“The Jobs Numbers, What’s Really Going On?”

Sydney M. Williams

Thought of the Day

“The Jobs Numbers, What’s Really Going On?”

March 13, 2012

Saturday’s headlines had different takes on the same story: the New York Times, “Economy Shows Solid Job Gains for a 3rd Month;” FT Weekend, “Obama boosted by strong jobs growth;” the Wall Street Journal, “Jobs Recovery Gains Momentum;” and IBD, “227 New Jobs Last Month; Payrolls Still 5.3 Mil Off High.”

There is no question it is good news when the economy adds job, and for the third month the economy did. The question, however, remains: Why has it taken almost three years for this to happen? The only headline that was not disingenuous was the one in IBD. Not only did they provide the actual number of new jobs, but more importantly they put it into perspective, pointing out that there are still 5.3 million fewer people working than there were four years ago. The story in the FT quoted the President speaking Friday at a new Crosspointe, Virginia Rolls Royce facility (Virginia, it should be noted, is a right-to-work state!): “But here’s the good news: Over the past two years our businesses have added over 4 million new jobs.” There was no mention that approximately an equal number of jobs disappeared and that natural growth in population added 2.4 million people to the work force during the same period. Not surprisingly, there was no mention that payrolls have been below the last peak for forty-nine months, the longest stretch since the Great depression, or that 5.4 million people (42.6% of the unemployed) have been unemployed for more than six months. Neither the President nor the FT nor the New York Times mentioned that GDP growth has not topped 4% in six years – the longest stretch ever. And, of course, the President did not mention the $4.7 trillion that has been added to federal debt since he took office.

(Keep in mind, for purposes of comparison, unemployment in 1982-1983 remained above 10% for ten months – September 1982 through June 1983, according to data from the Bureau of Labor Statistics, BLS. A year later, unemployment had fallen to 7.2 percent and GDP was growing in excess of 7 percent. In the recent recession, unemployment topped 10% only in one month, October 2009.)

Mr. Obama’s profligate spending has produced very few, if any, net new jobs since he became President. Since the trough in employment in October 2009, 1.9 million net new jobs have been added. But, as mentioned above, natural growth in the population adds about 100,000 to the workforce each month, indicating that since September of 2009 the workforce expanded by 2.9 million people, a million more than jobs created since the 2009 trough. Mr. Obama’s stimulus spending may have prevented the economy losing more jobs, but that is debatable and no one knows. I strongly suspect that its effects have been effete. What Mr. Obama has done, though, is add a lot of debt.

In three years, Mr. Obama has added about the same amount of debt as did his predecessor in eight years. Mr. Bush took on debt for a War on Terror in a bid to eliminate the threat of radical Islamic terrorism, which had manifested itself in an unprecedented attack on our nation on 9/11. We can argue as to whether Mr. Bush should have sought approval from Congress to fight the War on Terror. (I believe he should have.) But, his purposes were clear. Mr. Obama took on debt in the midst of recession and in the waning months of a financial crisis, as an attempt to radically transform the face and culture of the United States – to tilt the country further toward a form of European Socialism, a means of increasing the dependency of people on the benevolent hand of government. His purposes are also clear. We should not forget the infamous words of White House advisor Rahm Emanuel: “crises are terrible things to waste.”

Whether or not you agree with my version of Mr. Obama’s motive, there is no denying that total federal debt now exceeds 100% of GDP for the first time since World War II. Economic growth is the only way out. The question is: Which part of the economy is most dynamic – the public or the private sector? Do markets work? Are we better off letting government bureaucrats determine investments?

Too much debt limits government’s options. It is unable to spend on large projects, such as the 1960s space program. It would be unable to respond to a credit crisis, like that experienced in the fall of 2008. Washington may try to rectify the situation by increasing taxes to usurious levels. But, 10% of the people already pay 70% of all federal income taxes. And almost 50% of the population pays no federal income taxes. Perhaps Mr. Obama would prefer to see the top 10% be responsible for 90% of all taxes, and allow 75% of the population to receive the services of federal government for free? How much government does he want? What does he believe is fair?

At this level, debt is an impediment, not a stimulant. And, if we were forced to pay market rates, which we will at some point, the burden of debt will become far greater. While interest rates are being held down artificially by an accommodative Federal Reserve, there is an instinctive understanding, among many consumers and markets, that the road we are on is laden with potholes. At some point the Fed’s balance sheet will become indigestible. Incipient inflation has already been noted in food and energy prices. The BLS put the CPI at 2.9% for all of 2011. The same group (the BLS) noted that wages only increased 1.9% in 2011 – an ultimately untenable situation that will only be made worse when interest rates inevitably move higher. Certainly, rising gasoline prices, this early in the year, are not a positive omen.

When government invests, the motive is never profit; yet it is only profit that allows for continued self-sustained growth. CBS News, in a January 13th piece by Sharyl Attkisson, wrote: “CBS News counted 12 clean energy companies that are having trouble after collectively being approved for more than $6.5 billion in federal assistance.” She went on to write that five had filed for bankruptcy, and the rest are struggling. Bureaucrats in Washington, as academically smart as they may be, are no substitute for the market place.

So, while it is good to read that employment is improving, that fact says more about the resiliency of the American economy than it does about the policies of the President. The President has burdened the private sector with regulation, ranging from healthcare (the full effects of which won’t be felt until 2013-2014), and environment, to the financial. The negative effect has been most noticeably felt by minorities and the poor. Their cost-of-living has increased and their wages (when they are working) are not keeping pace. While the overall unemployment rate remained unchanged in February at 8.3 percent, it rose for Hispanics to 10.7 percent and for African Americans to14.1 percent.

Too many Americans are unemployed and underemployed. Unfortunately they will continue to struggle until government loosens the reins and allows markets to compete more freely in the global economy. Two-hundred and twenty-seven thousand new jobs was nice to see, but given the additions to the work force, at that rate it will take another five years to return to peak employment. Personally, the President has no financial worries, but millions of Americans do.