With unemployment at 10% (Dec) and expected to remain the same or increase slightly for January, it begs the question, WHERE’S THE JOBS? Last week’s GDP report came in at an astounding 5.7%. Historically GDP above 5% should substantially lower unemployment, even with it being a lagging indicator. However, this does not seem to be the case.
“If borrowing and spending all this money led to more jobs, then we’d be at full employment already.” Rep. Paul D Ryan (Republican, Wisconsin)
Over the past two years, we have had several stimulus programs and job creation programs. We have thrown billions of dollars at the problem in search of a solution. Now Obama wants to try again. Democrats claim their top priority is creating jobs, but achieving that goal has been elusive at best. Their efforts so far have been expensive with little to show per dollar spent. From the Wall Street Journal, Feb 1, 2010:
Recipients of economic-stimulus money said 599,108 workers were being paid by the funds in the last quarter of 2009, fewer than the number of jobs attributed to the package in the seven months after it was enacted.
The administration could face difficulty explaining how the reports square with its own calculations that the plan kept between 1.5 million and two million jobs in the economy through the end of 2009.
In his State of the Union address to Congress last week, President Barack Obama said that "because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed."
Those projections are based on macroeconomic models and try to include the number of jobs that exist indirectly as a result of people being hired to work on stimulus projects, or of people receiving food stamps or other aid funded by the stimulus program.
Note: In other words, those numbers are a figment of their imagination. Back to the article:
Stimulus recipients previously reported that they had directly "created or saved" 640,329 jobs by Sept. 30, but their filings were criticized after it emerged that some people had reported saving jobs when they had actually spent the money on pay raises or paying employees who were not in danger of being laid off.
As is the case in Washington where hubris runs amok, if something doesn’t work the first couple of times it is tried, it is not because it is a bad idea or because of a flaw in the original analysis. Instead, it is simply because it needs more money in order to succeed. Therefore, as a result of the first stimulus and the subsequent stimulus bills not producing a desired result, a new jobs bill is working its way through the Senate. Although specifics are not yet known, here are some of the key provisions said to be under consideration:
· A $5,000 tax credit to companies for each new worker they hire in 2010.
That’s a nice gesture but $5,000.00 does little to offset the cost of a worker. Demand has to be there in order for a company to hire. They will not hire simply because of a tax credit. At the moment, demand is still low.
· Businesses that increase wages or hours for their current workers in 2010 would be reimbursed for the extra Social Security payroll taxes they would pay.
Another nice gesture, but once again, demand must be there first.
· A Social Security tax break for employers who hire unemployed workers.
Instead of hiring the most qualified, employers are being urged to give first consideration to someone who is unemployed. But once again, demand must be there, or on the horizon, before businesses will hire.
· Continuing the Build America bonds for infrastructure
A good program to the extent it makes infrastructure improvements cheaper for municipalities and states but even with the tax breaks given by the bonds, the revenues still have to support the projects. Also these are one time projects and true organic growth is not created.
· Extensions of COBRA and unemployment insurance.
This does little to create jobs.
As is the case in Washington, the politics of power have to be thrown into the mix:
Echoing the message from Obama to House Republicans at their Jan. 29 retreat in Baltimore, Gibbs said, “We hope Republicans meet the president halfway.”
Gibbs couldn’t specify how many jobs the latest initiative might create but said the economic turnaround will take time.
“We’ve got a tremendous hole,” Gibbs said. “We didn’t get here over night. We were losing jobs for two years. We’ve got a tremendous hole we have to fill in. This isn’t going to do it all, but an important first step in the recovery. (CQ Politics.com, Jan 31, 2010)
First step? Uh, what have all the other programs been. Trials?
"The government doesn't create jobs by and large. The private sector creates jobs, especially small- and medium-size businesses." Sen. Byron Dorgan (Democrat, North Dakota)
Sen. Dorgan, a Democrat, seems to understand that the government will not create jobs. Robert Reich, former Secretary of Labor under President Bill Clinton, realizes Obama’s plan will fail also. He writes in his blog dated January 28, 2010:
The answer, of course, is that across-the-board supply-side tax cuts for businesses don’t increase the demand for the things businesses produce. They’re useful only to the extent businesses are confident consumers are out there, able and willing to buy. Carefully targeted — as are the cuts the President is proposing — they can give businesses an extra nudge to hire. But without adequate demand, they’re useless.
