Friday, November 4, 2011

Luke Warm

The Lehmann Letter (SM)

The problem with today's economy is not that we are headed back toward recession. The problem is that the economy continues to grow at such a tepid pace that we are unable to deal with some of our severe problems.

This morning's October jobs report from the Bureau of Labor Statistics is an example:

Employment did grow by 80,000. As the chart indicates this is much better than the horrific declines of the recession. But it's far less than the 200,000 to 300,000 pace of job growth required to restore full employment. The unemployment rate is now 9% and will remain at that troublesome level until job growth accelerates.

Job Growth

(Click on chart to enlarge)

(Recessions shaded)

If you examine the detail in the link above you will notice that government jobs declined by 24,000. This is tragic because severe unemployment should generate a federal effort to stimulate hiring. Government employment should be growing not shrinking. But government efforts to stimulate employment are now bogged down in controversy over the federal deficit. It would be helpful to boost employment now and deal with the deficit later.

Some may take solace that our government problems don't seem as pressing as those in Europe. But Europe has a long post-World War II history of going to the brink, muddling through and then finding a solution that creates a stronger Europe. There is every reason to believe that Europe will pull the rabbit out of the hat once again, strengthening the euro and knitting a stronger continent.

There is less reason for optimism on this side of the Atlantic Ocean.

(To be fully informed visit

© 2011 Michael B. Lehmann

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