A few months ago with the White House and Congress were ramming the pork ridden stimulus bill through Washington the President’s economic team produced the graph below to justify the legislation. The stimulus isn’t helping, it never will help, and it was a colossal waste of money. The economy will eventually bounce back and if it happens during this administration the White House will cite the stimulus as the reason. The economy is the number one issue right now and the President seems more worried about health care, climate change, and the Olympics.
ht: Greg Mankiw
Young people are supposedly rallying around Obama. This summer they should have plenty of time to volunteer for his campaign since unemployment is us up the most for people under the age of twenty-five. The spike in unemployment for this demographic is the reason for today’s jump in the unemployment rate. This is news to me since the press didn’t mention it in any of the news releases. When the Democrats took over the House and Senate two years ago one of their first priorities was to raise the minimum wage. At the time economists and yours truly said it was a bad idea and it would only increase unemployment among young people. Good old economics 101 rears its ugly head again. I don’t expect anyone to bring this up because it would mean exposing Obama’s support of the minimum wage. I wonder how many young people realize it’s difficult to find a job because of the minimum wage increase. Ah, more change we can believe in…
Anyway… Ed Morrissey at Hot air sums it all up all quite nicely.
Why have these new job seekers found it difficult to get jobs? One reason is that Congress made jobs costlier just in time for this economic slowdown. Congress raised the minimum wage last year by seventy cents an hour, from $5.15 to $5.85. It will rise again in July to $6.55 an hour, and next year will hit $7.25 per hour. That makes entry-level labor as much as 27% more expensive this summer, when consumers have already slowed down their spending. The natural loss of work from the slowdown amplifies the effect of the minimum-wage increase, because businesses now cannot afford to raise prices to maintain their entry-level positions.
When the minimum wage increase was under debate last year, many of us warned that it would have precisely this effect. Now we see it unfolding before our eyes. Will the Democrats acknowledge the error and take the blame for hundreds of thousands of jobs lost to their economic meddling — or will they try to shift the blame to the Bush administration for no good reason at all? (via Power Line)
Update: Steve Horwitz at the Austrian Economists chimes in on the minimum wage link to the unemployment numbers.
But what only one or two people have noted is the two groups where the jump in the unemployment rate was the largest: teenagers, where the rate went up 3.3 percentage points and blacks, where the rate went up 1.1. The unemployment rate for adult men is 4.9% and 4.8% for adult women, but for teenagers it is 18.7% and 9.7% for African-Americans.
It is at least possible that in addition to the more general problems in the US economy, last summer’s increase in the federal minimum wage as well as the next jump coming in late July are behind the particulars here. Last July, the federal minimum wage increased to $5.85/hr and it will go up to $6.55 on July 24 of this year. With a sluggish economy, it certainly seems possible that the higher minimum wage is discouraging employers from hiring lower-skill workers whose productivity cannot justify paying them that wage, particularly if they know they will have to give them a raise come late July.
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