So what’s the President’s new proposal for boosting overall demand? Hmmm. Turns out, he’s not really proposing anything new on that score. (Some who watched his State of the Union the other night thought they heard him call for a second stimulus. Actually, he didn’t, and as far as I can tell he doesn’t plan to.) His political advisors are telling him to emphasize deficit reduction instead. And that’s what he did Wednesday night when he talked about a “freeze” on discretionary spending, and a “commission” to look for ways to cut the deficit.
Why is it so tough to create jobs this time when the method has worked numerous times in the past? It is because we are not just in a recession, we are in a deleveraging process as a result of the massive debt accumulation by individuals, companies and governments. To some extent, you have to let the deleveraging process play out. Trying to solve for it, especially using models created for business cycles, only creates greater costs that must be confronted later. While the deleveraging process is in play, there are a couple of things that policy makers can undertake that would prove beneficial in the long run including:
· Focus on venture capital especially in areas of technology development and health care. New technologies have the potential to lower costs in the future and employ new workers.
Instead of promoting venture capital, policy makers are looking for ways to further tax the income of those who support it.
· Focus on the development of alternative energies. We should diversify our energy sources as much as possible to keep us from having to defend our oil supply through deadly and costly wars.
· Encourage domestic production of food and food stuff. We should not rely on hostile countries for the production of our sustenance.
The old school Keynesian economics have proven ineffective because a greater force is at work. Throwing another $100 billion into a broken model is not going to produce a different result than the last couple of tries. We must start thinking outside the box and forcing politicians to do so also.
53 Comments
cbxer55
Probably around three percent of that 5.7 is government transfer payments, ie government spending. Take that away and we are right back in a depression again. Coming soon to a theater near you.
If I had my own business, a $5,000 tax credit would definitely not entice me to hire a new person if the demand is not there for there labor. And these days, demand is lagging, in case no one has noticed.
a cruel accountant
Liquidate labor, liquidate stocks, liquidate real estate, liquidate farmers. I wish Andrew Mellon was still around. Purge the rotten from the system.
SSS
Obama claims 2 million jobs saved or created (impossible to verify). His supporters have bumped it up to 3 million, according to some pundits. Sounds like the 17-50 million range of beneficiaries supporters of health care reform claim will benefit.
StuckInNJ
There are no jobs because of so much UNCERTAINTY. I found the following two quotes today to be very accurate, imho.
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http://www.aolnews.com/opinion/article/opinion-economic-recovery-threatened-by-lack-of-clarity-from-washington/19340072
But what the economy needs right now isn't more fixes. It needs clarity -- in the form of targeted and effective regulatory, fiscal and economic policy that will allow American business to play its crucial role in the economic recovery.
As a small-business owner myself, in a highly regulated industry, I am hesitant to make long-range decisions as long as the following questions remain unanswered.
Businesspeople must have the ground rules clearly defined, and know that impending reform will be constructive and beneficial without crippling their ability to grow, profit and, most importantly, hire. American ingenuity and risk-taking have always been the engine of American economic growth, and new rules must be developed within this framework instead of stifling it.
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http://www.nytimes.com/2010/01/31/opinion/31friedman.html
It is a shame because here we are as a country scrounging around for a few billion more dollars of stimulus to help our unemployed and small businesses — when the biggest stimulus of all is hiding in plain sight. And that is ending our political paralysis and the pall of uncertainty it is casting over everything from the cost of my health care to the cost of my energy to the way our biggest banks can do business.
If the two parties could get together and remove the clouds of uncertainty over those issues, remove the growing sense that our country is politically paralyzed, you would not need another dime of stimulus money. Investment and lending would take off on their own. If, however, the two parties continue with their duel-to-the-death paralysis, no amount of stimulus will give us the sustained growth and employment we need.
JennJohnson
The gap bt Real GDP and Real GDP ex inventory is as wide as it has been in 20 years. So while businesses decided to produce to replace depleted inventories, the consumer is not buying. The consumer has two choices. It can re-lever and/or it can stop saving. Neither choice is optimal. Therefore, unless the govt creates govt jobs, there is going to be a sustained period of higher unemployment.
flash
Look in the Bureau-Crapper.
http://washingtontimes.com/news/2010/feb/02/burgeoning-federal-payroll-signals-return-of-big-g/
"From 1981 through 2008, the civilian work force remained at about 1.1 million to 1.2 million, with a low of 1.07 million in 1986 and a high of more than 1.2 million in 1993 and in 2008. In 2009, the number jumped to 1.28 million.
Including both the civilian and defense sectors, the federal government will employ 2.15 million people in 2010 and 2.11 million in 2011, excluding Postal Service workers.
The administration says 79 percent of the increases in recent years are from departments related to the war on terrorism: Justice, Defense, Homeland Security, State and Veterans Affairs."
