America’s unemployment rate officially topped 10 percent last week, and President Obama is to blame.
At least that’s the conventional wisdom. A sitting president always gets the credit or condemnation over the nation’s economic condition.
But the United States economy is like a huge ship at sea. It doesn’t turn on a dime. The factors that led to the nation’s 10.2 percent jobless rate were in place well before Obama took office. And since most economic activity in this country stems from the private sector, the ability of government to alter the employment landscape over a matter of months is minimal.
I doubt there is anything Obama reasonably could have done during his first nine months in office to that would have reduced unemployment. However, some economic experts will argue the much-maligned bailout moves by Obama and — to a lesser extent — those of former President George W. Bush helped to stabilize the nation’s financial system and key industries.
Without those efforts, it’s possible to envision America’s unemployment rate running at 15 or 20 percent.
The bailouts and related economic stimulus programs of the Obama administration carry a hefty price tag. Federal deficits are now topping $1 trillion a year. That level of debt will weigh down the economy in future years. It needs to be addressed — and soon.
There’s a sad irony about the ongoing rise in unemployment. It comes at a time when government officials and economists are declaring the nation’s recession has ended and the recovery is under way. Try telling that to someone on the unemployment line or who was just shown the door.
Joblessness is what economists call a “lagging” economic statistic. In a recovery, hiring new employees tends to be among the last things companies do as they return to growth-oriented operations.
That’s because employees are an expensive proposition. As business expands in a recovery, companies resist hiring and try to have existing workers do more.
Evidence of that was reported last week, when the government said worker productivity in the U.S. jumped 9.5 percent in the third quarter of the year. Theoretically, firms will gradually add positions if they are confident that a growing level of business activity will justify the hirings.
“Confidence” is a key word when it comes to economics. In fact, the government keeps data on what it terms “consumer confidence.”
By surveying consumer attitudes, Washington assesses whether or not the economy will grow. If consumer confidence is rising, people are likely to spend or borrow more money — including for large purchases such as cars or homes. But if confidence is waning, consumers are inclined to keep their cash.
That’s a big deal, because consumer activity makes up about two-thirds of U.S. economic activity. If people are reluctant to spend money, because they are out of work or fear they may soon be so, that leads to a negative ripple effect.
And it helps to explain why it’s so difficult to turn the nation’s economy around during hard times.
Of course, people don’t complain when the trend is running in the opposite direction. Warnings are frequently issued during economic booms about high debt rates and people living beyond their means. But it usually takes a crash to get folks to change their ways.
Eventually, we will see the unemployment rate start to come down. However, it will do so slowly, and there will be a lot pain in the interim. It’s mainly a consequence of an economy that was allowed to get out of whack several years ago, rather than anything that’s happening now.
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