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Unemployment Rate Would Be 7.1 Percent Without Government Job Cuts: Report

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The unemployment rate would have been 7.1 percent without government austerity, according to Labor Department data cited by The Wall Street Journal.
The unemployment rate would have been 7.1 percent without government austerity, according to Labor Department data cited by The Wall Street Journal.

In an analysis sure to bolster austerity critics, Justin Lahart at the Wall Street Journal crunched April's jobs numbers and discovered that if not for government job cuts since the financial crisis, the unemployment rate would have been at a more sustainable 7.1 percent in April.

That's 12 percent lower than April's 8.1 percent jobless rate.

The government has slashed its workforce by 6 percent since December 2008, putting 1.2 million workers out of a job. In Congress, many are arguing for more cuts in government spending.

Theoretically, the unemployment rate would have been even lower, tweeted University of Pennsylvania economics professor Justin Wolfers. He mentioned the "fiscal multiplier" effect--if more workers were employed by the government, their spending would have created more jobs in other parts of the economy or at least prevented those jobs from getting cut -- a factor that the WSJ analysis doesn't account for.

To be sure, playing the numbers game with jobs data is a tricky business. If the government hadn't cut jobs, the WSJ points out, then fewer people would've left the workforce, pushing up the share of people actively searching for work. So maybe the rate wouldn't have dropped.

Nonetheless, the WSJ's analysis provides more evidence for prominent critics of austerity, such as Nobel Prize-winning economist Paul Krugman. He told Reuters on Monday that in Europe, "All this austerity actually is self-defeating. What you're seeing is countries slash spending, drive their economies further into the ditch."

Krugman also said in a speech in February that though politicians like to call for belt-tightening in the economy, as with a household budget, the two are very different: Spending in the economy actually creates income for others, as opposed to spending in a household which is a net expense.

Austerity was resoundingly rejected in European elections on Sunday. French president Nicolas Sarkozy got voted out of office on Sunday, after supporting German chancellor Angela Merkel's push for more austerity to supposedly calm investors and spur growth. Greeks also voted for more extremist parties. After austerity measures, more than half of all young Greeks are unemployed, and the eurozone's unemployment rate is at a record high.

The unemployment rate fell in April, mostly because discouraged workers left the workforce, according to the Labor Department. The labor force participation rate fell to a 30-year low in April, depriving the economy of additional income.

Many of the jobs that have been created are in low-wage sectors such as food service, according to the Labor Department, which could be a bad sign for the recovery.

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Unemployment Rate Without Government Cuts: 7.1%