As Election Day approaches, the unemployment rate has miraculously fallen from 8.2% to 7.8% in two months. President Obama is elated, saying that the economy is on the road to recovery. But is it? The unemployment rate is down, but the number of unemployed Americans is also down. When President Obama was inaugurated in January 2009, 142.3 million Americans had jobs. In September 2012, that number had fallen to 140.4 million. Nearly a million fewer are employed since the recession supposedly ended in June 2009. Even though fewer Americans have jobs, the unemployment rate has fallen to 7.8%. This is because there are fewer eligible Americans in the labor force. The participation rate, the proportion of the eligible population in the labor force has fallen from 65.5% to 63.6%, a two-point drop. People are giving up trying to find work.
A further problem is that anyone with a part-time job is considered fully employed. The number of part timers in September 2012 stood at 34.4 million. Look for the number of part-time employees to increase. Obamacare defines anyone who works 30 or more hours a week as full time. Employers must provide all full-time workers with medical benefits or pay the Obamacare fine. Darden Restaurants, owners of Red Lobster, Longhorn, and Olive Garden, plans to put a large majority of its 180,000 employees on part time status to avoid providing health insurance or paying $3,000 per employee fine. This will be bad for the economy but good for Obama since Darden will be forced to hire more part-time employees, who will be counted as full time and will further drive down the unemployment rate.
As the unemployment rate improves because of more part-time workers and a smaller labor force, employment will continue to worsen. The reduction of the unemployment rate to 7.8% is largely the result of result of an increase in temporary and seasonal workers. The holidays and election are coming. Poll workers and clerks are needed for a short time. But businesses are afraid to hire full-time career employees. Why? Because of Rational Expectations. RE is my favorite, and perhaps the only valid, economic theory because it lends credence to my position that all economics is local. Acting under RE, business owners and consumers make decisions based on what the rationally expect to happen. Right now they expect bad things to happen. Business owners and entrepreneurs expect higher business taxes and more costly regulation. Energy costs will skyrocket. Remember that President Obama said owners of coal companies would be put out of business. That is proving true. Consumers expect higher taxes, and they are getting them. Government is getting bigger and more powerful. The private sector is shrinking. A new career field, Dependency on the Washington Teat, is developing and now encompasses nearly half the population. The economic future of this country is uncertain regardless of who is elected, but will be much worse if American voters pick President Obama.

Posted by at October 23, 2012
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