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High unemployment hinders US economic recovery

Nick Doms's picture

The May job numbers, released yesterday, disappointed the markets and the continued high unemployment rate does not show any signs of an economic recovery, according to traders and market makers.

While the unemployment rate fell 0.2 percentage points versus April, according to official figures released by the Department of Labor, it remains high at a 9.7% level and does not show any signs of decrease in the next months to come.

The new job creation of 431,000 during the month of May also included 411,000 new temporary jobs for the Census Bureau, which will ultimately disappear. The mere difference of 20,000 new jobs clearly shows that the private sector is not hiring, hence an economic recovery is not in sight.

The US economy is struggling with 15 million unemployed people who ultimately will have to find their way to the labor force in some way or another. That is not an easy task to achieve and increasing the number of government jobs while the private sector remains stagnant is not a solution for the future.

Our economy is hindered by multiple factors and government spending is one main cause of high spending, high annual budget deficits and high outstanding debt. It is crucial that the private sector finds the confidence to invest in hiring employees since they are the driving force behind a slow but steady way to recovery.

The current set of events in Europe and its current fiscal and monetary policies will prove to put even more extra burden on the US economy. A very weak euro has its advantages for Europe, making their exports cheaper and therefore polishing their trade balance sheets, but the American consumer cannot sustain the weight it will have to carry.

A tax stimulus for small and large businesses would be the catalyst we need in order to revamp our production and export capabilities. That measure alone will create jobs, open the credit markets, increase our GDP and reduce our annual deficit.

Our recovery is not only in our hands but also dependable on how Europe and China work in tandem to find a global solution for the current financial crisis.

Written by Nick Doms © 2010, all rights reserved

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