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How Misleading Unemployment Claims Data Can Cause the Double Dip Recession
Raymond Richman, 8/4/2011

As usual, the BLS reported seasonally adjusted initial claims in the first paragraph of their weekly report dated August 4, 2011 and in the following section of the report it reported the actual number of claims filed. The report was published at 8:30 AM., Thursday, August 4. For the week ending July 30, it reported that seasonally adjusted initial claims were 400,000, a decrease of 1,000 from the previous week's revised figure of 401,000. In other words, for all practical purposes, there was no change in the number of claims from the previous week. The actual number of initial claims, not adjusted seasonally, totaled 339,348 in the week ending July 30, a decrease of 29,939 from the previous week, a decline of almost ten percent. There were 402,140 initial claims in the comparable week in 2010. The advance unadjusted number for persons claiming unemployment insurance benefits in state programs totaled 3,663,134, a decrease of 89,947 from the preceding week. A year earlier, the volume was 4,438,886. The total number of people claiming benefits in all programs for the week ending July 16 was 7,570,439, a decrease of 75,192 from the previous week. All this relatively good news was unreported in the media.

Before the New York stock markets opened, Asian markets showed a decline and markets in Europe substantial declines. It is not surprising that the New York Stock Exchange opened lower but the combination of bad news in Asia, Europe, and the dismal report of unemployment insurance claims in the U.S. led to the DOW falling 512 points, the second worst decline since the recession began. We expect the relative good news about unemployment claims to be repeated in the employment data to be released at 8:30 A.M. August 5, 2011 and hope it may restore some optimism about America’s future and rally the stock market.

We are not optimistic about our economic recovery. We welcome any indication of improvement in the economy however modest. Butwe have been calling our readers’ attention to the fact that the Obama administration was doing almost nothing to promote economic recovery and restore full employment for the nearly three years of its existence. In our analysis of the causes of the recession and the steps needed to promote economic recovery, we pointed out how the recession originated in the government-promoted real estate bubble, had been caused by the steps taken by the U.S. government beginning with the Community Redevelopment Act of 1937 which led to the flood of subprime mortgages and unprecedented laxity in requiring buyers to have sufficient equity when buying homes. We have pointed how Pres. Clinton and G.W.Bush ignored the growing U.S. trade deficit which was de-industrializing the U.S. and causing the loss of millions of good American jobs. We noted how the Obama administration put foolish environmental costs on American industry, impeded the drilling for oil on public lands, offshore, and in the Arctic, imposed regulations and burdens on domestic industry thus discouraging construction of factories in the U.S., and foolishly subsidized inefficient wind and solar electric generating plants, and heavily subsidized hybrid motor vehicles, etc., etc.

It may already be too late to prevent the recession from worsening. But there are steps we could take to promote recovery. One step is our invention of single-country-scaled tariffs to balance the trade deficit and promote manufacturing and job creation in the U.S. We have recommend eliminating the corporate income tax and either integrating it with the personal income tax, i.e., treating corporations as partnerships are treated under the income tax code or replacing it with a tax that is deductible for income tax purposes as the value-added tax is treated by most of our trading partners. Some other steps are included in the previous paragraph. We need to stop doing those things that impede recovery.

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]