U.S. Economy Keeps on Rolling

by John M. Curtis
(310) 204-8700

Copyright May 6, 2011
All Rights Reserved.                                         

               Politically-motivated skeptics on the U.S. economy continue to make excuses while the Labor Dept. reported April’s job picture improved by a whopping 244,000 private sector, non-farm jobs.  While public sector, i.e., government, jobs dropped by 24,000, the private sector zoomed ahead, adding 268,000 jobs.  With federal deficits shrinking but still running about $1.4 trillion, Washington continues to slash government payrolls, much like the private job market did during the recession.  When the public sector catches up and ends the hiring freeze, monthly job growth could top 400,000, replacing the 7 million lost jobs since the economy went into recession in Dec. 2007.  Washington’s GOP-backed budget-slashing mood is exactly the opposite of what’s needed to help the economy take off.  As jobs continue to expand, budget deficits will continue to shrink

            Advancing stock markets have fueled strong job growth, keeping hedge and private equity funds from shorting the market and hurting long-term investing.  Since President Barack Obama was sworn into office, the Dow Jones Industrials have risen nearly 5,000 points, or over 60% of its value, attesting to how bull markets propel economies out of recessions.  Continued stock market growth anticipates more job growth and shrinking budget deficits.  While today’s Gross Domestic Product to deficit ratio remains at just under 10%, more stock market and job growth dramatically lower budget deficits.  Federal Reserve Board Chairman Ben S. Bernanke and Treasury Secretary Tim Geithner seek to return to the days of former President Bill Clinton and Treasury Secretary Robert Rubin when a bull market with its massive capital gains revenue created budget surpluses.

            Instead of following the European model, where austerity programs rule the day, the White House should continue on the same course of pro-stock market growth.  Only by generating the liquidity in the stock markets, can publicly traded companies have the capital needed to expand payrolls.  Washington’s budget and federal job-slashing mood does nothing to stimulate the economy other than artificially reduce today’s budget deficits.  With a growing stock market, it’s only a matter of time before the government collects new tax revenues by adding new jobs.  Washington’s GOP-driven penchant for slashing government jobs actually increased April unemployment rate to from March’s 9.8% to April’s 9.0%.  Watching the nation’s GDP drop to 1.8%, Bernanke kept interest rates steady at historic lows, signaling that the Fed still sees deflation as a bigger threat than inflation.

            Despite the sluggish GDP rate, the manufacturing sector added 57,000 jobs, largely in the auto industry where the Ford, GM and Chrysler watched strong earnings in the first quarter.  Hurting the economy have been high oil prices, driving pump prices up and punishing consumers from spending more cash.  Oil companies watched their earnings and profits rise to record levels in Q-1, hurting the overall economy by robbing consumers to needed cash.  With oil prices peaking and beginning to decline, consumers may get some relief at the pumps, giving them more cash to fuel consumer spending.  Increases in auto manufacturing have helped generate more jobs and tax revenues, stimulating the overall economy.  More private sector job growth over the next few months should help relieve the temporary bump in the unemployment rate caused by the government shedding jobs.

            Getting Osama bin Laden was a big shot in the arm to the U.S. economy.  Since Sept. 11, the economy has been fragile, despite several positive growth years during the Bush administration.  Since the real estate bubble collapsed in 2007, consumers have had less discretionary spending.  Barack must do a better job of lobbying Congress to induce more U.S.-based companies to end outsourcing and encourage domestic manufacturing of big-ticket items like cars and refrigerators.  Discouraging companies from outsourcing and encouraging more domestic manufacturing should help to expand the job base.  No economy can thrive if it can’t supply enough jobs to a growing population.  Stubborn unemployment levels are improved by inducing more domestic manufacturing .  Keeping oil companies from running amok also assures that consumers will have enough cash to stimulate the economy.

            April’s job numbers are a good omen to the shape of the economy to come.  Publicly traded companies continue to add to payrolls, expanding the tax base.  More growth in the stock market supplies the needed liquidity to continue adding jobs and reducing growing budget deficits.  Obama’s politically motivated critics are hoping for bad economic news, especially after the president landed Osama bin Laden May 1.  For all Obama’s critics, stock markets continue rising and private sector jobs keep getting added to the economy.  GOP sponsored-budget slashing hurts long-term growth my slowing or reducing public sector jobs.  Whether from the private or public sector, job growth expands the tax base, reduces budget deficits and stimulates the economy.  GOP-backed budget-slashing shows no confidence in today’s balanced formula for growing the U.S. economy.

 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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