The Economy Is Even Worse Than You Think

OPINION

The average length of unemployment is higher than it's been since government began tracking the data in 1948.

By MORTIMER ZUCKERMAN

The recent unemployment numbers have undermined confidence that we might be nearing the bottom of the recession. What we can see on the surface is disconcerting enough, but the inside numbers are just as bad.

The Bureau of Labor Statistics preliminary estimate for job losses for June is 467,000, which means 7.2 million people have lost their jobs since the start of the recession. The cumulative job losses over the last six months have been greater than for any other half year period since World War II, including the military demobilization after the war. The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

Here are 10 reasons we are in even more trouble than the 9.5% unemployment rate indicates:

David Klein

- June's total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.

- More companies are asking employees to take unpaid leave. These people don't count on the unemployment roll.

- No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.

- The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.

- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).

- The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.

- The average worker saw no wage gains in June, with average compensation running flat at $18.53 an hour.

- The goods producing sector is losing the most jobs -- 223,000 in the last report alone.

- The prospects for job creation are equally distressing. The likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers back to full time. Many unemployed workers looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are almost impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance.

Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period.

Can we find comfort in the fact that employment has long been considered a lagging indicator? It is conventionally seen as having limited predictive power since employment reflects decisions taken earlier in the business cycle. But today is different. Unemployment has doubled to 9.5% from 4.8% in only 16 months, a rate so fast it may influence future economic behavior and outlook.

How could this happen when Washington has thrown trillions of dollars into the pot, including the famous $787 billion in stimulus spending that was supposed to yield $1.50 in growth for every dollar spent? For a start, too much of the money went to transfer payments such as Medicaid, jobless benefits and the like that do nothing for jobs and growth. The spending that creates new jobs is new spending, particularly on infrastructure. It amounts to less than 10% of the stimulus package today.

About 40% of U.S. workers believe the recession will continue for another full year, and their pessimism is justified. As paychecks shrink and disappear, consumers are more hesitant to spend and won't lead the economy out of the doldrums quickly enough.

It may have made him unpopular in parts of the Obama administration, but Vice President Joe Biden was right when he said a week ago that the administration misread how bad the economy was and how effective the stimulus would be. It was supposed to be about jobs but it wasn't. The Recovery Act was a single piece of legislation but it included thousands of funding schemes for tens of thousands of projects, and those programs are stuck in the bureaucracy as the government releases the funds with typical inefficiency.

Another $150 billion, which was allocated to state coffers to continue programs like Medicaid, did not add new jobs; hundreds of billions were set aside for tax cuts and for new benefits for the poor and the unemployed, and they did not add new jobs. Now state budgets are drowning in red ink as jobless claims and Medicaid bills climb.

Next year state budgets will have depleted their initial rescue dollars. Absent another rescue plan, they will have no choice but to slash spending, raise taxes, or both. State and local governments, representing about 15% of the economy, are beginning the worst contraction in postwar history amid a deficit of $166 billion for fiscal 2010, according to the Center on Budget and Policy Priorities, and a gap of $350 billion in fiscal 2011.

Households overburdened with historic levels of debt will also be saving more. The savings rate has already jumped to almost 7% of after-tax income from 0% in 2007, and it is still going up. Every dollar of saving comes out of consumption. Since consumer spending is the economy's main driver, we are going to have a weak consumer sector and many businesses simply won't have the means or the need to hire employees. After the 1990-91 recessions, consumers went out and bought houses, cars and other expensive goods. This time, the combination of a weak job picture and a severe credit crunch means that people won't be able to get the financing for big expenditures, and those who can borrow will be reluctant to do so. The paycheck has returned as the primary source of spending.

This process is nowhere near complete and, until it is, the economy will barely grow if it does at all, and it may well oscillate between sluggish growth and modest decline for the next several years until the rebalancing of excessive debt has been completed. Until then, the economy will be deprived of adequate profits and cash flow, and businesses will not start to hire nor race to make capital expenditures when they have vast idle capacity.

No wonder poll after poll shows a steady erosion of confidence in the stimulus. So what kind of second-act stimulus should we look for? Something that might have a real multiplier effect, not a congressional wish list of pet programs. It is critical that the Obama administration not play politics with the issue. The time to get ready for a serious infrastructure program is now. It's a shame Washington didn't get it right the first time.

