the prescription is no longer working. The U.S. government has run three consecutive years of trillion-dollar-plus deficits. They have not worked to bring down the unemployment rate.

This raises a pair of questions. First, with respect to economic theory, why isn’t the policy prescription working? Second, historical: When a theory ceases to explain events, why won’t it be abandoned by a younger generation of theorists?

These two questions faced neo-classical economists in 1936. They could not answer either of them. They lost the war for the minds of the next generations.

KEYNES’ REVOLUTION

In 1936, Macmillan published John Maynard Keynes’ book, The General Theory of Employment, Interest, and Money. The book was an attack on the free market’s ability to clear itself of unsold goods, including “labor goods,” by means of downward price adjustments.

The answer to this issue had been provided two years earlier in a book also published by Macmillan and written by the rising economic star, Lionel Robbins. Its title: The Great Depression. It was written from an Austrian School approach. Robbins had studied informally with Ludwig von Mises in Vienna. Keynes’ question was answered again in 1937 by another book published by Macmillan, Banking and the Business Cycle, by three economists. It also was written from an Austrian outlook. So, the big winner in all this was Macmillan.

Keynes’ book became dominant. Younger economists adopted it. The other two books were forgotten by 1940. Within two decades, the modified Keynesianism of Paul Samuelson was dominant in Anglo-American academia. It remains dominant today.

The heart of Keynes’ thesis is this: downward price flexibility does not clear markets, including the capital goods markets. Classical economics had taught that the competitive pressures of the free market will lead to falling prices and decreased unemployment. The rule was this: “At a lower price, more is demanded.” This includes labor.

The Great Depression by 1936 seemed to refute the classical economists’ theory. Because this theory of causation was central to economics from Adam Smith to the Great Depression, the persisting unemployment seemed to refute this fundamental tenet of free market economic theory. Thus, the profession was waiting for a new theory of free market pricing. Keynes supplied this. The theory was wrong, but it had a ready market.

Keynes recommended what every Western government had been doing since 1930: run deficits. His solution was more of the same: larger deficits and more government employment.

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via Permanent Keynesian Unemployment – GoldSeek.com.

Sears to close 100 to 120 Kmart, Sears stores

NEW YORK – Sears Holdings Corp. plans to close between 100 and 120 Sears and Kmart stores after poor sales during the holidays, the most crucial time of year for retailers.

Sears Holdings announced it will close scores of locations.

By Seth Perlman, AP

Sears Holdings announced it will close scores of locations.

The closings are the latest and most visible in a long series of moves to try to fix a retailer that has struggled with falling sales and shabby stores.

In an internal memo Tuesday to employees, CEO and President Lou D’Ambrosio said that the retailer had not “generated the results we were seeking during the holiday.”

Sears Holdings (SHLD) said it has yet to determine which stores will close but said it will post on http://www.searsmedia.com/ when a final list is compiled. Sears would not discuss how many, if any, jobs would be cut.

The company has more than 4,000 stores in the U.S. and Canada. Its stock fell $7.88, or 17%, to $37.97 in premarket trading.

The company’s revenue at stores open at least a year fell 5.2% to date for the quarter at both Sears and Kmart, the company said Tuesday. That includes the critical holiday shopping period.

Sears Holdings said the declining sales, ongoing pressure on profit margins and rising expenses pulled its adjusted earnings lower. The company predicts fourth-quarter adjusted earnings will be less than half the $933 million it reporter for the same quarter last year.

Sears Holdings also anticipates a non-cash charge of $1.6 billion to $1.8 billion in the quarter to write off the value of carried-over tax deductions it now doesn’t expect to be profitable enough to use.

Sears said it will no longer prop up “marginally performing” stores in hopes of improving their performance and will now concentrate on cash-generating stores.

“These actions will better enable us to focus our investments on serving our customers,” D’Ambrosio said.

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via Sears to close 100 to 120 Kmart, Sears stores – USATODAY.com.

 

Canada Loses Most Jobs Since 2009 as Jobless Rate Rises to 7.3%; Meaningful Miss Sends Loonie Lower

More proof the entire global economy is cooling rapidly comes from North of the border where Canada Loses Most Jobs Since 2009 Recession as Jobless Rate Rises to 7.3%

Canada’s economy lost the most jobs since the 2009 recession during October, led by declines in the manufacturing and construction industries, cementing projections that the recovery is slowing.

