Saturday, January 09, 2010

2010 - Its the question of how the word "Unemployed" is employed

Here are my Saturday morning musings. Despite what may go on over the next 9 months national security wise or other, unemployment (its the economy stupid) will be the pillar issue for voters in November. Not sure if you saw the jobs report out yesterday...

Looks like its going to be a nine month number spinning game. See article below - Obama / Dems will spin this as the unemployment rate has "topped out at 10%" - meaning things have stopped getting worse, but this article shows the fallacy of those statements and confusion over the definition of unemployment leaving Washington to attempt to spin the confusion for their own salvation.

Interesting scenario. Even if the number doesn't get worse in coming months - it almost certainly won't get better (unless you count Census takers as real jobs - which I'm sure some will try). Corporations have record profits due to productivity gains and lower payroll costs and aren't likely to invest in more workers with so many potential taxes (health care, FICA cap elimination, marginal rates up, etc) possible and the economy showing no bright signs of recovery. With profits looking good based on current levels of economic activity, the have no need to take a chance on hiring and ruining their rosy profits.

The Obama administration takes every chance it can to bash corporations via the Wall St. conduit (yeah, most companies are listed/traded public companies) , but it foolishly doesn't realize that by doing so it is perpetuating the situation of lackluster employment and contributing to their record profits through keeping the labor market tight allowing them to keep wages down as well and reducing worker mobility. They have little urgency or conviction to hire given this situation especially when they're now in a great position financially for the most part.

Small businesses fear the same with more concern on health care benefit costs which can crush a small business when looking to expand their payroll by even one person is a 5-10% cost increase to the business for many mom and pop businesses. So we've got a chicken or the egg situation with hiring / economic recovery / taxes. Will the Republicans be able spin that as failure and push through supply side agenda and take over the house and ruin a filibuster proof majority? In short - could we be heading for another 1994?

I don't like deficits and ballooning debt, but if you're going to do it, you have to know that its only financed based on our expected recovery. The longer that doesn't happen, the less likely our creditors will be to lend, and the more expensive our current and future spending is to finance. I remember in March when Obama said the key to solving the deficit is growth - right there. Problem is, he never got the growth part right, unless he was talking about government entitlement and bureaucracy. It seems pretty evident to me that if you just gave the money we've spent directly back to the taxpayer, they'd have been a lot longer way toward de-levering their personal balance sheet and their de-levering/spending would be providing the green light in economic activity to businesses to hire again. We could still pay for the unemployment benefits, but we wouldn't be paying as much because people would be already on their way with new jobs.

Not surprisingly, I think the economy may get better despite the Government, albeit just more slowly. All it needs is a glimmer of hope that the Democratic agenda is over or neutralized. That would mean - if we get gridlock in the house and or senate in November without the health care bill and higher taxes - not just the stock market takes off again, but hiring and economic activity. If not, well you can guess. All this adds up to a huge cover up job by the Democrats and the White House on the meaning of unemployment while they hope for the economy to recover. Toward that end, look to become even more confused over what the actual unemployment rate is between here and November, but just remember - it won't be getting better until government centralized economic policy steps out of the limelight.

Businessweek Reports on the Newest DC Spin Game


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