Bleak Economic Outlook for Blacks Based on Fed’s Actions!
(ThyBlackMan.com) Blacks, who are experiencing the highest unemployment rate among measured working groups in the United States, are headed for even more turbulence economically in the near future. You ask how this is possible with the stock market reaching new highs and the national unemployment rate decreasing from 7.4% to 7.3%. Well, you have to look behind the unemployment numbers and the motive for Federal Reserve Chairman Ben Bernanke saying he will hold quantitative easing at its current level for the near term.
Let us look at the unemployment numbers. The economic recovery appears to be moving forward on the backs of black workers rather than black workers advancing in lockstep with the recovery. When you look at the black unemployment numbers over the last seven months, the black unemployment rate has been vacillating between a 13.8% high in February to a low of 12.6% in July. It currently stands at 13.0% for August up from the July low. Black male unemployment hit a high in May at 13.5% and again, is at that 13.5% high in August. White unemployment, which was at 6.8% in February ended at a low of 6.4% in August.
When you look back over the entire seven months, blacks started out in February with an unemployment rate of 13.8% and that rate now is at 13.0%. Black males started out in February with an unemployment rate of 12.9%. As indicated, black male unemployment currently is at 13.5% for the month of August. What do these numbers imply? They imply that overall blacks have not measurably improved their standing economically. The above numbers are the official numbers. The unofficial rate of unemployment for blacks is higher by as much as 2% to 5%, or more, which places black unemployment in real-time at 15% to 18% nationally.
Consider some hard hit states, such as, California where the unemployment rate for August is 8.9%, Michigan, 9.0%, Illinois, 9.2%, and Nevada 9.5%. These rates are all above the 7.3% national rate of unemployment. Within these states are large concentrations of black workers. The black unemployment rates were unavailable for August for these states, but you can bet they are “at least 50% higher” or more than these states’ official rates.
If blacks were counting on the economy improving in the near future to help them, Federal Reserve Chairman Ben Bernanke poured cold water on that prediction. How did the Federal Reserve Chairman do that you ask? By holding the Fed’s bond buying activities at its current level, Mr. Bernanke is signaling the economy is not improving at the desired projected rate. It is not creating enough jobs to allow the Federal Reserve to taper, and decrease its purchases of $85 billion dollars in bonds per month. Bond purchases by the Fed have kept interest rates low.
The way the Fed keeps interest rates low through buying bonds or buying debt, which is what bonds represent, is when the U. S. Government comes to the bond market for funding or financing, the Fed stands ready to buy these bonds. You see, the federal government borrows money to fund the government. This includes bonds issued by government housing financing agencies, Fannie Mae and Freddie Mac. The Fed buys these bonds or debt at extremely low interest rates forcing other buyers to either buy the bonds at the same rate or find other means of earning a profit on their funds. Those that can, go into the stock market, which is why the market has been moving higher and making new historical highs daily.
However, banks and some lending institutions have to be a lot more conservative with depositors’ funds and cannot take the risk associated with buying stocks. The objective in buying these bonds by the Fed is to stimulate lending among these institutions. Banks and other lending institutions often take deposits and go to the bond market, buy government bonds, take the interest they earn from those bonds and pay a portion of that interest to depositors. They keep the difference, which is their profit. The Fed has stated it would continue its bond buying activities.
This will drive down interest rates, and deprive banks and lending institutions of this easy way to make a profit on money left with them through deposits. The line of reasoning is that banks and other lending institutions would then be more encouraged to lend more, as a way to make a profit, thus creating jobs. Also low interest rates encourage consumers to spend more. Hence, the car industry is seeing greater profits as consumers take advantage of low interest rate car loans.
The Federal Reserve is the 800-pound gorilla in the debt market. By signaling it will buy all United States government debt, it keeps interest rates low. You see, no one can out spend the Federal Reserve Bank, as it has the lawful responsibility of printing money. If it needs more money to buy even more bonds or debt of the United States government to emphasize its low interest rate policy, it simply prints the currency it needs! Quantitative easing is what the bond-buying program is officially called.
If the Fed is projecting the economy is not improving enough for it to reduce its bond buying activities, it is in essence saying, the economy is not improving enough to create the number of jobs needed to decrease the national unemployment rate continuously. The economy over the last two months has averaged job creation nationally at a rate of 166,000 jobs. This economy needs to create 250,000 to 300,000 jobs monthly to be considered healthy. Understandably, for black people who have the highest unemployment rate of any labor group, this is not good news!
Blacks must not let Mr. Obama run away from the truth of their horrible situation! The sixth straight year of double-digit unemployment starts comes January, which is ninety days away, if nothing is done. Double-digit unemployment has got to be having “a range of adverse affects” upon blacks, their families and their communities. Blacks should demand the president put a national job creation plan on the table ( http://www.sslumpsum.com ).
Spending on infrastructure, which was what the administration’s American Jobs Act called for, is no substitute for a national job creation plan. Such spending will not bring us the sustained long-term recovery we all seek. This administration cannot expand the federal government’s payroll to hire enough of the estimated 11.2 million or more unemployed workers.
Based on this news from the Fed, it looks like the pressure is not going to lessen. It’s only going to get more intense for blacks and the black community, as they will be the first in line to feel the pain if the monthly national job numbers continue to trend unfavorably. Sign the petition at http://www.sslumpsum.com demanding a national job creation plan now!
Staff Writer; James Davis
More information about JD and his Deficit Neutral Stimulus Plan Can be founded at http://www.sslumpsum.com.
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