The Corner

The Stimulus in Action: Unemployment Reaches 9.8 Percent

This is a very bad, troubling jobs report. While labor-market reports in the previous few months have been bad, they have also contained some positive aspects to give hope that a bottom was near. But in September, every labor-market signal was bad. Hours worked? Down. Weekly Wages? Down. Unemployment rate? Up, with the male unemployment rate at its highest level since the Great Depression. The only reason the overall unemployment rate did not top 10 percent is because so many Americans dropped out of the labor force entirely. In future months, the unemployment rate will continue to climb as people try to reenter the labor force.

This report is a stinging indictment of the failure of the stimulus bill. The heavy-construction industry has lost 5 percent of its total workforce since May; so much for shovel-ready projects boosting that sector. An unemployment rate of 9.8 percent and climbing shows how wrong stimulus proponents were to claim that the stimulus would hold unemployment at 8 percent. The cost per job created by the stimulus bill must be staggeringly high.

Teen unemployment climbed to a record-high 25.9 percent despite almost 150,000 fewer teenagers looking for work. The July minimum-wage increase, combined with other new legislation to raise employment costs, such as the health-care mandates, will ensure a very slow, painful recovery for teenage workers.

The actions of the federal government are not helping the labor market. At some point, hopefully soon, companies will cease their layoffs, but for the labor market to recover, companies will need to start hiring. Currently, there is too much uncertainty, both with the economic recovery and with Washington. The Left is trying to impose many different expensive mandates and regulations on businesses. That makes it impossible for businesses to determine what the actual cost of a new employee will be. How can a business be expected to hire if suddenly its labor costs are 2 percent or even 8 percent higher than expected? It cannot be surprising that hiring has ceased in the last few months, as businesses cannot tell what their future costs are going to be.

The bright spot is that the labor market is not shedding jobs as fast at it was earlier in the recession. Hopefully, September will just be an aberration, and next month’s report will be better. You never want to read too much into one month. However, if next month’s report is as bad as this one, then unemployment-rate forecasts will be revised upward well past 10 percent.

– Rea Hederman Jr. is assistant director of the Center for Data Analysis and senior policy analyst at The Heritage Foundation.

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