Difference in Rate of Unemployment: Government Sector- 4.2% & Private Sector-8.6%

It has been observed through researches that there is a great difference between the rate of unemployment in the government sector and that in the private sector. About 4.2% of the workers in the government sector are found to be unemployed. On the other hand the rate is about 8.6% in the private sector. This difference has called the attraction of economists. It is therefore believed that shrinking the government sector is a correct public policy goal although it would pull down the GDP data and the job numbers. Increase in private sector employment opportunities is to be focused in the present scenario. It is a well known fact that the private sector is more productive than the public sector and it calls for the need to shift the resources from the public sector to the private sector.

 

As per a research conducted this January, the unemployment rate of workers who came under the public sector was 4.2% and that for the public sector was 8.65(as per Bureau of Labor Statistics). In particular, the public sector workers involved in education department account play an important role in the maintaining the country’s economy. This sector provides jobs to about 14% of the total jobs. Apart from this, the larger fragment, the 86% of the workers are those who require more attention. This sectors needs growth as most of the workers earn their living through this sector. From the different facet, the public sector salaries find its origin from the taxes and other government funds which would only rise by public sector employment.  If the current decline in the economy is to be recovered, the private sector unemployment rate has to be decreased. As per a study of the data from the years 1939 to 2008, it was found that whenever there was a rise in public spending, it lead to a decrement of the same in the private sector. This clearly shows the inverse relation between the private and public sector spending.

It finally comes to a conclusion that the cuts in public expenditure due to the recession like condition in the economy, would act as a stimulus of growth for the private sector. A study was made to confirm whether an increase in the government spending result in any activity in private activity. First of all the private spending were studied. With the samples and notifications available it was then observed that for a rise in government spending, there was a significant fall in private spending, each and the every time. This finally shows that the GDP multiplier always remained below unity. Then it was tried to find out, if the tax increments lead to any increase in the GDP multiplier and it was found that it had no effect on it. The bottom line was then found out to be referring to the fact that at a balance government spending, the economy can reach the most stable state.

U.S Austerity: The Facts

It has been observed that there haven’t been any cuts in the federal spending. Many of the economists had warned that premature austerity would be a hindrance to recovery for the U.S economy. Indeed, it was found to shackle the economy and being dragged behind rather than assisting in any recovery. What is happening with the economy was something like suspense. Let’s take a look at the ratio between the spending and the potential GDP. Taking the values from the CBO, it showed that normal growth would have been a better criterion than the raw numbers. The chart below shows the relation between federal spending and GDP.

Even now, spending is slightly higher than the pre-crisis state. More of the spending was on unemployment benefits, food samples, pressures of baby-boomer retirement and medical costs increment. However, it is lower than the peak. Being engaged in austerity has become the primary cause of slow recovery. Let’s now include the state and local government spending. Austerity in state and local government could also have been a good policy choice. The graph below shows you total government spending as a share of potential GDP. 

The graph clearly shows that total government spending as a share GDP is not even a percent point higher than what it was before the onset of recession.

In context to the big hit that the private spending experienced with the housing investments, here is the graph showing you the residential investment as a share of potential GDP.

The housing recovery however showed a slight rise after 2012 (as visible in the graph). Here at this point, the private demand is depressed by the housing-debt-bubble and the government spending is even higher than what it was at the highest peak of the bubble. The economy is not at a very good state even today.

U.S in the Midst of a Financial Crisis

It’s not a news now that the U.S financial ship is surrounded by high tides of financial debts. With various reasons that pushed the country into the waves, excessive spending in past few years is one of them. American government has been spending huge amount of money which was much more than what it received as an income. This has lead to an instability in the financial status of the country and has brought an economic insecurity among the citizens. Regular emptying of the reserve with lesser incoming s in the funds, kept on decreasing the funds with the government and the Federal Reserve on the other hand kept on printing more currency to keep the balance. This very attempt of the Fed just created a short term mirage among the people but gradually people came in acquaintance with reality.

Considering the official figures of the government, national debt amount of the country is expected to reach 150% of its GDP. This is the figure that was after the World War II. The Fed has lowered the interest rate to zero and it cannot be done below that. Continuous printing of currency may lead to a state of inflation and the long term interest rates will keep on rising. The federal Reserve has tried its best to keep the economy alive by printing more currencies but all in vain. It further pulled the economy nearer to the grave. The only reason why U.S is still not bankrupt is that it is a country and not a business. It has control over the Fed.

The present finance scenario brings front a skeleton of the US economic condition. The economy has nothing left with it and what it has is all into debt. In case of any further state of recession, the country won’t be able to regain its state. It has got damaged from all the corners and it is just by some minor economic supports basically the taxes that it is managing to somehow keep straight. The nest bar market condition would make the condition worse than what it was during the great depression. Michael Lombardi has come up with Crisis Profit Alert - an investment suggestion for the investors. In the current state of devastating US economy, he provides you with some really brilliant ideas to make investments and earn profit even in this tough financial condition. This is why he has named it as Crisis Profit Alert.

Gold Stock Investments: A Wise Decision

Making investments in gold stocks can be a wise decision by you even in worse economic conditions. Michael Lombardi, a stock market adviser and predictor has been regularly coming up with his suggestions to make the most profitable investment in gold stock market. Gold investments may bring you profits but is also accompanied by serious risk factors. The present scenario in America displays a financially shattered economy and it makes it vital to make proper research and get aware of all possible risks and benefits before heading in for the investment. Here are some reasons why you can made a better investment in gold by just being alert and well informed.

Being in the initial phase of the global currency degradation, the gold prices that have reached to a lower rate is expected to rise. This can be a perfect time for the investors to make an investment in gold. In the long run you are going to really benefit out of your investment. The investment demand for gold is expected to grow at a huge rate as people get aware of the currency degradation. In the situation at the present time, precious metals can be the only choice. Although the price of gold can be unstable in the short-term, its price is expected to rise to will maintain it too in the long-term. The economic crisis in America has brought a tornado in the stock market and this is the time when every investor need the help. Michael Lombardi has been a successful predictor since many a long years. All of his predictions made in past have some true and this is what makes him famous among investors. You can subscribe for his daily newsletters and get suggestions on gold investment.