A little over a year ago, President Obama signed into law the $787-billion stimulus legislation that was supposed to prevent the unemployment rate from exceeding 8 percent. And although the unemployment has receded some from its high, it’s still well North of 9 percent. So if that stimulus is given more time, will unemployment improve?
Last week’s jobless claims numbers, showing a stagnant unemployment rate of 9.7 percent, didn’t provide any reason for optimism. And on CNBC’s April 12 “Squawk Box,” host Joe Kernen asked CNBC CME Group floor reporter Rick Santelli if this economic indicator is going to be stubborn number, which would confirm a failure of Obamanomics.
“Rick, I wasn't here last week when that claims number came out. But if I could really just dig deep down into your view, do you think a year from now we're still going to be talking about a stubborn unemployment rate, Rick?” Kernen asked.
Santelli cited an op-ed in the April 12 Wall Street Journal by liberal economist and former Clinton Labor Secretary Robert Reich, who wrote “many outsourced jobs will never return, and median income will likely continue to fall as it during the last so-called recovery.” Santelli explained modest economic growth will now be seen as a very positive sign.
“Years from now, way more than just one year in my opinion,” Santelli said. “I think that The Wall Street Journal article today kind of touches what I and many believe and that is a lot of the jobs lost aren't coming back and a lot of the unemployment has to do with things like education and skills that aren't fixed overnight. And when you talk about interest rates, listen, I'm going to keep it simple. You asked me where I thought it would be. I think it's a two-tier issue. I'm assuming the economy is going to be mediocre for many years, three to five, meaning 2 percent to 3 percent growth is going to be good. If it gets better than that, I think interest rates will rush up much more aggressively in 2011.”
According to Santelli, another problem confronting the stagnant economy is the threat of inflation and thus higher interest rates, which is traditionally seen as an impediment to economic growth.
“Which the supply will put rates up,” Santelli replied. “If you want to throw in things like money supply actually coming off the banks' balance sheets where you really can get true textbook type inflation or you want to talk about the type of economic activity traditionally associated with higher rates, those are all ups and extras.”