JakeTowne
I am outside the box
http://towneforcongress.com/economy/common-sense-fixes-the-job-market-1
Freesmith
Thanks, Jenn, and thanks StuckInNJ for the emphasis on the deleterious effects of uncertainty on business planning. That was a vital element of Amity Shlaes' critique of the failure of the New Deal in "The Forgotten American."
On January 29, Mark Steyn - as usual - said it best in the Washington Times.
Functioning societies depend on agreed rules. If you want to open a business, you do it in Singapore or Ireland because the rules are known to all parties. You don't go to Sudan or Zimbabwe, where the rules are whatever the state's whims happen to be that morning.
That's why Mr. Obama is such a job-killer. Why would a small business take on a new employee? The president is proposing a soak-the-banks tax that could impact access to credit. The House has passed a cap-and-trade bill that could impose potentially unlimited regulatory costs. The Senate is in favor of health care reform that would allow the IRS to seize your assets if you and your employees' health arrangements do not meet the approval of the federal government. Some of these things will pass into law; some of them won't. But all of them send a consistent, cumulative message: There are no rules.
In such an environment, would you hire anyone? Mr. Obama can bury it in half a ton of leaden telepromptered sludge, but the message is clear: more Washington, more regulation, more spending and no rules.
Mr. Obama and the Democrats have decided, in the current cliche, to "double down." What's the endgame here? Mr. Obama gave it away in his student loan "reform" proposals: If you choose to go into "public service," any college loan debts will be forgiven because public service is more noble than the selfish, money-grubbing private sector. C'mon, everybody knows that. So we need to encourage more people to go into public service?
Why? In the past 60 years, the size of America's government work force has increased five times faster than the population. Yet the president says it's still not enough: We have to divert more of our human capital into the government machine. He's explicitly telling you: If you start a business, invent something, provide a service, you're a schmuck. In the America he's building, you'll be working 24/7 till you drop dead to fund an ever-swelling bureaucracy. Mr. Obama's proposals are bold only insofar as few men would offer such a transparent guarantee of disaster: It's the audacity of hopelessness.
If you want to strengthen an economy you have to unleash the most productive, profit-oriented sectors and reduce the sectors that are non-profit.
The largest segment of the non-profit economy is government.
Here's a 3-Step Plan: No new taxes for 5 years. No new regulations for 5 years. A 25% across-the-board force reduction in the civilian federal work force, with concomitant 25% reductions in all existing budgets, salaries, benefits and pensions for the remaining civilian federal departments and employees.
If you think that's radical, and needs to be tried on a smaller scale first...
I recommend Detroit, Michigan as the laboratory of economic freedom. Substitute state, county and municipal workers for civilian federal. Substitute police and fire for active-duty military.
ReverseEngineer
I don't agree that "uncertainty" about the future is the reason behind biznesses not hiring. Rather, it is the CERTAINTY that the current economic model is not sustainable that puts a lid on any job creation outside of Da Goobermint sector.
Even dunderheads who get all their Newz from the MSM don't believe Obamouts can perpetually work to keep the economy moving. There is no obvious market for any goods or services which are not downright ESSENTIAL right now. Try this thought experiment on yourself: If Obama offers you an Interest Free Loan of $1M, what Small Biz would you open up to hire some workers so somebody would buy what you are selling? With all the Small Biz Entrepreneurial Geniuses populating this board, I'd like to hear the Biz Ideas that are going to bootstrap up our economy.
Let's say you hire 10 UE Construction workers at $20K a year dirt cheap wage. You are going to build Windmills. The Windmills generate say 5KW each when the wind is blowing, enough to power a McMansion. Parts for the Windmills cost say $5K each. Your Value Added contribution here is building the Windmills from the parts, so say you charge $10K per Windmill. So you have $5K to pay your workers for each windmill they build, less the cost of fuel and all the tools they need to build said Windmills. When all is said and done, lets say you have $1000/windmill to pay back the loan. You'll need to find 1000 McMansion Dwellers in your market with $10K who want you to build a windmill for them.
Except WAIT A MINUTE! Currently said McMansion dwellers are out of work and in foreclosure. They don't HAVE $10K to invest in a Windmill. If they have $10K, they aren't going to spend it on a Windmill for a McMansion the Sherriff is soon to boot them out of. So your only market here are the people in your neighborhood who all are secure enough they're not in danger of losing their jobs and have $10K to send on a windmill. Said consumers of electricity though currently get it plenty cheap off the grid, maybe they pay $1000/year for it. So it would take 10 years in their minds to pay off said windmill. Will said windmill still be operational in 10 years, after numerous T-Storms, possible Tornadoes and Hurricanes?
