Friday, November 7, 2008

Dismal Unemployment Results

The Bureau of Labor Statistics released unemployment figures for October 2008 this morning; the results cannot be described as anything but dismal. The official unemployment rate rose to 6.5%.

Alas, things are much worse than these figures indicate. There were also increases in both the number of discouraged workers (who do not get counted in official unemployment figures) as well as the number of people working part-time but would like full-time employment (these people are counted as fully employed). With the large number of layoffs recently announced by many firms, things are going to get much worse over the coming months.

How bad things get now depends on Congress. The Federal Reserve has done its job of cutting interest rates again and again over the past year. It is time for Congress to pass a large fiscal stimulus bill. The focus needs to be spending programs rather than tax cuts. What it does is less important than the fact that it does something, does something very soon (this month, rather than early next year when the Congress and the new administation is in place), and it does something large (additional government spending well over $100 billion, in an attempt to create several million jobs).

My first strong preference is for infrastructure spending. Let's repair the roads and bridges in the US that are crumbling and need to be repaired soon, no matter what the state of the economy. Also, given our energy and environmental problems, let's work on developing a decent rail system in the US.

I live on the New Jersey shore around an hour or so drive to both New York and Philadelphia. There is a train line to New York that is too slow and requires a train switch because the entire line to New York has not yet been electrified. Getting to Philadelphia by train is an exercise in absurdity. It requires going north almost to New York and then getting another train heading south to Philadelphia. If everything works well (the trains are on time and the connection is good), I can do it in 3-4 hours. If not, the train to Philadelphia takes 4-5 hours. We can and we need to do much better than that.

My second preference is to have the federal government just give the money to state and local governments so that they do not have lay off employees or raise taxes to make up for severe budget shortfalls. This has the virtue of being quick and it is easy. And it will save important jobs that are related to public safety and the ability of government to function in difficult economic times.

No comments: