Cracking the 10% unemployment barrier
At 8:30 a.m. today, the Labor Department will release the October unemployment figure. Most forecasters expect the rate to rise from 9.8 percent in September to 9.9 percent in October. But they've been wrong on the downside before during this recession, so 10 percent is a solid possibility.
Last month, the economy cracked a positive psychological barrier -- the Dow rose back through 10,000, the first time it had touched the five-digit number since it was falling down through it a year earlier. Dow 10,000 was hailed as a sign of recovery from this long downturn, though it passed back down through 10,000 shortly after and didn't pop back up again until yesterday. So goes our recovery.
But if the official U.S. unemployment rate hits 10 percent, that is a psychological barrier of another kind -- a very bad one. What will it mean?
First, it will mean that one in 10 Americans -- according to official estimates -- cannot find a full-time job.
Second, it will be a continuing headache for the White House. Unemployment was 7.6 percent when President Obama took office in January and -- aside from one month's technical anomaly -- it has done nothing but go up.
The White House has repeatedly referred to the ongoing economic crisis as one that it "inherited" from the Bush administration. And Obama signed a $787 billion stimulus in February, designed -- he said at the time -- to "create or save three to four million jobs." Since then, however, the number has shrunk. Late last month, the administration said the stimulus has created or saved, in fact, 1 million jobs. Or will, that is, once it's all spent. So far, the White House claims 640,000 jobs actually created or saved.
All this by way of saying: If unemployment hits 10 percent -- and more importantly hangs there for several months, as economists expect and history predicts -- then the White House may feel it is forced to push for a second stimulus, which would add more to the already-swelling national debt, or watch its public approval rating go down.
And the White House will be forced to hear every day about "double-digit unemployment," something this nation hasn't seen since 1983.
So is today the day unemployment hits 10 percent? Let's take a look at how it's been trending over the past year, according to the official numbers from the Labor Department's Bureau of Labor Statistics:
December 2008: 7.2%
November 2008: 6.7%
October 2008: 6.5%
It's easy to see that the rate of climb in recent months has slowed substantially from the big jumps that marked the first part of this year. The * marks the statistical outlier month, July, when the rate retreated slightly. But that happened only because of a very bad reason: The labor pool -- people actually seeking jobs -- shrank because so many unemployed Americans got so discouraged, they gave up looking for work.
The most recent big leap -- .5 percent -- came from April to May. Since then, the moves have been smaller. This shows that although unemployment continues to rise, it does so at a slower pace.
Today may not be the day unemployment cracks 10 percent. But it's probably coming.
-- Frank Ahrens
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November 6, 2009; 7:01 AM ET
Categories: The Ticker | Tags: Obama, unemployment
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