Wrong facts often lead to wrong decisions-so make sure you know the real facts. Then make decisions and plans accordingly.
In our June issue, our highly respected Contributing Editor, Don Vance, claimed that we have the highest unemployment since the Great Depression (“Priming the Pump,” C&RB June 2009).
Don, you have your facts wrong!
Actually, I don’t blame Don at all. If you listen to the mainstream media and current Administration, you would think this is true. But here are the facts…
During the height of the Great Depression (1933), unemployment reached 25%. And regardless of what you may have read about Roosevelt’s alphabet of recovery programs, we came out of the Depression with the onset of World War II. Many of you may think it was because “the arsenal of democracy” hired all of the unemployed workers, but in truth, it was because 12 million people went into the military. Unemployment…. gone!
The 1981-82 Recession was, and remains, the worst of the nine recessions we have had since WW2. Here are the facts about that period:
-Unemployment : 10.8%
-Inflation : 17%
-Interest Rates : 22%
The latest numbers put our current unemployment rate at 9.2%. Inflation is almost non-existent (watch out, though—it’s coming, and coming big). Interest rates are below 6%.
Why is this important? Because wrong facts often lead to wrong decisions, which lead to wrong programs. Why would the media and the administration put forth wrong data? Simply, to scare people. The media has always liked scaring their readers and listeners, because it sells. The administration likes to scare people so that voters will suspend critical judgment and say, “Do something!”
It’s the “do something” that scares me. Here is a boring economic fact. Full employment, as defined by virtually all economists, is usually considered to be 95-96% employment. The remaining 4 to 5% is termed “frictional unemployment,” made up of people who are between jobs, teenage summer workers, and those poor souls who have simply given up.
What this really means is that the 9.2% unemployment rate highlighted by the media is only 3 to 4 points below full employment. While this is not a happy time, especially if you are unemployed, it is hardly the “worst since the Great Depression.” My bigger fears are that the desire to “do something” will trump common sense and in fact the plethora of programs in our “stimulus package” will make the recession worse and cause it to linger.
I mention this to you so that in our meetings with both our employees and members, let’s make sure we know the real facts, and make decisions and plans accordingly.
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