The Bureau of Labor Statistics announced today that the unemployment rate has reached 8.5 percent; perhaps more important, 16 percent of people are either unemployed and looking for a job, forced to work part-time instead of full-time, or have simply given up on finding a job at all -- nearly one in five Americans.
One meme going around lately is that "unemployment is a lagging indicator" -- that is, we can look at other statistics, like GDP growth or various market and credit indicators, to see what the economy is really doing. This is mainly because economists hope that GDP growth will turn around next fall, signaling the end of the formal recession. The administration is going to be forced by political incentives to seize on any rosy news to trumpet the success of its economic policies, but as far as I'm concerned, unemployment isn't lagging; those other numbers are just too far ahead. Economic growth is important, but the bottom line of fixing our economy is getting people back to work. You're probably familiar with that old saw, "What happens if the economy grows and nobody notices because they're all out of work?"
One small bit of silver lining: Only recently did some of the stimulus measures, like less withholding on the payroll tax, kick in, and we have yet to see a majority of the effects that will come from that legislation. We won't see those losses turn around any time soon, but it would be nice to see them decelerate.
-- Tim Fernholz
