10% Unemployment?: Stimulus Total Failure or Not Enough?


A number of articles have been written over the past week relating to the effects (or lack thereof) of the stimulus on the American economy.  At the heart of the debate is the unemployment rate–a staggering 9.5% for June.  And, today the Federal Reserve said unemployment could hit 10% later this year.  The Obama Administration is taking particular heat over their unemployment projections released prior to passing the stimulus law. 

The graph below illustrates their projected unemployment rate with no stimulus package compared to the unemployment rate with a stimulus package.  These data are overlaid with the actual unemployment figures through June.  As you can see, actual unemployment is higher than anyone imagined.  Consider the 10% rate postulated by the Fed, and we’re not even on the same planet with the projections.

 

As a New York Times blog points out, some economist take a position that the original stimulus was simply not enough (add to this a slower-than-anticipated release of the money, and you get no positive economic impact).  Other economist argue the stimulus simply didn’t work, suggesting another stimulus would be a waste of money (and an economic drain on the future). 

IMPLICATIONS

Whether or not another stimulus package will be passed is yet to be seen.  What is clear from a vendor perspective is funding already committed in the current package has not yet made its way to American business.  Even the construction industry, one of the first sectors to actually see money flow, projects three-quarters of stimulus spending for 2009 will actually slip into next year

As such, contractors need to be patient and dilligent.  Alliances and partnering opportunities are more important than ever as in this environment.  Don’t wait to begin solidifying these relationships.  Focus on value creation, and pay particular attention to how your piece fits into solving the larger problem.

The rough ride is unfortunately far from over.  But times like these can help “sharpen the saw” for better days ahead.

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