Unemployment plummeted to 6.6% in January ... Why?

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   My Esotericposted 10 years ago

   Unemployment hasn't been this low since 2008 while 113,000 more jobs were added during one of the worst winters America has seen.  E\What do you think?

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      wildernessposted 10 years agoin reply to this

      I think the extended benefits ran out in Jan, taking a great many people off the unemployment rolls.
      
      And the people that claim unemployment plummeted as a result of not drawing unemployment insurance are lying through their teeth.

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         My Esotericposted 10 years agoin reply to this

         They ran out starting Dec 28 and have continued to run out to the tune of about 70,000 per week.  So, far over $2 billion has been lost to small business as a result.
         
         But, you are right, the initial analysis does show the .1 drop wasn't due to people leaving the labor force, but that is coming; it can't be helped.  One big incentive of unemployment benefits is that you had to keep looking.  But why bother now, employers won't hire you anyway, statistics are showing, because you have been out of work too long anyway.

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            wildernessposted 10 years agoin reply to this

            Two billion has been lost?  Lost how?  Who lost it? 
            
            But for the rest - I agree.  I retired early myself - too old to find work in my field and not about to flip burgers when I can collect some of what I've paid for for 40 years.  And my wife, just as rhamson said, got laid off from a major manufacturer near us.  With skills specific to that company and no other, she went to school and got a new skill - to find that no one wanted a woman approaching 60.  Not when the field is crammed with young (healthy) kids that will work for peanuts because they don't have the living expenses that mature people do.

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               My Esotericposted 10 years agoin reply to this

               Unemployment money goes directly back into the economy.  Each dollar not given by the gov't (which comes from employers to begin with) goes right back to business as it passes through the unemployed person.  Now it doesn't; to the tune of $55 million per week.  The businesses keep on feeding the unemployment machine at the same time and it doesn't decline simply because the extended benefits were cut off.  If fact, my rates have gone up to cover the cost of the recession and will continue to do so for awhile (granted, maybe for not as long now)  But, because of the actions by the Republicans, I can't get some of it back now from the purchases the unemployed would have made with their benefits from my store (assuming I owned a facility they would use; which I don't, other businesses use my services, but I am sure you get my point.)
               
               That is where the $2 billion comes from, the unemployed who lost their benefits haven't spent the $2 billion they would have received if the Republicans had seen fit not to make them and small business suffer.

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                  wildernessposted 10 years agoin reply to this

                  But the unemployed didn't have anything to spend.  The money came from someone else (which they would have spent themselves were their taxes not so high) and loans from China (which will NOT do the country any good in the long run.
                  
                  So you haven't lost anything but "digital" money that you would have to repay anyway.  Pretending that the 2$ billion they would have received was anything real doesn't help.

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                     Josakposted 10 years agoin reply to this

                     That is not how economics works.
                     
                     Taxes can certainly be taken from sectors unlikely to spend that money (poor people on the other hand almost always spend their money because food and rent etc. are constant necessities). So the first point is out.
                     
                     As for Chinese debt that does have some interest but it's in the 1% range.
                     
                     On the other hand economic stimulation creates economic growth and savings. If that money had been spent by the unemployed people then businesses would have more customers meaning they would need more staff (thus fewer unemployed and less entitlement spending) and more produce (meaning more mining farming etc., which is where wealth is created, becomes necessary to meet demand).
                     
                     That is why the IMF and World Bank as well as every other major economic board has recommended stimulus practices and why countries like Australia that implemented them did not have recessions.

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                        wildernessposted 10 years agoin reply to this

                        Where is all this money that isn't being spent?  Put in a bank and then being loaned out to build factories to provide jobs?  Stuck in a mattress somewhere?
                        
                        Economic stimulation.  What you actually mean is taking from one to give to someone else or borrowing to give away.  While both will stimulate an economy, long term use of either will ruin it.  Known to all but liberals whose primary goal is to equalize wealth, not grow an economy.

