Why High Unemployment Will Linger Into 2011

There are several basic reasons why businesses today are showing a great deal of caution. In their regular annual survey by the National Federation of Independent Businesses (NFIB) learned that expenditures and short-term approach for new funds are well below 35-year lows. Additionally, the survey shows that only 7% of those businesses polled will be considering any expansion at all. Another 8% are reporting that they have openings right now. That's compared to the 14-24% average of 2008 and the 19-26% of companies that reported vacancies in 2007. That's a significant down turn.

The current state of the economy is cited most often as the reason for such soft hiring in the first half of this year. "It's not a good time to grow" at the moment is another. But surprisingly, the third most mentioned reason for not expanding is the "political climate." All of these are well ahead percentage wise, than the high cost of borrowing or availability of financing.

Statistic from the Department of Labour are giving the same conclusions. Investment during the third quarter of 2009 is down more than 20% from the very low numbers of 2008. Those numbers were nearly 15% down from 2007. What we have is a level of recapitalization that is 35% lower than two years before. The level of job creation is much less than any time in the past 25 years. While job losses are lower in the past few months, very few new jobs have been created to offset those losses. Moreover, those leaving unemployment benefit rolls though reemployment is now at the lowest point in 43 years.Thus more and more of those unemployed have ceased looking for work

This alone seriously suggests that it is an economic disaster in the making to push for a rapid transformation of the US economy during a financial crisis of this magnitude. If the "cap & trade" bill is passed, though fortunately this seems less and less likely, it will take somewhere above 5-10 years to recover fully. As it is, it is more and more probable that unemployment levels above 10% will linger well into 2011. Thus, by passing the "Stimulus Package" that had nothing to do with stimulating the economy in the first place. Furthermore, many of it's provisions were never intended to stimulate anything, but rather were meant to prop up failing Blue State economies.