Work at Home

[Terry Allison]

Work at Home

High Unemployment Should Not Hinder Equities and Growth
By Fisher Investments
July 18, 2011

High unemployment remains a major headline grabber. With the implication that ongoing high unemployment, which even ticked up with the last BLS release, is a material economic negative. However, Fisher Investments analysis is unemployment metrics are not predictive of future economic health.

What is more, much of the media reporting seems to suggest government should do something about unemployment. Our question is, What, exactly? John Maynard Keynes famous Great Depression-era suggestion was to hire people to dig holes then refill them. Mind you, at that time, roughly one out of every five people was unemployed, a level we are not even close to or likely to touch anytime soon. Yes, handing out shovels would create jobs for a time, but surely Lord Keynes was jesting. He no doubt was familiar with another famous economist Frederic Bastiat, who pointed out in the 19th century fixing broken windows or digging ditches and refilling them, is not actually economically stimulative. Nor does it necessarily keep people employed.

In Fisher Investments view, unemployment is not really the governments problem to solve. Nor is it truly an especially economic problem in terms of preventing growth. Rather, it is the frequently very uncomfortable and frustrating consequence of past economic weakness, in this case a recession that ended two years ago.

Folks frequently seem to struggle with the concept unemployment is a symptom of, but not the proximate cause of, recession. But think for a moment. Unemployment has risen in every recession on record, and yet growth has occurred following recession, while unemployment remained high, usually for a long time. And that has been true this time, too. Which only makes sense since the private sector does not hire based on hope or a sense of civic duty. Yet it is common for many to continually find new ways to tie persistent unemployment sluggishness to economic malaise, from blaming technology and employers high expectations to practically blaming President Obama directly.

Blaming a sitting president for high unemployment is an American tradition illustrating the crux of the issue. Of course, unemployment is clearly a tragic personal consequence for individuals affected, but see this as politicians do. Unemployed Americans are voters. In Fisher Investments view, that is at the heart of political platforms touting job creation and pundits calls for increased government actions to help, with wide-ranging proposed solutions sometimes even including resurrecting Depression-era programs like the WPA and the CCC.

But here is the reality. Government does not create private sector jobs, which represent the lions share of employment in the US. Government can only help create the conditions in which businesses can create jobs, or not, as the case may be. Sure, the government provides some vital services, and those certainly require manpower. But once those services are provided, aside from hiring folks to dig ditches and refill them, and the relatively tiny percentage of folks that enter the armed services and protect our shores and our friends and interests abroad, there is little else for government to hire people to do.

On the other hand, the private sector can come up with seemingly endless uses for manpower. Over time, some functions once performed by humans have been performed instead by machines. Think of how massively automated American manufacturing is today, but that has had the positive effect of vastly increasing productivity and freeing people to perform other functions machines can not handle. Or at least not yet. Maybe in the future, they will, but that is dependent on mankinds continually evolving ingenuity and his ability to dream and evolve technologys next generation.

Which, incidentally, provides jobs in and of itself. Without those entrepreneurs and risk-takers willing to see something others do not and pursue its creation. Man does not have computers. Man does not fly. And man does not tweet, which might not actually be a bad thing, but we digress.

Instead of focusing on stubborn employers playing the Scrooge or governments perceived inaction when it comes to unemployment, government would do better to stay out of private enterprises way as much as feasible, some amount of well reasoned regulation is a net benefit, and allow businesses to resume what they do best, innovating and competing with one another in a never-ending race to the top. Believe it or not, they will need to hire folks along the way to help them achieve that goal, and that is when we will see unemployment numbers begin to revive. Are there ways for government to better set the stage for job growth? Yes. But let us not overstate the governments ability to directly create a jobs boom or the impact of high unemployment.

This article constitutes the views, opinions, analyses and commentary of Fisher Investments as of July 2011 and should not be regarded as personal investment advice. No assurances are made Fisher Investments will continue to hold these views, which may change at any time without notice. In addition, no assurances are made regarding the accuracy of any forecast made herein. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.

Another Alternative and a Better Choice. Work at Home
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A work at home communty for people wanting to find out more information on starting their own work at home business. You can also subscribe to this RSS feed to receive up-to-date information from the community blogs Tomorrow's Home Business Social Community RSS Feed

Terry L. Allison, Sr.
Creator of Tomorrow's Home Business Social Community
http://terryallison.com
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