Why Is Unemployment So High?

The unemployment situation is very bad and getting worst. As the economy continues to dip, the official figures minimize the problem as all facets of the US workforce market continue to slow down. The feds inject hope which is stretching the real truth. The labor market is close to rock bottom and digging.

The latest unemployment rate according to the Bureau of Labor Statistics (BLS), is “at 8.9 percent” since the month of March. The fact is the unemployment rate is more than 20 percent and rising. The rate has been in the 20 percent range since 2008. With more job layoff expected this year coupled with so many unenthusiastic out of work Americans no longer looking for employment. The discouraged unemployed will hit 25 percent before August. This is misleading and the feds don’t want this known.

The feds only pinpoint short term unemployment in the public sector as small government level jobs are slashed to a minimum. The hardest hit is the private industry of middle class income level unemployment because it’s harder to fabricate numbers. Private-sector jobs are lower now than it was back during the last recession. What the feds won’t tell you is that we are in a great recession.

The current great recession we are in started in 2007 right after the Democratic lead congress pushed and signed into law the Bush tax cuts coupled with the subprime mortgage crisis led to the collapse of the housing market bubble which assets contributed to a global financial crisis. The crisis led to the failure of the US largest financial institutions labeled “To Big to Fail”. Bear Stearns, Fannie and Freddie, Lehman Brothers and AIG, along with the auto industry. The government bailed out the banking industry with a $700 billion bank bailout and $787 billion fiscal stimulus package. What has this done to the economy? Since December 2007 to current, the great recession duration is greater than 3.5 years since the “National Bureau of Economic Research” declared the end of this recession over in 2009. Wonder where they got their estimates from?

Since February 2011, the million private-sector jobs, is lower than it was way back in June 1999. Since the 12 plus years, with the influx of illegal immigrants becoming immigrated, more than “31 million” immigrants are employed in the US, yet we have fewer private-sector jobs in the country mainly because immigrants take labor based jobs working under the table.

Private sector based jobs during a economic boom, the unemployment rate never reaches zero as there are always millions of workers in the United States who are in between jobs, either because they quit their previous position hoping to find something better, or because they were laid off.

When unemployment hit the rate of “10.1 percent in October 2009” during the current recession, according to the feds, there were 3.4 million hired in the private sector. The problem was that there were 3.7 million job “separations” which includes layoffs or those individuals that quit. What makes the current great recession so painfully awful is not just the unemployment rate, but the failing private sector market providing unsold homes not finding buyers.

What contributed to this recession is during an economy boom private sector employers extend themselves to hire more workers over extending their resources as those resources were misallocated during the boom cycle that forced business to produce insufficient savings which takes time to realized then it becomes too late when that cycle changes. This was brought on during the 1990s considered as the longest period of growth in American history according to “The National Bureau of Economic Research”. The recession in the 90s lasted only 8 months.

What burst that bubble in early 2000 was the collapse of the information technology “dot-com “internet investments” that did not provided economic stability failing both business and investments and the 9/11 attacks brought this period of growth to an end. This recession was short and brief. Speculation was that without the September 11th attacks, the economy may have avoided recession altogether.

Why is unemployment so high? In 2007 the Federal Reserve cut the interest rate by 50 points from 5.25% to 4.75%. The move surprised many analysts during that timeframe. This forced the feds to provide “stimulus packages” that paved the way for inflation causing the worst recession by the government’s interference in the credit markets by manipulation of interest rates.

The government caused the second boom period bust when it injects new credit into the system pushing down rates according to the Austrian Business Cycle Theory. Credit is the driving force for both households and business. When it dried up, both business and consumer confidence plunged. Business stopped investing and households cut spending.

Loss of credit created the conditions for recession. Interest rates were lower than the market would allow contributed to the current crisis that continues to disclose today. The Federal Reserve made credit cheap which led to indebtedness.

The government and Federal Reserve’s interventions have only made things worse.





About the Author

Michael Coker

Conservative Political Writer, Contributor and Blogger, Founder secondopinionpundits – Political Web Magazine – Politically Opinion Based Facts