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The dogged persistence of unemployment

February 4, 2011 - Mike Maneval
The unemployment rate sank finally to an even 9 percent, officials reported Friday, a piece of good news that may prompt the question, why has unemployment persisted so doggedly during the past three years?

David Frum, former speechwriter for President George W. Bush, has an answer: The government is shrinking.

State and local payrolls, Frum notes, are shedding workers - including 200,000 cut in 2010. And with federal assistance through the stimulus likely to end, Frum warns we can expect states to cut more people from payrolls. And Frum may be on to something.

The Telegram and Gazette, a daily newspaper in central Massachusetts, reports that cities and municipalities are again facing layoffs, and the governor of Massachusetts, Deval Patrick, expects to cut budgets for public services. The Miami Herald reports Florida's governor, Republican Rick Scott, plans on cuts. Mayor Michael Bloomberg of New York City vowed spending cuts in late January, though Scott and Bloomberg have their eyes trained on cutting benefits and compensation rates, not positions.

But of course, cuts to retirement and health benefits for prison guards and school teachers have a negative impact on joblessness as well, as the increase in out-of-pocket spending by the public-sector employees to cover health insurance or retirement planning leaves less money for these Americans to spend as consumers on goods and services - the sort of spending that creates the jobs for which money-lenders often take the credit.

(Updated on 2/6 to include previously missing information)


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