On Wednesday, October retail sales figures were released. They hit an all time high, up 7.2% for October. This begs the question: How can retail sales be so good, while unemployment remains north of 9%? On his blog post this morning economist Ed Yardeni offers one potential explanation…Unemployment Benefits. He contends that ending support payments for long term unemployment would boost confidence by lowering the unemployment rate. Government subsidies tend to prolong unemployment by reducing the incentive to find a job. Ed actually believes that some of the “recipients of such benefits are actually working for cash, and off the books.” This could be one explanation for the disconnect
between 9+% unemployment and the good retail sales we have been enjoying lately.
