The Labor Department reported Thursday that new applications filed for unemployment insurance jumped by a seasonally adjusted 38,000. The nation's unemployment rate, now at 4.8 percent, is expected to rise to 5 percent in March. The jobless rate could climb to 5.5 percent or higher by the end of this year, according to some projections.
Reference Article: Jobless claims hit 2-year high
‘Real’ Unemployment at 10 percent
The numbers can be deceiving, because the report also shows total unemployment (with marginally attached workers and total employed part time for economic reasons) rose to 9.9 percent. "Marginally attached workers” is a bureaucratic word used to describe long-term jobless and discouraged.
Reference Article: ‘Real’ Unemployment Figure Nearly 10 Percent
Bleakest Economic Assessment to date
In his bleakest economic assessment to date, Ben Bernanke, the Federal Reserve chairman, said on Wednesday that the America economy could contract in the first half of the year. “It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly,” he said. “We expect economic activity to strengthen in the second half of the year, in part as the result of stimulative monetary and fiscal policies.” Later, he said that “a recession is possible,” but that “I’m not yet ready to say whether or not the U.S. economy will face such a situation.”
Reference Article: Fed Chief Sees Possible Contraction in First Half
Ben Bernanke is hedging on a recession and getting the public ready to embrace the reality of a full-blown economic downturn. When the recession is declared, Ben will be able to say, “I said it was possible”. The truth is that a recession is highly likely and perhaps inevitable.
Whether it’s called a recession or not, the economy is not likely to return to growth until the housing prices stop dropping, which is not likely to happen until 2010.
Reference Article: When will the Sub-Prime Problem Be Over
The economic growth projections for 2008 are not likely to happen. The entire economy is hoping for a strong second half of the year, and if it doesn’t happen, there will be the devil to pay.
Congress Needs to Take Drastic Action
Ben Bernanke went on to tell congress that they need to take action to prevent further economic decline. This statement further distances Ben from the looming economic collapse by puting congress in their rightful position to take the blame. Congress needs to cut back on spending drastically – which they have not started talking about nor have any intension of doing anytime soon. Instead, congress wants Ben to fix the economy problems so they can continue spending like there is no tomorrow.
As we move closer to the third quarter, if the economy does not start to show signed of life, congress will be forces to take drastic cuts in government social programs and employment – which will further increase unemployment as the government employs as much as 23 percent of the work force.