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Unemployment Number Drops While Economy Weakens

Posted by Steve Markowitz on November 17, 2015

The US Bureau of Labor Statistics last week released the monthly unemployment figures that indicated over 270,000 new jobs being created with the unemployment rate dropping to 5%.  The Obama Administration touted these figures as positive indicators of economic strength.  A look under the covers shows show something different.

While the official unemployment rate has dropped significantly since President Obama’s first election, these numbers are at best suspect.  First, they do not take into account the quality of the jobs created; i.e. pay scales. In addition, the figures ignore the many Americans who are underemployed and no longer count because they are no longer searching for a job.

Tony Sagami recently published an article titled The Poisonous Cocktail of Main Street Woes and Federal Reserve Liftoff that shares some sobering statistics putting the true economic situation in perspective.  This includes:

·       401(k) plans are a tax efficient means for workers to put money away for retirement.  Withdrawing funds from these accounts prior to the age of 59.5 leads to a 10% penalty and additional income tax.  Irrespective of this 30 million workers have prematurely taken money out of the plans with 20% of account holders borrowing against their 401(k)s.

·       A record 36% of women between the ages of 18 and 34 continue to live with their parents.  In addition homeownership is at its lowest level in three decades even though mortgage rates are at historic lows.

·       During October, foreclosures on homes jumped by 12% with final stage foreclosures increasing 31%.

At best the numbers Sagami presents demonstrate the weakness of the recovery since 2008.  They likely indicate systemic problems within the economy caused my inept governmental and central-bank policies, as well as the inefficiencies brought to the economy via access governmental regulations.

The low interest rate policies pursued by the Federal Reserve since the 2008 meltdown have failed to create a robust economy.  These policies have not only weakened long-term economic growth, but also increased the disparity between wealthy and average Americans.  However, the Fed is now in a conundrum.  While it should be increasing interest rates, and there are predictions it will do so in December, the economic withdrawal caused by that action could lead to further economic weakening.

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One Response to “Unemployment Number Drops While Economy Weakens”

  1. Carl Hackert said

    Steve,

    The method and assumptions (lowering of hours per week, part-time jobs counted as full time jobs, automatically adding jobs based on GDP, etc.,) used by the Obama Administration calculating unemployment have been altered for political purposes. This is why the real unemployment rate is in the double digits.

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