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InsiderOnline Blog: September 2012

The Economy Is Worse Than the Unemployment Rate Shows

Since the recession began, the proportion of adults working or looking for work has fallen to its lowest level in decades. In fact, if all those discouraged workers were still counted as unemployed, there would have been no drop at all in the unemployment rate in the past three years. The reason the jobs situation remains bad, explains James Sherk, has less to do with layoffs than with a lack of new hiring:

Employers hired 13 million new employees in the second quarter of 2012—15 percent fewer than the 15.3 million new workers hired in the last quarter of 2007. Unemployment remains high primarily because businesses are creating fewer new jobs—not because of increased layoffs. […]

Job creation and new hiring remain low for several reasons. The most prominent are the lingering effects of the collapse of the housing bubble and resulting financial crisis, as well as the domestic consequences of the economic slowdowns in Europe and China. The U.S. government has also contributed to the problem. Excessive taxes and increased regulation discourage risk-taking and investment. Prominent leaders in Congress have announced their intentions to raise taxes by $500 billion in January 2013. The Administration has increased the regulatory burden facing businesses, especially in health care.

Small-business owners report that tax burden and government red tape are significant problems. In fact, small-business owners are statistically as likely to cite either taxes (21 percent) or regulations and red tape (21 percent) as poor sales (20 percent) as their single greatest problem. [The Heritage Foundation, August 30]

Posted on 09/14/12 12:40 PM by Alex Adrianson

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