- The Washington Times - Friday, April 20, 2012


April remains a cruel month. New jobless claims are the highest they’ve been since late January, with the four-week average stubbornly hovering around the 375,000 mark. Though we’re technically in a recovery, nobody believes it. A Rasmussen Reports survey earlier this week shows a majority is under the impression America is still in recession. That’s for good reason.

To dig America out of the hole created by the financial sector’s collapse, we need an explosion of industry. Instead, we’re seeing a fizzle. The Philadelphia Reserve Bank found manufacturing output growth slowed slightly in the mid-Atlantic region, with its index of general business activity for the factory sector falling from 12.5 in March to 8.5 in April. The lackluster performance dampens the rest of the economy. People who don’t feel secure about their economic future aren’t investing in homes, so housing inventory remains substantial, with 2.4 million houses listed for sale by the end of February. In a healthy market, an average of 6 million homes changes hands in the course of a year; today, that number is closer to 4.5 million. With a significant chunk of the market still in the process of foreclosure, housing won’t recover anytime soon.

Company managers are also skittish. Employers added a net of 120,000 new employees in March. That’s barely half the number of jobs created in each of the last three months. April’s numbers aren’t expected to be much better, with predictions in the 125,000 to 175,000 range. That will leave the official unemployment rate at 8.2 percent.

That figure understates the true depth of the joblessness problem. The unemployment rate only measures the number of people actively looking for a job. It doesn’t count those who have left the labor force, discouraged in their unsuccessful efforts to seek work. The labor-force participation rate of 63.8 percent represents an all-time low. Even a year ago, the labor-force participation rate was higher at 64.2 percent. The drop in this rate understates the true level of unemployment.

About 42 percent of those in the jobless line haven’t had work in at least six months. This is a dangerous figure because the longer someone is out of work, the higher is the risk he will lose his home. The longer the period of unemployment, the harder it is to find another job. Because skills atrophy, employers are less willing to hire someone without a recent work history. Individuals who fall into this trap are increasingly likely to throw in the towel and join the ranks of the permanently unemployed.

As we drag through the second year of this “barely there” recovery, there’s little room for optimism. The Federal Reserve meets again soon and might unleash another round of quantitative easing. With interest rates already near zero, nothing is left in that bag of tricks. The true solution lies beyond the reach of monetary policy. Our oversized, debt-laden government is unleashing new regulations and creating marketplace uncertainty. This tells entrepreneurs they should hold back from the kinds of investment that would trigger growth and job creation. Real deregulation, not monetary or fiscal stimulus, is what’s going to free up America’s economic engine so we can finally see an actual recovery.

The Washington Times

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