Warning Signs as U.S. Jobs Market Slows

by John M. Curtis
(310) 204-8700

Copyright April 8, 2012
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               Telling the real story about the U.S. economy, March jobs growth was cut-in-two, revised downward to 120,000 from some 225,000 jobs recorded in February’s shortened month.  While there’s nothing wrong with adding 120,000 jobs, it raises question about whether or not the economy is slowing down. When Federal Reserve Board Chairman Ben S. Beranke’s Open Market Committee met March 13, he kept the federal funds rate unchanged at 0-.25%.  Beranke warned then that, given the nature of the recovery, it was premature to raise interest rates.  Wall Street acted positively jumping the Dow Jones Industrials to over 13,000, in what’s become the biggest rally since before the market collapsed in 2008.  While March’s jobs report was disappointing, it dropped the unemployment rate one-tenth to 8.2%.  If the jobs trend continues in April, Wall Street might head South.

            Since Jan. 1, the Dow Jones Industrials has rocketed up nearly 1,000 points, reflecting optimism on the street from six consecutive months of strong jobs growth.  Since April 2010, the nation has added nearly 4 million jobs.  Some suspect that the positive jobs growth since January was partly due to the East Coast’s relatively mild Winter.  Others think it mirrored strong corporate profits and expanded market capitalization.  More cash in companies’ stock accounts means more hiring.  Economists hoped for about 200,000 jobs in March, a pace to add over a million jobs before next November.  With former Massachusetts’s Gov. Mitt Romney bashing Obama as the nation’s jobs killer, any drop in jobs growth would add to his plea to change parties in November.  If jobs growth fizzles, Beranke will likely order a new round of Fed T-bill buying known as “quantitative easing.”    

         Before Barack turned his attention to jobs, he seemed focused on foreign policy and domestic priorities, especially his health care bill.  When he passed financial reform July 20, 2010, he didn’t change the way Wall Street did business.  His 2010 financial overhaul did nothing to restore the 1934 Depression Era Glass Steagall Act that banned banks from owning brokerage houses.  When former President Bill Clinton signed Gramm Leach Bliley Financial Services Modernization into law in Nov. 12, 1999, it was supposed create unprecedented economic growth and opportunity.  One year later, the stock market crashed and less than eight years later the country experienced a financial shock of epic proportions according to former Fed Chairman Alan Greenspan.  Only recently has the economy showed a pulse three years into Obama’s first term, signaling signs of hope.

          Keeping the jobs market expanding requires more than the Fed keeping interest rates at rock bottom.  When Bernanke begins to hike rates, Wall Street will know the economic recovery is real.  When jobs begin to evaporate, it makes the street nervous that the recovery could stall out.  “The economy may not be growing as strongly as the data around the turn of the year, benefiting from favorable weather, suggested,” said Michelle Girard, senior economist at RBS in Stamford, Conn.  Obama needs to reinforce his plan of bringing manufacturing and assembly jobs back to the U.S.  Outsourcing in Asia’s cheap labor markets has left too little assembly line jobs in the U.S.  If Barack follows the lead of the auto industry, he can pressure multinational companies like Siemens, Samsung and LG to begin relocating electronics manufacturing and assembly plants to the States. 

           Barack’s GOP detractors will no doubt seize upon March’s jobs report as proof his economic policies are not working.  Yet it’s hard to argue with the some 4 million jobs added since June 2010.  Any major economic downturn between now and the election will give swing voters doubt about returning Barack to the Oval Office.  Recent employment data showed a drop in retail sales, despite good news at Target and Macys.  Retail sales, accounting for about two-thirds of the nation’s Gross Domestic Product, waiver when employment weakens, something that could stall the economy.  With Barack’s signature health care legislation hanging in the Supreme Court, the administration should argue that the health care industry faces the biggest potential boom in U.S. history.  Insuring 40 million more citizens will require a major expansion in the medical/pharmaceutical industrial complex, adding potentially millions of new jobs to the economy.

           Obama’s reelection plans hang on the economy continuing to expand between now and the election.  All Secretary of State Hillary Rodham Clinton’s gunboat diplomacy about Iran only adds to international tensions hurting the global economy.  Any military adventure by the U.S. or its allies could have dire consequences on the U.S. and global economies.  Instead of rattling sabers, Barack should gin up the idea of creating more domestic manufacturing and health care jobs.  Nothing would torpedo the economic recovery more than another war.  If he really wants to grow the economy, unnecessary war must be avoided at all costs.  Repeating the mistakes of Iraq could reverse all of the economic gains made during the last two years.  Avoiding war and focusing on domestic manufacturing of major appliances and big screen TVs, would be a step in the right direction.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.       

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