Friday, April 06, 2007

U.S. Enemployment Drops to 4.4 Percent

I remember my first economics class in college and the professor discussed the concept of "full employment." Most would think that would be be the same as zero unemployment, but it is not. Instead, full employment is simply when all the people who want to work, have a job. In other words, there are people who only work seasonal jobs, there are others who are involved in illegal activities and want to stay below the economic radar as much as possible, and other still who chose to create a new business rather than get a job after they became unemployed. With that explanation, full employment is typically defined as around four percent.

At our new lower rate of 4.4 percent, the US is hovering slightly above that remarkably low number. This incredible number leads to me making a few observations:

* The tax cuts work. In the early 1980s Ronald Reagan (see photo) described his tax cuts bill as an "unemployment act." He knew that the cuts would revive the economy, stimulate economic growth and reverse the long term unemployment problems pervasive at the time. His plan worked and they recently did it again for President Bush.

* We are losing the point when it comes to illegal immigration. Many free market economists argue that illegal immigrants contribute more to the economy than they take. This is probably true. These immigrants do the jobs that keep food affordable, homes obtainable, and allow middle income people to live like the rich by being able to afford their services. Our low unemployment validates the claim that we need these workers to improve our lives. We just need such people here legally. That doesn't mean amnesty per se, but developing a logical approach to immigration that protects our security, but still provides opportunity for those less fortunate, and improves our economy. Let's not fool ourselves into thinking they are "stealing our jobs." Rather, they are largely improving our economy.

* Let's not exaggerate the "negative effects" of globalization. Another concept I learned in economics 101 is the "law of comparative advantage," which means it makes sense for some countries to produce some things and other countries to produce other things still. Because of that law we drive cars with parts from all over the world (including the US) and cost less than $20,000, where as the exact same car made bumper to bumper in this country would likely cost multiples of that amount. With 4.4 percent unemployment, these countries aren't stealing our jobs, but allowing Americans to live much wealthier than we otherwise would if the earth wasn't "flat." We are getting great products, at lower prices, that our almost fully employed economy enjoys.

Our economy is much healthier than the media wants to admit and it should put the "big stories" in the news into perspective. We don't need to become fortress America, but instead fully enjoy the advantages of a world economy.

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