Unemployment Not As Low As Reported, GDP Gains, Tapering Coming

Peter Morici to Moneynews: True Unemployment Rate at 13 Percent

Friday, 06 Dec 2013 01:55 PM

By Dan Weil and Lisa Barron

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While Friday's jobs report represents a sign of progress, it also understates the magnitude of the unemployment problem, said Peter Morici, a professor of international business at the University of Maryland and a Moneynews Insider.

The headline number for unemployment fell to a five-year low of 7 percent last month. But the total exceeds 13 percent if you count people who have given up looking for work or are working less than they'd like, he tells Newsmax TV in an exclusive interview.

"We see this at both ends of the labor force, young people who are basically reluctant graduate students for the third time and older folks in their 50s who have lost their jobs," Morici said.

While non-farm payrolls gained 203,000 in November, "we're not getting the kinds of numbers we would need to get unemployment to an acceptable level and have high quality jobs," Morici said.Still, "they [the jobs numbers] are a lot better than we were expecting," he said. "And going forward, 2014 will be a little better year. We're not going to get the 400,000 jobs a month we need, but we're going to get more jobs than we've been getting."

As for the economy, third-quarter GDP growth was revised up to 3.6 percent Thursday from 2.8 percent previously. But the gain came largely in inventories, Morici notes. That will have a dampening effect on fourth-quarter growth as those inventories need to be worked off, he said.

He expects growth of about 2.5 percent for 2014 and 2015. "However, this is nowhere near what can be accomplished," Morici said. "Ronald Reagan, at this point in his recovery, had the economy growing at nearly 5 percent, and he was recovering from a deeper recession than Mr. Obama

"Morici said the economy is strong enough for the Federal Reserve to begin tapering its quantitative easing. The Fed is buying $85 billion of Treasurys and mortgage-backed securities a month."We'll start tapering in January and February," the professor predicted. "I believe we've gotten all we can get out of steroids, and now we have to get down to fundamental structural reforms." 

If President Barack Obama is unwilling to make those reforms, the Fed should stop bailing him out, "because it's building up a lot of negative effects in the agricultural land market, in the real-estate market, and so forth," Morici said.

The Fed should avoid tapering dramatically, so that it doesn't send the economy and stock market out of whack, he said.

"This is something the U.S. economy can accept and the stock market can deal with," Morici said.

"There may be an initial adjustment in the market because you know how the market is. It should be looking ahead six months. Instead, it looks ahead six days and maybe only six hours at times. But tapering is on the way."

© 2013 Moneynews. All rights reserved.

Folks, We Are In Trouble, The House Is On Fire and The Fire Department Is Asleep

Dollar Tumbles, Debt Inflates, International Community Calls For Alternative

October 21, 2013 by Sam Rolley 

Government dysfunction has pushed the value of the U.S. dollar near its lowest point of the year against the euro. Meanwhile, the price of U.S. Treasury debt has skyrocketed to its highest point since January.

The Wall Street Journal noted on Friday:

Yields on the 10-year Treasury note, which move inversely to prices, touched 2.538%, the lowest level since July 24, according to CQG. The dollar continued its slide against major rivals, including the euro, the yen and the pound. The euro recently bought $1.3686 from $1.3676 late Thursday, while the pound fetched $1.6186 from $1.6165. The greenback traded at ¥97.71 from ¥97.93.

As a result of the government shutdown’s effect on dollar value and debt prices, the Federal Reserve’s easy money policy is expected to continue beyond December, when the Fed was initially expected to begin the process of tapering government stimulus efforts. Instead, the central bank is likely to continue pumping until March 2014.

As the dollar continues to slip, policymakers and investors in China and Japan have reportedly begun making plans to distance themselves from the dollar to ensure that Washington’s dysfunction doesn’t impair their own economic viability.

“We’re glad a deal has been struck,” said a Japanese policymaker Reuters. “But the uncertainty will remain and it will be the same thing all over again early next year.”

Last week, China made headlines when officials in the nation urged the international community to replace the dollar as the international reserve currency.

“As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world,” China’s official state-run news agency, Xinhua, said in an English-language commentary before the U.S. Congress came to a temporary budget agreement.

Since 2009, China has been calling for a world reserve currency replacement for the dollar. It has also been taking steps to make the yuan, its own currency, a viable alternative.

China holds more than $1.3 trillion U.S. Treasury debt.