Employment fell by 54,000 after an increase of 60,900 jobs in September, Statistics Canada said today in Ottawa, in the biggest monthly decline since February 2009. The unemployment rate rose to 7.3 percent from 7.1 percent. Economists surveyed by Bloomberg News had forecast an increase of 15,000 jobs and a 7.1 percent jobless rate in October.

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via Mish’s Global Economic Trend Analysis: Canada Loses Most Jobs Since 2009 as Jobless Rate Rises to 7.3%; Meaningful Miss Sends Loonie Lower.

An Overpriced Market Meets The Global Economic Slowdown | Bob Chapman

October 19 2011: A stock market that is still overpriced, what can leverage do for bailouts, debt is endemic worldwide, injections of money and credit cant stop the global economic slowdown, no viable solutions for Europe.

It could then be that this is the top of the stock market, which is fundamentally very overpriced. The latest rallies are the result of statements by French President Sarkozy and German chancellor Mrs. Merkel that a financial solution is at hand for Europe. This announcement named the end of the month as the date for release of this information. Thus far there has been no further comment. This was the justification for a very strong rally. In the wings there are large short and put positions, which tell us that there is a body of speculators that believe the fundaments are not in place, nor was the recent rally justified. In relation to Europe we see two possibilities; countries bailing out their own financial sectors and the use of leverage to extend bailout funds into trillions of dollars to assist the six insolvent nations. Some nations currently prohibit the use of leverage. Needless to say, rules do not impede adventurous politicians in the control of elitist interests such as the banking community. We will have to wait for this new formula, but in the meantime its results have already been discounted, or military action increases in the Middle East, perhaps in connection with Iran?

Debt problems are endemic worldwide. We all know of the problems in the US, UK and Europe, but they extend all over the world. We are in a major financial crisis, which is as bad and will be as damaging as the credit crisis of three years ago. In fact we never exited that crisis. Debt is the problem and creating more debt does not solve the problem. We have written often about debt and currency problems and as yet nothing is being done to solve these problems. It is as if these powers wanted a collapse. How long can the US dollar continue to take this thrashing? Unfortunately it is not only the dollar. Over the past 1-1/2 years nine major currencies have fallen on average more than 20% vs. gold and silver. Thus many countries and their financial institutions are going to be in serious trouble. The dollar and the euro are both overvalued and even after a 15% devaluation the Swiss franc is undervalued. It is not only going to be currencies, but everything financial that is going to be affected. That includes bonds, stocks, savings accounts, CD’s; cash value life and annuity policies. The only things that will benefit will be gold and silver related assets. For all intents and purposes in the US, the FDIC has no funds and has to have them allocated in the form of debt by the government. More debt means more inflation and higher precious metal prices. The global financial community has to be terrified because their whole world is coming unraveled around them.

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via An Overpriced Marked Meets The Global Economic Slowdon | International Forecaster Weekly Bob Chapman The International Forcaster | Economy News | Investing | US Market Information | Gold | Silver | Wall Street Bailouts | Investment Trends | Money Resources | US and Worldwide Politics.

Joblessness: An American Epidemic

There will be no economic recovery until there is a jobs recovery.

Broken down and in ruins, the city of Detroit is feeling the full force of America’s economic decline. One in three residents live below the poverty line, half of the city’s public schools are closing, and crime is sky rocketing.

The Capitol of the country’s motor industry has an unemployment rate of just under 30%. But city officials and residents say the real figure is close to 50%.

They can downplay and manipulate these statistics all they want, but acceptance of the problem and the reality of the situation is the only way we’ll be able to move forward with real, meaningful change (not the campaign slogan, but actualization). So long as the narrative being shoved down the throats of the American public is one of denial and deception, the situation will only get worse.

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via Joblessness: An American Epidemic.

Alternate Unemployment Charts-John Williams of Shadow Government Statistics

The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.

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via Alternate Unemployment Charts.

Analysis of Financial Terrorism in America: Over 1 Million Deaths Annually, 62 Million People With Zero Net Worth, As the Economic Elite Make Off With $46 Trillion

EXCLUSIVE: Analysis of Financial Terrorism in America: Over 1 Million Deaths Annually, 62 Million People With Zero Net Worth, As the Economic Elite Make Off With $46 Trillion | AmpedStatus.