Current Events:
Unemployment at 22.1 percent, if accurate, would be at numbers not seen since peak unemployment during the 1973 to 1975 recession.
Economist John Williams, publisher of www.shadowstats.com (ShadowStats.com), estimates that the peak of unemployment in non-farm unemployment in the Great Depression of the 1930s would, by his methodology, have registered at 34 to 35% in 1933.
Why does Obama report the lower unemployment percentage?
The Clinton administration changed the way BLS calculates unemployment statistics by excluding "discouraged workers," those who had given up looking for a job because there were no jobs to be found.
Since the Clinton years, discouraged workers looking for a job for more than one year are not counted as "unemployed" because they are considered to have dropped out of the labor force.
The BLS still includes in "U6 Unemployment" calculations short-term discouraged workers, as long as they have been looking for a job less than one year.
This definition permits Obama to under-report "U3 unemployment" at 10.2% when real unemployment as calculated before the Clinton administration redefinition is twice that amount, and U6 unemployment lies somewhere in between.
These differences in the chart that Williams produces in the "Alternative Data" section of his website named "Shadow Government Statistics: Analysis Behind and Beyond Government Economic Reporting."
Williams concludes that the economy is not recovering, but has been stimulated by excess liquidity placed into the financial system by the Federal Reserve keeping federal-funds rates at the historically low rate of zero, or near zero.
With millions of jobs outsourced to China and India under free-trade globalism, the dollar weakness that accompanies most recessions is not stimulative, largely because the U.S. has lost so many manufacturing jobs that are never returning to its shores.
I linked the In-service references from yesterday.
Chapter 4 Market Efficiency, Market Failure, and Government Intervention
Markets are efficient mechanisms for allocating resources. However, in the real world, markets can “fail” as a result of departures from the idealized competitive market structure. This chapter assesses the efficiency of markets in terms of maximizing consumer and producer surplus, and explains the circumstances under which market failures can occur. Government intervention in markets in the forms of price floors, price ceilings, and taxes is also examined.
Begin Chapter Five: Powerpoint Introduction.
Price Floors and Price Ceilings
What happens when the government interferes with the market mechanism by artificially imposing a "better" price?
HW: gmsmith@shanahan.org
Chapter 5 Elasticity
1. Do the four Checkpoint Questions;
2. Study for Chapter Four Test on Monday (Multiple-Choice questions).