Mr. Zuckerman is chairman and editor in chief of U.S. News & World Report.

Richard Viguerie: All Issues at Sotomayor Confirmation Hearings Boil Down To One

(Manassas, Virginia) The following is a statement by Richard A. Viguerie, Chairman of ConservativeHQ.com, concerning the Senate Judiciary Committee confirmation hearings for President Obama's Supreme Court nominee, Judge Sonia Sotomayor:


"Some Republican senators are finally hinting at the one issue that could dominate and make uniquely historic the Sotomayor hearings. As longtime Chicago-way Obama advisor David Axelrod said in a May 26, 2009 interview, the President nominated Sotomayor because 'he wanted someone whose philosophy of judging was his,' which was to 'adapt' - meaning change - 'constitutional principles and law.'


"That is a shocking admission of Obama's views, which go beyond judicial activism and undermine our constitutional structure based in separation of limited, enumerated powers.


"Judge Sotomayor's rulings, whether dealing with the 1st Amendment, 2nd Amendment, private property rights, criminal law, use of foreign law, race, equal protection, and other areas of law, demonstrate that she is consistently 'empathetic' in favor of government power.


"In her speeches, Sotomayor has said policy is made by the courts, which affirms her view shared with Obama that judges may and should make law. That, however, usurps the powers of the people's elected representatives.


"All senators have a serious, constitutional obligation to the American people to explore in great detail such a dangerous and radical view of judicial power, especially for Obama's first Supreme Court nominee.


"President Obama is a statist. The real debate is no longer whether he is a socialist, but whether his ideology is authoritarian. The views of judicial power shared by Obama and Sotomayor are inconsistent with the Constitution itself, and that should disqualify this nominee for the highest and in some cases last forum to protect individual rights and prevent authoritarian government, which America's founders feared.


"These hearings are an opportunity for Republicans to define Obama, which they and John McCain's campaign failed to do in the 2008 election."

NOTE TO EDITORS: Richard A. Viguerie pioneered political direct mail and has been called "one of the creators of the modern conservative movement" (The Nation magazine) and one of the "conservatives of the century" (The Washington Times).

The Money Masters (DVD) How Banks Create the World's Money

By Bill Still and Pat Carmack

This comprehensive, 3-1/2 hour, fast-paced historical documentary throws back the veil of deceit hiding the origins and operations of the corrupt banking plutocracy that owns and rules America and is gradually and clandestinely imposing a worldwide tyranny on the rest of us.

In 1913, President Woodrow Wilson approved the Federal Reserve Act. A few years later, he reflected:

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world -- no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men."

A century before Thomas Jefferson reflected much the same sentiment:

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks....will deprive the people of all property until their children wakeup homeless on the continent their fathers conquered....The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

This riveting DVD documentary covers the history of monetary reform from Roman Times to the present. It is packed with brilliant quotations and is absolutely the best production on the Federal Reserve available. Presented in layman's terms that the average person can comprehend, this set even includes a 16 page booklet containing the Monetary Reform Act.

"Outstanding! The best video yet on the history of the Federal Reserve and the mysterious disappearance of America's gold reserves. Fast-paced and riveting."

--Robert Caroll, Humane World Community, Inc.

Get your "Money Masters" set today and find out the full story of the Fed and the true nature of the U.S. monetary system.

NOTE: Purchasing "The Money Masters" from WND's online store also qualifies you to receive three FREE issues of WND's acclaimed monthly print magazine, Whistleblower. Watch for the FREE offer during checkout.

Parties Set to Paint Opposing Pictures of Nominee

Democrats Will Describe Judge as a Meticulous Workhorse While Republicans Cite Controversial Decisions, Remarks

By JESS BRAVIN

WASHINGTON -- Two different images of Sonia Sotomayor will emerge from the Supreme Court nominee's confirmation hearings that begin Monday.

Democrats, focusing on her 17-year record as a federal judge, will portray the nominee as a meticulous judicial workhorse, impartially applying the law, even as her rise from the projects marks her as a quintessential American story.

"It's somewhat odd that three of the biggest constitutional cases she decided were the most truncated opinions that you can almost imagine," said Sen. Jeff Sessions of Alabama, the Senate Judiciary Committee's ranking Republican.

