The growth of unemployment had been slowing moderately over the past two months but it took a turn for the worse in May despite conflicting reports from major media outlets. Forbes.com ran an article Friday June 5, stating that job losses in May were just 345,000--far fewer than the 550,000 most economists were predicting. It uses this as a signal that the economy is turning around.
Unfortunately, there are several things wrong with this argument. First of all, this country needs to be creating hundreds of thousands of jobs each month to soak up unemployment, increase GDP, and prop up lagging incomes. A loss of 345,000 jobs is just sinking us further into the hole. The second, and most important, counterargument is that while this economy may have seen a drop in "non-farm payroll employment"- the actual number of unemployed persons increased by 787,000, according to the Bureau of Labor Statistics.That is the largest monthly increase of 2009, and one of the largest jumps since the recession began in December of 2007. The national average unemployment rate now stands at 9.4 percent, and the total number of people who are officially unemployed now numbers 14.5 million--a full 7 million of whom are direct effects of the economic downturn.
The non-farm payroll numbers only show the number of brand new layoffs and cutbacks, the unemployment increase signifies the total number of people who are now collecting government assistance. The disparity between the two figures is explained by the time it takes for an individual to finally decide that they require aide and go through the paperwork process.Just six months ago unemployment was already at a 14-year high, it has since rocketed to heights untouched in generations. Furthermore, if we use other evidence not used in the government's standard calculation you can see that the rate of unemployment/underemployment is closer to 20 percent on the national average--twice as high as the BLS reporting.
Professor Peter Morici, writing for Tradereform.org, projected job losses to be nearly half of a million in May. According to the BLS initial figure, that projection seems far too high. However, when reading the entire BLS report it is apparent that Morici's estimate was in fact far too low, and the employment problem in the United States got much worse than any expert or analyst could have imagined.Morici's article goes on to discuss the 6 percent contraction of the U.S. economy over the past 6 months--a gigantic contraction for such a small period--and how the government's current actions simply are not enough. The stimulus package for instance promises to create roughly 3 million, mostly temporary, jobs in the U.S. At the same time, the economy will have lost at perhaps 10 million or more employees over the same period.
Our economy is getting much worse by the month, and for the most part major news outlets are heralding a growth in the stock market as being a sign of rebirth and revival. The truth is, the American economic system has yet to begin its long journey back to prosperity.