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                     My Esotericposted 10 years agoin reply to this

                     Unemployment taxes come from only one place, employers ... me and my company, in other words.  For each employee I have, I contribute up to $42 per year into the Federal program, and varying amounts in each State I have employees; in some states, that can be very expensive (up to a few hundred dollars per employee) if they have generous programs or, like in Florida, very cheap, if they would rather have the unemployed starve, as they did my step-son-in-law.
                     
                     If the fund runs out, the States and the Feds lend it money and the rates we are charged are raised in order to replenish it.
                     
                     The question is, what would most small businesses do with the extra money if they didn't have to pay into unemployment insurance?  Common sense as well as detailed analysis says that a smaller percentage makes it way directly back into the economy than direct payments to the unemployed and the social value of it zero while for the unemployed it is 100%.  For large corporations, even less makes its way back into the economy in the same beneficial way as it does through the unemployed; most of it would go into the pockets of the executives.

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                        wildernessposted 10 years agoin reply to this

                        Really?  But the feds are paying for a a great many months of extended benefits.  Benefits NOT paid for by employers; benefits paid for by borrowing.  I understand how the system worked in the past, and how it works now.  The basic difference is that the feds are handing out money they don't have to people that can't or won't work.  States are handling the paperwork, but the bulk of the money is coming from the feds, not from local business.
                        
                        So the question isn't what a small business would do with the extra money the feds are gathering from china and giving away as they never had it to start with.

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                           JohnfrmClevelandposted 10 years agoin reply to this

                           Then I don't think you really understand how the system works now (and has for the past 43 years). 
                           
                           When we were on the gold standard, the government was not able to create more dollars (deficit spend) unless it acquired the requisite gold to back it up.  So in order to deficit spend, they borrowed, exchanging bonds for gold-backed dollars, then spending those dollars.  This kept the actual number of gold-backed dollars constant, so they had the gold to fully back those dollars.
                           
                           When we went off the gold standard, we no longer needed to procure more gold in order to create dollars.  The government, if it chose to do so, could issue dollars directly.  But bonds were in place, as were some gold-standard-are laws that required us to keep a positive balance in the Treasury's account at the Fed.  Plus, nobody was really sure how the new system was going to work in practice.  So bonds stayed.  BUT - today, with fiat money, they do not represent real debt, as it costs the government no real resources to meet their obligations (illustrated by the fact that they can, and do, "borrow" from themselves).  The "national debt" is illusory, because those bonds could be exchanged for dollars tomorrow, and the government would not break a sweat doing it. 
                           
                           So it is not at all correct to say that the federal government is "spending money that they don't have," because they have an unlimited supply of dollars.  And deficit spending is necessary to keep the economy going, because so many dollars get hoarded out of circulation that the economy would starve without the new influx.  Every dollar lost to net imports is lost to the economy, until those countries decide to start spending more dollars than they earn (which isn't likely anytime soon).

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                              wildernessposted 10 years agoin reply to this

                              All fine and good...until the value of printed money begins to fall.  I lived through the double digit inflation of the 70's, and others have lived through the hyper inflation of other countries.  This is what happens when governments indiscriminately print money.
                              
                              Which we understand and is why our govt. does not simply print out what it needs, borrowing instead. 
                              
                              Again, who is hoarding all those greenbacks?  Whose mattress is stuffed with it?  What is the physical location of those billions of $$?

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                                 My Esotericposted 10 years agoin reply to this

                                 Actually, nobody is hoarding dollars and nobody is printing extra dollars today.  They didn't in the 1970s, either.  Inflation was driven by the sudden doubling then tripling in price of oil and the subsequent increases in price from oil based commodities which wasn't based on demand.  Non-demand driven price increases = inflation. 
                                 
                                 Further, I think you will find the Fed. in the late 70s and early 80s, didn't print money then either, they lowered interest rates and loosened reserve requirements to help drive increased growth in face of stagflation caused by another round of oil price increases.  It has been a very long time since the Fed has actually simply "printed" money to buy down U.S. debt.