Democrats plan to shift the debate to Judge Sotomayor's experience. A host of mostly liberal interest groups and researchers have been issuing reports on Judge Sotomayor's courtroom record, which they say dispel suggestions she is a judicial radical.

Her supporters got a boost from a 55-page report from the nonpartisan Congressional Research Service, an arm of the Library of Congress. Sotomayor opinions "belie easy categorization along any ideological spectrum" and seem to reflect "careful application of particular facts at issue," along with a disinclination to overstep the court's "judicial role," researchers found.

The Brennan Center for Justice, a liberal advocacy program at New York University's law school, said its researchers analyzed 1,194 cases to see if Judge Sotomayor differed from her colleagues on the Second Circuit Court of Appeals, overturned a legislative or executive action or deferred to a lower court or agency decision. She voted with the majority in 98.2% of constitutional cases, the center said.

On the federal district court from 1992 to 1998, Judge Sotomayor was more likely than other judges to send criminal defendants to prison, according to a Syracuse University research center. It reviewed 7,750 criminal prosecutions in the Southern District of New York, and found "she was notably tougher in her sentencing of white-collar criminals than was typical in this district."

Sen. Charles Schumer (D., N.Y.) issued a report showing Judge Sotomayor ruled against 83% of immigrants seeking asylum -- about the same as the Second Circuit overall.

"There's no better way to predict how a judicial nominee will perform on the bench than by their previous judicial records," Mr. Schumer said.

Conservatives, for the most part, don't dispute the statistics, but aren't surprised Judge Sotomayor's decisions accord with other judges. They say most appellate-court opinions are controlled by precedent, while the Supreme Court can overrule prior cases.

Criticism of the nominee "is not based on how she ruled, it's based on what she said," said Curt Levey, president of the Committee for Justice.

A Senate Democratic aide dismissed the idea that Judge Sotomayor has been concealing radical objectives. "It's hard to believe she was lying in wait just so she could save them up until she was on the Supreme Court," the aide said.

Mr. Levey, however, said the notion is not so far-fetched. "She's known for more than 10 years that she's being considered for the Supreme Court, so to some extent she's been on her best behavior," he said.

Write to Jess Bravin at jess.bravin@wsj.com

The Road to Economic Demoralization

by Larry Kudlow

Townhall.com Columnist

There’s no question that current government policies for taxes, spending, and regulation are causing the U.S. to lose competitiveness in the global race for capital, prosperity, and growth.

Of course, China has been moving in the direction of free-market capitalism for years. To some extent, this shows the positive benefits of America’s free-trade policies and its open-mindedness in helping nurture not only China growth, but also middle-class prosperity worldwide.

But what’s particularly galling about Obamanomics is that we may well be losing our competitive edge with Europe. While Europe is ever so slightly moving toward Reagan and Thatcher, the U.S. is shifting toward an overtaxed and overregulated model that smacks of François Mitterrand. That’s something no one should want to tolerate.

Heavy government controls at home, along with an income-leveling social policy couched in economic-recovery terms, is no way to run a railroad. At the simple stroke of a computer key, world investment flows to its most hospitable destination. That includes a reliable currency. But in President Bush’s last year and President Obama’s first, the U.S. has become a less-hospitable destination for global capital. That should worry everybody.

But let’s first look to the China story.

We know that China is already our principal banker, to the tune of nearly $1 trillion. As President Obama’s record spending and borrowing continues -- he’ll be the greatest bond salesman in American history -- our financial reliance on China grows daily. But that’s not all.

Fortune magazine recently reported that the number of U.S. companies in the world’s top 500 fell to the lowest level ever, while more Chinese firms than ever made the list. Thirty-seven Chinese companies now rank in the top 500, including nine new entries. Meanwhile, the number of U.S. firms has fallen to 140, the lowest total since Fortune began the list in 1995. This is not good.

China also surpassed the U.S. as the world’s biggest automaker in the first half of 2009, with June sales soaring 36.5 percent from a year earlier. The Chinese registered 6.1 million car sales for the first half of the year. That way outpaced American sales, which were only 4.8 million.

And China has no capital-gains tax. It only has a 15-to-20 percent corporate tax. The U.S., on the other hand, is raising its cap-gains tax rate to 20 percent. It’s also increasing its top personal tax rates.