When the grid goes down, no doubt you will have plenty of customers, but by then it is too late because said customers won't have money to buy your windmills. All the IT workers will be UE, because of course the computers won't be working to program.
Building Windmills is actually one of the few good ideas here, but so far nobody including T. Boone Pickens has been able to sell this building bubble. Could the small entrepreneurial Bizman with a $1M Interest Free Obama Stimulus Loan be able to succeed where T. Boone Pickens failed? I doubt it, but even if possible it still requires Da Goobermint to start handing out $1M Interest Free loans to everybody to do this. Isn't that Goobermint Interference in the Free Market?
Nobody is going to do any real hiring here because nobody can come up with any way to make a profit in a deleveraging economy, other than to Short the Phone Book. When somebody comes up with a way to make a profit not by gambling on losses but on actual productivity, THEN you might get some hiring going on. Its so far not happening in the Free Market, nor is it happening in Goobermint either. It most certainly won't happen if/when Da Goobermint collapses entirely, because then there will be no money AT all around that holds any value. Well, if you are a Gold Bug maybe the Gold holds some value, but how many people have any gold at all to pay you to build a Windmill for them? Exceedingly few, and you will rapidly run out of customers, not to mention the fact the Chinese company which builds the motors you use will have stopped shipping here a while back.
The monetary system has to collapse COMPLETELY here before any real rebuilding can take place. There is no salvaging it. I think most people while they do not understand why it is happening do viscerally understand it, and so everybody is just waiting for the final collapse to occur. Nobody hires when Waiting for Collapse. You just hunker down and pray.
RE
Kill Bill
Kitty
Jenn- more on Bloomberg on green jobs initiatives and how the jobs are not going to be made in the USA:
China’s Labor Edge Overpowers Obama’s ‘Green’ Jobs Initiatives
Feb. 4 (Bloomberg) -- President Barack Obama is spending $2.1 million to help Suntech Power Holdings Co. build a solar- panel plant in Arizona. It will hire 70 Americans to assemble components made by Suntech’s 11,000 Chinese workers.
That gap shows the challenge Obama faces as he works to create “green” jobs. Asia makes more than half the world’s wind and solar energy equipment, and is gaining ground as U.S. factories lose out to cheaper labor and higher demand for clean energy. China for the first time topped the U.S. in wind-turbine manufacturing and installations last year, the Brussels-based Global Wind Energy Council said yesterday in a report.
Obama is giving billions of dollars in tax breaks to the wind and solar industries to create jobs in the U.S. even as production expands faster overseas. First Solar Inc., the world’s largest maker of thin-film solar-power modules, won $16.3 million to add 200 manufacturing jobs at its Ohio plant, yet 71 percent of its planned factory growth will go to Malaysia. The company employs 4,500 globally.
“The cost of manufacturing here is too expensive compared to Asia,” said Guy Chaffin, chief executive officer of Elite Search International, a Roseville, California-based executive search firm that has found employees for Tempe, Arizona-based First Solar and Solar Millennium AG. “As far as a flood of good jobs coming to the U.S., we’re not seeing it.”
Anonymous
just proves there isnt enough coffee pouring or burger flipping jobs to go around.
Anonymous
by the time this govt gets its shit together, it'll make my mowing lawns in the 50's for a buck an hour look like the bonus' we're being pilfired out of to pay the ass holes of the LEGAL kleptocracy.
Anonymous
1) How many people does it take to make one laptop? The same number that it takes to make 15000. In a high-tech world, we don't need lots of employment to create lots of objects. The model that employment is proportional to GDP ignores the effect of computers and automation.
2) Those who are employed are working their fingers to the bone; productivity is enormous. Boosting employment requires lowering efficiency, hiring unqualified people, and training them. Even that may not be a solution in light of 1).
3) Has technology and efficiency gotten to the point that we need a different means of allocating resources than from-each-according-to-his-ability, to-each-according-to-his-productivity (or the generosity of transfer payments)?
4) And don't forget that to pay back $14 trillion of debt, we need to tax over $40k/person in the country in excess of services provided (or inflate the currency to the point were $14 trillion is irrelevant).
HansGruber
The consumer credit economy is dead; that is why nobody is hiring. We have to transform our whole economy back into a nation that actually produces things and we have to undergo a mindset shift and stop referring to ourselves as consumers. We need to be a nation of workers first. A nation of savers second. Debt and consumerism are destroying us.
