Nikola Drobac – 7/12/06

This page was last updated on July 16, 2006.

What about the unemployed?; Nikola (Nick) Drobac; Beaver County Times; July 12, 2006.

This is the 22^nd anti-Bush and/or anti-Republican rant by Mr. Drobac since July 1, 2004, though I believe it’s his first in the last 10 months. As usual, Mr. Drobac doesn’t let facts get in the way of a good rant.

What may make this letter a little worse than usual is Mr. Drobac is or was a high school business teacher. It’s a little scary to think he may pass along his misinformation as fact to his students.

Below is a detailed critique of the subject letter.

“On Friday, in Chicago, George W. Bush proudly reported that American companies created 150,000 new jobs in June. Bush also stated that the unemployment rate was 4.6 percent.

“According to a July 7 news release by the U.S. Department of Labor’s Bureau of Labor Statistics, the United States created 121,000 jobs in June. The BLS also reported that there were 7 million unemployed Americans in June.

“It’s great that there are 121,000 jobs being created in the United States. However, there are still 7 million Americans who want jobs and cannot find jobs. Bush and other politicians never seem to present this statistic. Politicians love to tell you about the number of jobs created, not the total number unemployed.”

[RWC] So Mr. Drobac’s complaint is that by reporting unemployment in terms of a rate instead of an absolute number the government is trying to hide something?

Mr. Drobac also doesn’t explain the “7 million Americans” is not a static group of people. People cycle into and out of unemployment all the time. Mr. Drobac wants us to believe his “7 million Americans” are permanently unemployed.

“Anyone who has taken an entry-level college economics class knows that full employment is achieved when the unemployment rate falls below 4 percent.”

[RWC] I don’t know where Mr. Drobac took his “entry-level college economics class,” but his assertion is BS. The truth is, the so-called “full employment” rate varies depending on circumstances and any claimed full employment level is at best an educated guess. Citing a cookie-cutter full employment rate displays ignorance. That said, I’ve seen figures ranging from three to seven percent depending on the economy, though most people tend to go with five percent for the U.S. economy of the last several decades. Indeed, when President Clinton ran for reelection during the summer of 1996, reporters called 5.6% an “already low” unemployment rate.

If today’s unemployment rate were 3.6%, who wants to bet Mr. Drobac would claim, “full employment is achieved when the unemployment rate falls below” three percent? Does anyone want to bet Mr. Drobac would have told us 6% unemployment indicated full employment in 1996?

Using Mr. Drobac’s 4%, we’ve had full employment in the U.S. for only six months since 1970. Even using 5%, we’ve had full employment only about 17% of the time since 1970.

“Full employment is when everyone who wants a job can find a job. This also helps to reduce the total number of underemployed Americans, increases wages for all Americans and causes employers to offer benefits in an effort to attract new workers.”

[RWC] Oh no! Mr. Drobac appears to believe in market forces. This may come back to haunt him in future letters. <g>

What Mr. Drobac doesn’t tell us is that as we approach full employment, all the increased wages and benefits drive up costs and thus drive up inflation. When the increased cost of employing Americans becomes too high, at least four things happen.

First, businesses will find ways to cut the manpower required to produce a good or service in order to remain competitive. Second, businesses will find ways to outsource manpower to countries with a lower labor cost. Third, businesses that don’t find ways to control labor costs will go under. Fourth, the resultant higher prices for goods and services result in less sales and decreased consumer buying power. Anyone care to guess which end of the income spectrum is hurt most by decreased buying power?

All of these scenarios have a negative impact on employment and compensation. Using Mr. Drobac’s own words, “Anyone who has taken an entry-level college economics class knows” this. Why doesn’t Mr. Drobac?

“The Federal Reserve Board has increased interest rates 13 straight times in an effort to slow down the economy.

“Slowing down the economy will cause the unemployment rate to increase. This is one of the techniques the Fed uses to control inflation.

“So, on one hand we have the president talking about the number of jobs being created in America, and on the other hand we have the Fed increasing interest rates to slow the economy and job growth.”

[RWC] If Mr. Drobac believes inflation isn’t a problem, perhaps he needs his memory refreshed about the stagflation we endured during the late 1970s and early 1980s as a result of poor economic policy in the 1970s. Lest we forget, we were “treated” to double-digit inflation, interest rates (I had a 16% mortgage and thought I was lucky.), and unemployment.

“This means we have a president providing lip service in an effort to keep Republicans in control of the government and the Fed is doing everything it can to keep the unemployment rate above 4 percent.”

[RWC] No, what we have is a liberal partisan who must invent a way to turn good news into something bad. If we ever reached “full employment,” and perhaps we already have, does anybody doubt Mr. Drobac would be bashing President Bush for the resultant increased inflation rates?

In fact, the 4.6% rate is even better when you consider we have anywhere from between five to 20 million illegal aliens working in the U.S.

In comparison, the socialist “paradises” in Europe would kiss our butts if that would get them anywhere close to 4.6% unemployment. For example, France’s rate is approximately 10% and Germany’s is about 12%. At the same time, the U.S. economy is growing at roughly four to six times the rates of France and Germany, respectively. Check Mr. Drobac’s letters over the years, and you’ll see his beliefs lean strongly toward the socialism end of the economic/political spectrum.

If a 4.6% unemployment rate, 5.4 million jobs generated since August 2003, and an economy growing at 5.6% is “lip service,” let’s have more of it.