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Obama’s Job Recession
By Larry Kudlow
Political advantage can be fleeting. A couple of months ago, during the
winter quarter, job gains looked to be picking up, unemployment was
easing lower, and President Obama’s reelection hopes looked more
secure. But things sure have changed.
In recent weeks, a whole bunch of new economic stats have been pointing
to a sputtering economy -- maybe even an inflation-prone,
less-than-2-percent-growth recession. Stocks have dropped five straight
weeks, as they look toward slower growth, jobs, and profits out to year
end. And Friday’s jobs report didn’t buck these trends.
“Anemic” is the adjective being tossed around the media. According to
the Labor Department, nonfarm payrolls increased a meager 54,000 in
May, while private payrolls gained only 83,000. A week or two ago, Wall
Street expected 200,000-plus new jobs. Didn’t happen.
Perhaps the most telling weakness in the jobs report comes from the
household survey, which is made up of self-employed workers. Think of
mom-and-pop owned stores and small businesses. Think of the Main Street
entrepreneurial families who make up the backbone of the economy, and
for the matter the country. And they vote, too.
Well, household jobs increased a paltry 105,000 in May, after falling
190,000 in April. The jobless rate is determined by the household
survey, and you really need a couple hundred thousand new household
jobs a month -- at least -- to lower unemployment. And you really need
about 300,000 household jobs a month to put a little torque behind the
Main Street economy. But with the lackluster May report, the
unemployment rate edged up to 9.1 percent from last month’s 9 percent
and March’s 8.8 percent.
Suddenly President Obama has gone from reelect to big trouble. The
economic rug has been pulled out from underneath him.
So what changed in the last couple of months or so? Answer: A nasty
oil-, gasoline-, and commodity-price shock. It’s eating away at
economic growth and jobs. It’s stalling the economy. And it has cut
into consumer real incomes and business profits.
Much of this problem can be traced to the failure of the Federal
Reserve’s QE2 pump-priming campaign. QE2 has not produced growth, but
it has produced inflation. In fact, the consumer price index over the
past four or five months has been running close to 6 percent annually.
And most of that new Fed money has served merely to depreciate the
dollar. And most of those cheaper dollars are on deposit at the Federal
Reserve, where banks are earning 25 basis points for safety and risk
aversion. In other words, the majority of that new money is not
circulating throughout the economy. It’s a boneheaded Fed stimulus, and
it has done more harm than good.
That said, in a larger sense, the failure to ignite small-business job
creation has to be laid at the doorstep of the Obama administration,
and the economic policies that threaten higher taxes and regulations
virtually across the board. On Thursday this week, the president again
promised House Democrats to raise taxes on successful top
small-business owners. What a great new idea.
So mom and pop don’t feel like taking a risk in this environment.
Higher tax-and-regulatory costs have put these entrepreneurs in
survival mode. They’re playing their economic cards so close to the
vest, business activity has buttoned up tight.
What you want is for people to take their suit jackets off, roll up
their shirt sleeves, and go out there and build. But people are
hunkering down, not building.
Bear with me for few more jobs stats.
Since the household-survey employment peak back in November 2007, 6.8
million jobs have been lost. Since the so-called end of the recession
in June 2009, 199,000 jobs, on balance, have disappeared. And so far
this year, household employment has increased by a total of 573,000,
which is about 115,000 a month. That’s only one-third of what’s needed
to bring down unemployment significantly.
The bottom line is that there hasn’t really been a jobs recovery.
President Obama is going to have to own that. But the question is, both
in Congress and on the campaign trail, does the GOP have a pro-growth
jobs program that will get Main Street mom and pops to roll up their
sleeves once again?
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