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10.2%? Would the Real Unemployment Rate Please Stand Up Print E-mail
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Personal Finance - Investing
Written by Omie Ismail   
Friday, 06 November 2009 14:00
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10.2%? Would the Real Unemployment Rate Please Stand Up
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Today, the federal government released statistics showing that the unemployment rate rose to 10.2%-- more than expected.  Unfortunately for the United States, that number, while grim for many, doesn’t remotely reflect the true unemployment.  The jump past 10% was attributed to changes in teen unemployment and the self-employed.  Although many economists were surprised by the leap, it shouldn’t have come to a shock to anyone who really understands the unemployment figures.  Anyone that delves into the Bureau of Labors Statistics (BLS) statistics, the organization that calculates official unemployment, would know that the true unemployment rate likely lies somewhere between 17% and 22%.

Both families and individuals need to make smart decisions about their spending as the government and the press paints a picture of a recovering economy.  The government has a vested interest in consumers opening up their pocketbooks to get the economy going again.  However, if such spending is done on credit, as was the case for the first seven years of this decade, households will only find themselves further behind in the future.  The recent stimulus programs including Cash for Clunkers and the recently extended Homebuyer tax credit take the two largest debt producing transactions and incentivize them with a relatively modest 3% to 18% contribution from the federal government.  It is smart for the government because the sales and income taxes generated at the state and local level make all governments as a whole even on the transaction.  Since the Federal government would likely have to bail out some of the states, particularly California, such programs allow the government to make a tax transfer indirectly instead of providing additional grant funds or emergency loans.  But if consumers were fully aware of the state of unemployment, would they be so eager to buy a house or an automobile?


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