Unemployment Continues to Rise; Good Thing the Recession is Over

November 8, 2009 at 12:57 am Leave a comment

The October unemployment numbers were released on Friday, and they’re even worse than expected at 10.2%. If you believe the media, this is the highest rate since 1983. On the other hand, when the numbers are calculated as they actually were in 1983, the true unemployment rate is now at 17.5% (the chart below from ShadowStats.com shows a few alternate figures using different criteria).

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Does anyone remember back in January when Obama & Co. announced that unless we passed the American Recovery and Reinvestment Act (worth $787 billion), unemployment would rise to approximately 9%, and that the “stimulus plan” would keep unemployment below 8%? Well, we got that plan–and quite a bit of other government meddling with the economy–and things are even worse than the administration claimed they would have been had they done nothing. Harvard economist Greg Mankiw has maintained a nice graphic (below) to illustrate how things are progressing.

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This really isn’t all that surprising. Despite the common belief that FDR’s New Deal got us out of the Great Depression (after only 17 years!), the reality was that businesses could see the writing on the wall, and chose not to make investments in what they felt was a hostile environment. As Robert Higgs argued in his book, Depression, War, and Cold War,

[T]he insufficiency of private investment from 1935 through 1940 reflected a pervasive uncertainty among investors about the security of their property rights in their capital and its prospective returns.  This uncertainty arose, especially, though not exclusively, from the character of the actions of the federal government and the nature of the Roosevelt administration during the so-called Second New Deal, from 1935 to 1940.

Now before you say that we’re lucky that businesses today aren’t so pessimistic, I call your attention to the chart below showing the current status of private domestic investment.

Gross Private Domestic Investment - 1948-10.2009

As the Washington Post reported on Friday in their article “Some Giants Sitting on Piles of Cash”, many business executives are smart enough to see that the climate being created by Washington is not one in which they should be taking risks. One of the businesses highlighted, Nucor Corp., is not investing because, as stated by their CEO Daniel DiMicco, “we don’t have a lot of confidence that the right things are being done in Washington to reinvigorate the economy…”.  On top of that, attempts by politicians to “stimulate” their favorite sectors of the economy are only ensuring that what investments are made, are made in the wrong areas.

It’s time for Obama & Co. to get out of the way and allow the economy to function as it should. The more politicians monkey with efforts to produce and to create real wealth, the longer it will take to see recovery. If this op-ed from the Wall Street Journal is any indication, things just may be beginning to look up.

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