Thunderbird
"We must start thinking outside the box and forcing politicians to do so also."
We must do more than think outside the box - we must act and do outside the box we are in. But by my observations that cannot be done until the system collapses. The economy is dying. Observe all the fast food places, restuarants, and businesses you drive by and observe empty parking lots.
The banking system was saved because it controls all the transactions and is the conduit for government control of regulating business and collecting all types of taxes. The problem now is the banks have no work to do because of all the failing businesses. Go inside your local bank and you now see people sitting at their desks with nothing to do.
The economy is really crashing in slow motion and the government cannot do anything about it. Soon there will be massive layoffs at all levels of government which will mean that the regulators will be out of a job. Many companies will be going out of business and when this happens along with large government layoffs then the demand for services by the companies and institutions still in existance is going to be great. That is when people who are productive and have skills to offer will not be impeded by regulations, because there will be no one to enforce these regulations, that have caused the economy to flop in the first place, because of the expense to keep these regulations in place.
We are fast approaching the day of reckoning for this capitalistic system that we somehow let suck us in.
Anonymous
thunderbird; until thinking out of the box is made illegal in the u s, it wont happen.
StuckInNJ
Damn! Here is an amazing stat I found moments ago. Never seem it put this way before .....
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Zero Private-Sector Jobs Created Since 1998
http://blogs.investors.com/capitalhill/index.php/home/35-politics/1360-zero-private-sector-jobs-created-since-1998
But these silver linings shouldn’t cloud the depth of the labor market’s woes. Factoring in a modest 12,000 drop in private payrolls in January and revisions to prior data that wiped out another 1.4 million jobs, private nonfarm payrolls were at their lowest level since November 1998.
In all, 8.5 million private-sector jobs have been lost since December 2007. Meanwhile, over the 11 years of zero private-sector job creation, 2.4 million government jobs have been added. Virtually all of those gains have come at the state and local level.
Nonfarm payrolls don’t include the self-employed or farm workers. But if you factor in those two categories, the absence of private-sector job growth would extend back even further. According to the BLS household survey, farm jobs have been on a steady decline while the size of the self-employed population has budged very little.
As IBD noted recently, there are a few possible interpretations to the dearth of private-sector job creation. Those who don’t see a continuing jobless recovery make the case that payrolls have been cut to the bone and will spring back, at least somewhat, to keep pace with even modest demand growth.
An alternative perspective is that the nation’s job-creating machine is badly broken and needs to be repaired. Some might disagree whether a government or less-government solution is required.
Update: Please see this post pointing out that private-sector hours worked are at 1997 levels and questioning whether the Senate jobs bill provides a micro fix to a macro problemAlessandro
At some point, will 200 shovels employing 200 people be deemed more valuable than one caterpillar, the operator, and a whole bunch of gasoline to run it?
Unfortunately, who is more apt to contribute to the democratic party? The 200 shovels or the caterpillar company? Probably Caterpillar (however once the shovels unionize then we have a whole new set of issues to deal with). The thing about the shovels is they promote a more healthy lifestyle (probably don't need to do it 8 hours a day either) and probably use less overall unrenewable resources.
Clothing those 200 shovel holders and providing the necessary cleaning materials after a day of work creates additional local jobs.
The caterpillar company promotes more higher paying jobs, more overseas purchases of expensive suits and cars, and more troops to fight for the fuel that goes in the caterpillar engine.
therooster
There will be plenty of private sector jobs when the private sector expands on the distribution of asset based money (PM's) and the resulting stimulation ripples throughout, not only benefitting that immediate sector. Liquidity rocks, especially when it's debt-free. This will be demand driven ! Buy !
Why make a simple issue complicated ?
therooster
@Thunderbird ....
"We must start thinking outside the box and forcing politicians to do so also."
The first step is to ignore the notion that you need politicians because as long as your paradigm resides there, you will remain supply driven in hierarchy. Hierarchical structure is a supply driven concept that focuses power to the apex much like a lens focusing light to a focal point.
We will always reside in a supply driven economy as long as we have a supply driven money system. It governs. Power needs to be decentralized by restructuring within the private sector where there is the most market access to grass roots power.
sue
This is really a big concern especially for women and children.Being a woman myself i have been looking for a job since Dec 1st.There is not anything out there.At least that's what they say. I just thank God my husband has work! Where are all the job's? And what is going on with this country?Being born and raised in this country i think more illegals have the jobs.I guess it doesn't take a genius to figure it out.The Rich companies don't want to pay the american people so they pay these poor illegal's as little as nothing.Slavery is not over it's going strong right here in the USA.