Is the low unemployment real or it is a result of inflation-lowered real wages?


US unemployment is record low. What do this means? Obama will be re-elected. OK. It doesn't matter much, as in republican race Mitt Romney has almost secured his nomination and a choice between Obama and Romney is a choice between Obama and Obama or Romney and Romney. In fact Obama=Romney and with Romney as a pretender-candidate the Washington establishment guaranteed that the general policy accepted and run by Obama will not be changed. So for the general US politics unemployment already has no much importance.

But it was a talk about the record low statistics and what do they mean.

I think, that when we talk about employment we must consider the salary level too. It is an economic principle that with lower wages you can hire more employees. Lowering wages is a way to lower the unemployment too.

In last 3 years central banks, led by FED are printing much money to repay government debts. This leads to inflation. And with inflation the real wages are going down. The true inflation in USA is a top secret information, but everyone knows it is much more than official statistics of 2-3%. The food, fuel and energy prices skyrocketed, so the real inflation is valued to tens of percents.

This means that real salaries are lowered and therefore there is a possibility of hiring more workers, as company incomes are nominally increased (due to inflation).

So when we celebrate the low unemployment, we must ask a question about the real money paid to workers. If I hire 100 workers for $20 per hour, or I hire 200 workers for $10 per hour, this is one and the same, although in second case there is higher employment. The real improvement is if I succeed to hire 200 workers with $20 per hour. And the real unemployment improvement is only when measured with stable hard money and no inflation.

Now it is not sure that the gains from higher employment are bigger than the losses of inflationary devaluation of the dollar. It is possible the damage of the invisible inflation and the loss of it is higher than the visible gain in employment.


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