Fed Official: Real US Unemployment Rate is 16%

Dennis Lockhart may be expressing his own views, but the figure of 16% he quotes is nothing more than the Bureau of Labor Statistics "U-6" measure of unemployment.

U-6 Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons,economic reasons, as a percent of the civilian labor force plus all marginally attached workers.

Here is a chart showing the 'official' U3 measure of unemployment and the U6 alternate measure. The chart also includes the unofficial unemployment rate projection done by John Williams of Shadowstats.com.



It appears that Dennis wanted to take this occasion to say that things were SO bad that there is little use in applying any sort of stimulus to the public, although there is plenty of stimulus required for the banks.

Breitbart
Real US unemployment rate at 16 pct: Fed official
Aug 26 02:25 PM US/Eastern

The real US unemployment rate is 16 percent if persons who have dropped out of the labor pool and those working less than they would like are counted, a Federal Reserve official said Wednesday.

"If one considers the people who would like a job but have stopped looking -- so-called discouraged workers -- and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart.

He underscored that he was expressing his own views, which did "do not necessarily reflect those of my colleagues on the Federal Open Market Committee," the policy-setting body of the central bank.

Lockhart pointed out in a speech to a chamber of commerce in Chattanooga, Tennessee that those two categories of people are not taken into account in the Labor Department's monthly report on the unemployment rate. The official July jobless rate was 9.4 percent.

Lockhart, who heads the Atlanta, Georgia, division of the Fed, is the first central bank official to acknowledge the depth of unemployment amid the worst US recession since the Great Depression.

Lockhart said the US economy was improving but "still fragile," and the beginning stages of a sluggish recovery were underway.

"My forecast for a slow recovery implies a protracted period of high unemployment," he said, adding that it would be difficult to stimulate jobs through additional public spending. (How about Bank bailouts and bonsues? Plenty of room to add more, right? - Jesse)

"Further fiscal stimulus has been mentioned, but the full effects of the first stimulus package are not yet clear, and the concern over adding to the federal deficit and the resulting national debt is warranted," he said.

President Barack Obama's administration has resisted calls for more public spending, arguing that the 787-billion-dollar stimulus passed in February needs time to work its way through the economy.

Lockhart noted that construction and manufacturing had been particularly hard hit in the recession that began in December 2007 and predicted some jobs were gone for good.

Prior to the recession, he said, construction and manufacturing combined accounted for slightly more than 15 percent of employment. But during the recession, their job losses made up more than 40 percent of all US job losses.

"In my view, it is unlikely that we will see a return of jobs lost in certain sectors, such as manufacturing," he said. (Yep that's it. Manufacturing is dead, forever. Never to return. - Jesse)

"In a similar vein, the recession has been so deep in construction that a reallocation of workers is likely to happen -- even if not permanent."

Payroll employment has fallen by 6.7 million since the recession began.

'New Deal for Wall Street' Programs Subsidizing Subprime Lenders

Welfare for Wall Street is just another phase of the 'trickle down' approach that seems to be so popular with the financerati.

If "Cash for Clunkers" had involved subsidized loans for cars administered by the banks it would have been touted as the greatest thing since sliced bread by the coporate media and mainstream infomercials, instead of being slammed on a daily basis as a troubled, pointless giveaway program.

So now we have a new "Cash for Criminals" program from the finance friendly folks at the tarnished Treasury and finagling Fed as outlined in the story below, this time for those overpriced housing loans sold to underpaid, over-indebted consumers.

The housing market needs to clear, the losses need to be realized, and the debt must be written down or taken into default by the banks.

The banks do not wish to foreclose because this will force them to start marking down the toxic assets they still hold on their books.

The Obama Administration is doing a fairly good imitation of Japan Inc.


Washington Post
Subprime Lenders Getting U.S. Subsidies, Report Says
By Renae Merle
Wednesday, August 26, 2009

Many of the lenders eligible to receive billions of dollars from the government's massive foreclosure prevention program helped fuel the housing crisis by issuing risky subprime loans, according to a report to be issued Wednesday by the Center for Public Integrity.

Under the $75 billion program, called Making Home Affordable, lenders are eligible for taxpayer subsidies to lower the mortgage payments of distressed borrowers. Of the top 25 participants in the program, at least 21 specialized in servicing or originating subprime loans, according to the center, a nonprofit investigative reporting group funded largely by charitable foundations.

Much "of this money is going directly to the same financial institutions that helped create the sub-prime mortgage mess in the first place," Bill Buzenberg, executive director of the center, said in a statement.

For example, J.P. Morgan Chase, Wells Fargo and Countrywide, which has been bought by Bank of America, are eligible to receive billions of dollars under the program, according to the report.

The report comes as the Obama administration is prodding lenders to do more to help borrowers. Less than 10 percent of delinquent borrowers eligible for assistance through Make Home Affordable have received help, according to Treasury Department estimates released this month. The administration is aiming to more than double the number of borrowers helped under the program to 500,000 by Nov. 1.

"Mortgage lenders and servicers have been reluctant to participate in foreclosure prevention programs despite their role in creating the subprime debacle. Intense pressure from Congress and the White House hasn't worked, either," the report said. "The stick has not been effective, so the Obama administration is offering a carrot -- billions of dollars in incentive payments to lenders and loan servicers to encourage them to participate..."

Capital Flight: A Plunge in Foreign Capital Inflows Preceded the Break in US Financial Markets

The peak of foreign capital inflows into the US was clearly seen in the second quarter of 2007, just before the crisis in the US that has rocked its banking system and driven it deeply into recession.

Are the two events connected? Had the US become a Ponzi scheme that began to collapse when new investment began to wane, and the growth of returns could not be maintained?

Watch the dollar and the Treasury and Agency Debt auctions for any further signs of capital flight, which is when those net inflows of foreign capital turn negative. And if for some reason the unlikely happens and it gains momentum, the dollar and bonds and stocks can all go lower in unison, and there is no place to hide except perhaps in some foreign currencies and precious metals.

The sad truth is that US collateralized debt packages and their derivatives have become toxic in the minds of the rest of the world, and there is little being done to change that, except an orderly winding down of the bubble, with the remaining assets being divided largely by insiders, and not price discovery and capital allocation mechanisms centered by the 'invisible hand of the markets.'



Unfortunately the Net Inflow Data is quarterly, and subject to revisions. But we have to note that the spectacularly rally off the bottom in the SP 500, not fully depicted above, is not being matched by a return of foreign capital inflows.

If that inflow does not return, if the median wage of Americans does not increase, if the financial system is not reformed, if the economy is not brought back into balance between the service and manufacturing sectors, exports and imports, then there can be no sustained recovery in the real, productive economy.

The rally in the US markets is based on an extreme series of New Deal for Wall Street programs from the Fed and the Treasury, monetization, and the devaluation of the dollar.