In fact, the scheduled income-tax hike along with a much-discussed 4 percent health-care surtax will balloon the top U.S. tax rate all the way to 51 percent. And there’s more. In order to finance so-called health-care reform, congressional Democrats are now talking about raising the tax rate on capital gains and dividends by another 1.5 percent while installing a value-added tax (VAT) that would begin at 1.5 percent.

Accentuate the Positive

Streetcar Line

Conservative War Room Strategy

By Quin Hillyer

Barack Obama is a disaster for the country because his economics are straight out of Mussolini's playbook, his foreign policy is that of Ramsey Clark, his Justice Department is that of Ramsey Clark as well, his ethics are pure Chicago thuggishness, his hostility to Christianity in the public square akin to that of Madalyn Murray O'Hair, and his ego like Napoleon's.

Yeah, … and trying to make those complaints will get conservatives exactly nowhere. Nor will complaints that the establishment media have put their journalistic ethical manhood in collective hock, trading in their watchdog roles for not just a lap dog role where Obama is concerned, but more like lap dancers for the president while asking him exactly what he wants them to show him.

Yes, Nancy Pelosi and Pat Leahy are hypocrites and cheaters; and yes, Barney Frank's economics are a threat to the republic; and yes, making "empathy" a criterion for choosing judges is about as relevant as making calculus skills a criterion for picking a hockey team.

To all those points, much of Middle America asks "so what?" Why should that make them pay attention to conservatives instead of paying attention to dead weirdo musicians and to their own credit card debts? Oh, much of Middle America will indeed give a passing thought to conservatives when those conservatives are flaking out in Argentina, Alaska, or airport assignations. But otherwise, conservatives just don't seem relevant.

A huge part of the problem is that our elected leaders don't seem to have a clue about how to mobilize conservative grassroots, much less the general public, behind positive themes or principled conservative ideals. The number of Republican congressmen not seriously afflicted with Inside-Baseball-itis can probably be counted on a broken abacus on which the beads don't move. And the congressmen who actually understand that good principles are good politics, rather than an occasional tool for political ends, are as rare as the latest confirmed sighting of a hairy-nosed wombat.

But none of that excuses the rest of us for our failures to win political battles.

The conservative movement somehow lost its ability to elect enough of its own to office. The movement certainly lost its ability to stay connected with enough of the politicians it helped elect to office. And it -- we -- clearly failed to maintain the constructive hold that conservatives once enjoyed on state and national Republican Party apparatuses.

To understand how bad things are, one need only watch Republicans in the Senate fumble the chance to win a real public relations battle concerning the nomination of Sonia Sotomayor to the Supreme Court. On every level, polls give conservatives the edge on issues related to judges. Yet Alabama's Sen. Jeff Sessions has been allowed to wage a mostly lonely battle -- a valiant and well-thought-out battle, but still a mostly lonely one -- while most of his colleagues act as if it's a foregone conclusion that Sotomayor will be confirmed.

You can't win by acting as if you can't win.

And that's a shame, because if the nomination battled is waged well, there actually is, or could be, a serious chance, even if decidedly difficult, to defeat Sotomayor.

But I digress. The point here is that conservatives need to relearn politics.

Now that's a tall order. Relearning politics from top to bottom involves all sorts of campaign technology, media savvy, personal skills, and myriad other challenges -- far too many challenges to be discussed in one column.

But one fairly simple lesson from past conservative successes can be emphasized concisely. The lesson is this: To capture the public's imagination, a movement needs to push a galvanizing, positive policy change.

In the late 1970s, a flailing Republican Party rallied around what became the Kemp-Roth tax-cut plan, along with calls for a strong defense. In 1994, conservatives rightly embraced the Contract with America. In 2002 especially, but also in 2004, conservatives effectively campaigned on the issue of judicial nominations. And in 2004, it is almost certain that various state initiatives to outlaw homosexual marriage helped carry President Bush to re-election while helping save or win seats for a number of Republicans, conservative or not, who benefitted from high social-conservative turnout.

In each case, conservatives clearly provided something to vote for. Yes, it also helps immensely to have something to vote against. Parties and candidates can win elections on the strength of being against something or someone bad. But principled movements can't elect enough principled politicians to office, and keep them in office, merely on a negative message. They need to offer something positive -- something either inspirational or at least deeply felt. Something for people to support.