Unemployment Hits 8.5%

The unemployment numbers in March were not pretty. In the private sector alone, 633,000 jobs were cut. The unemployment rate is now at 8.5%, making it the highest in 25 years. Many people thought the worst was over, but now it looks like the worst is yet to come.

Businesses all over the country have announced plans to cut more jobs in the future. Even the U.S. Postal service is planning on cutting jobs in up and coming months, showing that jobs in the private sector are not the only jobs at risk.

Since December of 2007, 5.1 million American jobs have been lost. Of those lost jobs, 3.3 million have been in just the last 5 months. The automobile industry, manufacturing, and construction industries are responsible for the bulk of the cuts.

So what should be done?

Before making any sudden decisions, the reasons for this systematic failure have to be discovered. The most immediate and obvious piece of evidence, is that demand for these goods has dropped dramatically.

Demand for a product can decrease at any time for a number of reasons. But how can the aggregate demand for all goods drop so dramatically and simultaneously? This sudden drop of spending has sent the economy spiraling into chaos.

This switch in consumer behavior has baffled our government officials and economists alike, which has caused them to panic. People have demanded instant action, resulting in rushed policies.

However, these rushed policies were thought up out of panic and instinct, not economic reasoning.

One solution has been to create government jobs and "invest" in the nation's infrastructure. But as I have explained in previous articles, this increase in government expenditures requires a decrease in private sector spending. Government jobs and production increases, but decrease in the private sector.

The other solution has been more expansionary monetary policy.

The Federal Reserve has been actively manipulating interest rates in an attempt to expand the credit available.

This expansion of credit is the reason for this crisis in the first place, and continuing this reckless policy will create more bubbles and delay recovery. This will be my topic next week.

I'll explain the cause of decreased spending, high unemployment, and who is responsible. Also, I will explain why the actions taken by our government are wrong, and how it will delay recovery.

Make sure not to miss out on next week's article!