There is an Employment Crises

Today the U.S. Labor Department reported that the unemployment rate for the U.S. declined to 7.7% in February. The stock market is making news highs, apparently taking this as a good omen and an indicator that the Fed's Quantitative Easing is working. Yes, there are some good things happening in the U.S. economy, but the advances being made are not enough to substantially reduce unemployment over the next year or so.

I have written about our longer-term employment problems in past blogs, but I haven't said that things were at a crises level, and they aren't in the U.S. But there is a lesson to be had by observing what's happening in Europe where unemployment is much higher.

As a result of not being able to pay their bills, some countries are tightening their belts (they are being forced to by the bond market which increases interest rates such that these countries cannot borrow the money to pay the bills). As a result, the austerity measures have sent most European countries into recession raising the unemployment rate to very high levels. In Greece and Spain, the unemployment rate is over 20%. In Italy it is 11.2%.

Is this a crises? Look what's happened lately. In Spain there is a serious separatist movement (The Catalan Independence Movement) to secede from Spain because that area of Spain is much more prosperous and the people there are unhappy that their Spanish brethren are not carrying their weight. In Greece, it is the Golden Dawn party that is gaining seats in the Grecian parliament. The Golden Dawn party has been described as neo-Nazi and fascist. Then, there were the recent elections in Italy that were won by the Five Star party which is a populist movement headed by a professional comedian.

But there is really nothing funny about what's happening. Its not that any one of these political movements are bad in and of themselves, but it shows how bad economic conditions can cause serious social and political unrest. These political movements may actually be good in the long run, but they also show that if we don't get our economy going much better than it is right now, there may be social and political unrest here in the good ole USA.

What's the answer? In a word, Growth!. But spending our way to growth no longer works because there is so much debt. So how do we provide for growth? This sounds simple, get the government out of the way! The specific cure is two-fold, reduce the size of government by cutting Federal government budgets and reducing regulations that hinder businesses doing business, and secondly, reform taxes so that rates can come down, particularly for corporations.