There's No Such Thing as a Jobless Recovery

There's No Such Thing as a Jobless Recovery
http://www.wiseandfrugalgovernment.blogspot.com/

I have been watching the U.S. markets and the economy for twenty-five years. And I can tell you with confidence: There is no such thing as a recovery when unemployment is rising. I can also tell you that over those twenty-five years (during which I was managing billions of dollars) never have I seen a media so determined to call an end to a recession only to declare with the next bit of economic news that the so and so indicator "unexpectedly" came in below expectations... Unexpected? Only to the wishing on a star crowd.

Look at the chart attached. It is a government chart that shows unemployment registering 7.5% in January of this year. That is the unemployment number (among other things) that prompted Mr. O to declare the worst recession since the Great Depression. We were advised that Congress must pass the economic stimulus package to the tune of some $870 billion dollars to ensure that unemployment not rise above 8%. Well, nine short months and a stimulus bill later we are hovering at 10% and rising. Stimulus of the sort the Obama Administration (and Bush before him) has advocated and employed obviously does not work.

Now, take today's GDP number. Hip hip hooray. The Gross Domestic Product rose by a seasonally adjusted 3.5%--greater than expectations. Why? Because consumer spending rose 3.4% during the quarter and added 2.4% to overall growth. Why? Because the Cash For Clunkers program borrowed demand from the future by incenting consumers to make car purchases during the quarter. What has happened since then? Auto sales have fallen off a cliff. This will happen every time sales are managed through government programs that borrow demand from the future. Look at the housing market if you need further confirmation.

There is one thing that is certain from today's report. The consumer is critical to GDP growth. And without jobs, consumers won't sustain spending.

Here is one prediction you can take to the bank: Until the Obama Administration embraces fiscal responsibility, which includes reigned in spending and tax cuts to incent true growth, the end to this recession will continue to surprise the economically naive.