It Isn't Working

Another month, another mediocre jobs report from the Department of Labor.  This is consistant with the rest of the economic evidence that this is a lackluster  recovery that so far is not turning into a durable expansion.
The economy shed 121,000 jobs in July and the number of jobs created in May and June were revised downward to 221,000 lost jobs.  The unemployment rate held steady at 9.5% but that does not reflect the fact that the number of discouraged workers is also up 389,000 from a year ago.  The employment practices of the government also helped them show better results.  They laid off census workers only to rehire them the next week!  Private employment did inch up in July by 71,000 positions, with a nice 36,000 in manufacturing jobs, but even that number is deceptive.  The vast number of those jobs were in the auto industry.

The problem is if you are still looking for work, because the private sector isn't feeling confident enough to create jobs.  The declines in the household survey tend to reflect small business better than does the payroll survey, and small businesses in particular aren't creating new jobs the way they have in other recoveries.

So far, the Obama team has thrown the entire *Keyensian playbook at the economy.  We have paid people to buy cars,  purchase homes, pay off their mortages, weatherize their homes, and put solar paneling on their roofs. Of course there was the original stimulas package of $862 Billion, though some of that remains unspent.  None of it has put America back to work.

The policy lesson is that you can't have a jobs recovery without private confidence and investment.  The Obama crowd bet that you could force-feed private investment with government spending and politically directed credit, but the result has been to traumatize business instead.  Why would a small business owner hire anyone new if he knows that taxes are going up, health care costs are sure to rise, and the cost of each new employee is uncertain?  Nor can you inspire business confidence if you demonize bankers and business.

As the evidence mounts that government spending doesn't  create new jobs, the White House insists we need to double down on spending and monetary stimulus.  We've now had three years of this policy and it isn't working.  Time to try a different economic model, one that worked in the 80's after another severe recession.

Come November we have a chance to try that new model!


*Keyensian: The theory that government must compensate for lack of business investment in times of recession.____________John Maynard Keynes 1936