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                                    wildernessposted 10 years agoin reply to this

                                    "And deficit spending is necessary to keep the economy going, because so many dollars get hoarded out of circulation that the economy would starve without the new influx"
                                    
                                    If dollars are not being hoarded, why did you say they are?  And you made quite a case for govt. to print more, saying it is really cheap to do so.  I realize that they don't actually print that much now, but injecting "digital" money, or purely "bookkeeping" money, is no different where inflation is concerned.
                                    
                                    While oil certainly paid a part, the biggest reason for inflation back then was the increase in labor costs without showing an equivalent increase in productivity.  Labor cost increased, but nothing was received for the increased cost, and that caused the inflation more than any other single thing.

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                                       JohnfrmClevelandposted 10 years agoin reply to this

                                       I was the one that said dollars are hoarded, not My Esoteric.  (We seem to disagree on this point.)

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                                          wildernessposted 10 years agoin reply to this

                                          My error, and my apologies to the both of you.  I shall endeavor in the future to get it right.

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                                 JohnfrmClevelandposted 10 years agoin reply to this

                                 Theoretically, a government could print up so much money and push it into the economy that inflation ensues, but this seldom happens.  You don't get this kind of inflation unless your economy cannot keep up with demand.  Our economy is perfectly capable of producing far more than we do today, so demand-pull inflation is nowhere in sight.
                                 The inflation we have seen is due to the price of oil.  If you remember the 70's like I do, you should remember that there was an oil embargo, and oil prices went up.  That affects the price of just about everything else.
                                 
                                 
                                 It may look like borrowing, but it's not.  There is no need for a government to borrow that which it can simply create.  If this was true borrowing, we wouldn't be able to loan ourselves dollars; also, we wouldn't be able to set our own interest rates, because market forces would push up interest rates.  (Haven't you ever wondered about interest rates?)  If China decided tomorrow to stop exchanging dollars for bonds, it wouldn't affect our ability to create and spend dollars in the least. 
                                 
                                 
                                 Whoever holds federal bonds.  China hoards quite a bit, as does Japan.  Major domestic holders of bonds are banks and corportations.  If you hold large amounts of dollars that you have no intention of spending, you normally prefer to hold them as bonds, which are considered 100% safe - plus, they earn a bit of interest.
                                 Do the math:  over America's history, add up our many deficits and few surpluses, and the net is about $18 trillion.  About $1.2 trillion of this is currency, and the balance is held as bonds.  They balance to the penny.  People/banks/businesses/countries could hold them as dollars, but they prefer to hold bonds.

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      rhamsonposted 10 years agoin reply to this

      There are more people leaving the job market. I know I came upon hard times and there is not much out there for an aging woodworker. The governments answer is go and get some education and qualified for a high tech job as there are many out there. Unfortunately as I am nearing sixty the employers are looking for young entry level people in these fields and not expensive insurance liabilities from an older employee.
      
      I find more and more customers coming to me offering cash for discounts on my services. Two things preclude me from accepting these offers. 1. I don't want the government to have a shot at me with an audit when I can barely keep my head above water. 2. It is impossible for me to hide it as my business has a large amount of materials that just don't go away in the books.
      
      In this race to the bottom I find even the 1%'ers who were my mainstay are price hungry and find items in IKEA to titillate their fancies more and more.

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         My Esotericposted 10 years agoin reply to this

         Plus, the longer you are unemployed in a market where there are still three people vying for each job opening, the less likely an employer will bother to look for them and now, 1/2 our elected officials have, eyes-wide-open, put them on the permanent welfare rolls or worse by taking way their unemployment benefits making them a self-fulling prophecy.

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         Credence2posted 10 years agoin reply to this

         Yes, it is sort of frustrating that years of work and experience are not of any value once you cross the line as an elderly worker. So what is left for seniors? Walmart greeters, flipping burgers? What has happened that so many older people find themselves in this position. That gap appears after 50 with only Social Security coming into play for most at 65+. I guess in the past people did not live as long to be of concern after they were considered too old for the workforce. When an older person is laid off what is to be done? This trend is unsettling, to old to start over, too young to retire.

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   Education Answerposted 10 years ago

   I wouldn't call it "plummeted."
   
   People stopped looking for jobs, and now they are not part of the unemployment numbers.  Additionally, the economy may be slightly improving.

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