Jobs Stall in Obama's Economy

by John M. Curtis
(310) 204-8700

Copyright September 4, 2011
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           Getting the bad news about zero jobs growth, President Barack Obama must weigh carefully his words for his upcoming speech to a joint session of Congress on jobs.   Voter frustration seems growing as evidenced by declining poll numbers for the president, largely related to the economy’s anemic performance.  Barack walks a razor’s edge, trying, on the one hand, to reassure anxious voters, while, on the other hand, to admit his policies haven’t resulted in much jobs growth.  Today’s Labor Department report about zero jobs growth in August raised the specter of a double-dip recession, weighing heavily on voters’ minds.  Whatever was wrong with the economy under former President George W. Bush, it’s now Obama’s to fix, something that’s been happening at a snail’s pace.  While there’s no certainty ahead, voters must see results to send Obama back for a second term.

             Word of zero jobs growth triggered another stock market selloff, exacerbated by short sellers swooping up profit on bad economic news.  Obama’s speech on jobs growth next week must do more than promise more economic stimulus, government spending and incentives to businesses to hire more workers.  Scheduled to address a joint session of Congress Sept. 8, the GOP is having a field day, labeling Barack as President Zero.  While the unemployment rate remained unchanged at 9.1%, zero jobs growth raises the specter of double-dip recession.  “Underlying job growth needs to improve immediately in order to avoid recession,” said HSBC economist Ryan Wang.  Most economists would like to see private more private sector jobs, something signaling expanded payrolls.  August’s numbers mirror a trend of lowered private and public secotr jobs growth in each of the first three-quarters.

            Declining jobs numbers from 168,000 a month in the first quarter, 105,000 a month in the second quarter and now 28,000 a month in the third quarter show stalled growth in the nation’s Gross Domestic Product.  Federal Reserve Chairman Ben S. Bernanke reassured markets recently that, if needed, the Fed would act with more stimulus known as QE3, where the Fed repurchases U.S. treasuries.  Front-running Republicans Presidential Candidate Texas Gov. Rick Perry warned Bernanke to stop printing more money.  But unlike Perry who hopes for more bad economic news, Bernanke must act urgently to keep the economy from another recession.  While Republicans keep talking of slashing budgets, economists know that losing public sector jobs also harms the economic outlook.  Barack’s 2009 $787 billion economic bailout helped keep federal and state employees at work.

            Before Barack steps to the podium in the House, he’d better have a more bipartisan approach to fixing the economy.  Since the GOP adopted a no tax pledge, he must stay focused on important microeconomic issues, especially Security and Exchange rules governing naked short selling.  Today’s unregulated hedge and private equity funds routinely bet against markets, profiting off market downturns.  Without a robust stock market moving higher in the long-term, the nation’s publicly traded companies won’t have the cash needed to add to payrolls.  “There’s no silver lining in this one,” said Steve Blitz, senior economist at New York City-based ITG Investment Research, fearing a double-dip recession.  “It is difficult to walk away from these numbers without the conclusion that the economy is simply grinding to a halt.”  Barack must have come up with a bold new plan.

            Declining employment doesn’t bode well for the consumer economy—considered about two-thirds of the nation’s GDP growth.  Whether it’s private or public sector jobs, the government must continue to do its part to maintain the employment rate.  With the budget-slashing mood in Washington, the Labor Dept. reported downward revision of 58,000 jobs in May, June and July, largely from government layoffs.  “The importance of job growth cannot be overstated,” said Joshua Shapiro, chief economist at MFR Inc., giving no preference to private or public sector jobs.  Whether private or public, employed individuals spend into the consumer economy.  Most economists believe that improving the manufacturing sector is key to expanding the private sector jobs base.  While there’s no easy fix, Obama must raise consciousness about the need for U.S. and foreign companies to manufacture in the states.

            When Obama steps up to the podium next Thursday, he’d better have constructive advice how to improve the nation’s dismal employment situation.  Private sector hiring has been hampered by Wall Street’s short sellers, squeezing cash out of publicly traded companies.  Like current developments in the European Union, the president must deal with runaway short selling by currently unregulated hedge and private equity funds.  Congress must face the music that short selling has robbed publicly traded companies of the cash needed to add to payrolls.  U.S. and foreign electronics manufactures must be strongly encouraged to set up shop in the U.S.   While most economists see light at the end of the tunnel with health care reform, Obama must do something now to add to  public and private sector payrolls.  Encouraging U.S. and foreign manufacturers to set up shop in the states is 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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