Thursday, 08 November 2012 17:00

Full Employment Not Expected Until After the Next Presidential Election

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After parsing the unemployment report that was issued by the Bureau of Labor Statistics (BLS) on Friday, November 2nd, two scholars at the Heritage Foundation, Rea Hederman and James Sherk, concluded that at the present jobs growth rate it could take another five years for a full jobs recovery to occur from the Great Recession. That would place the recovery after the next presidential election in 2016, and nearly ten years after the start of the recession in December 2007.

Noting that 125,000 new jobs must be created every month just to keep up with population growth, they turned to the “jobs calculator” offered at the website of the Federal Reserve Bank of Atlanta and asked it to determine how long it would take for job growth to return to normal, based on the average job growth over the past three months (170,000). The answer: the summer of 2017.

This assumption that future job growth would be maintained at that rate is laden with so many difficulties and subject to so many unknowns as to call the entire exercise into question. This is called “straight line thinking in a curvilinear world,” or, put another way, this assumes that the future will look like the past. It probably won’t.

For instance, there is the “fiscal cliff” and the great uncertainty about how the lame duck congress will deal with it, if they deal with it at all. Great speculation abounds about various scenarios, but each concludes that such a monthly job growth assumption could be wildly off the mark, resulting in much lower job growth in the future. 

Secondly, now that the president is free to work his will without having to face an unhappy electorate, the expected tsunami of regulations pouring out of Washington will certainly hamper job creators in the years ahead.

Thirdly, the recession extending across the nations of the European Union will likely ripple across the Atlantic to slow American businesses even further.

Finally, the predictable moving of American jobs abroad to avoid the draconian impact of ObamaCare mandates will further slow the economy and job growth.

Another Heritage scholar, J.D. Foster, has calculated that the president’s attempts to stimulate job growth have in fact fallen short by more than 7 million jobs. Foster’s thesis is simple: He used President Obama's own words. During the fall of 2008, Obama promised that he would create 2.5 million jobs by December 2010. Then at the end of 2008, Obama revised his target upward, promising that he would create 3.5 million jobs by the end of 2010. At that moment in time, employment stood at 135.1 million, so his revised “target” was 138.6 million jobs by December 2010.

But the current jobs report showed only 133.8 million are employed, more than one million fewer than in 2008, and nearly 5 million short of Obama’s “target” number he promised by the end of 2010.

It’s now the end of 2012. Foster took Obama’s promise of 138.6 million and factored in the jobs that must be added simply to absorb new entrants into the workforce — about 125,000 jobs every month. That revised Obama “target” would, if it had been accomplished, required that the American workforce be at 141.5 million. But the current employment report from the BLS shows only 133.8 million are employed. That’s 7.7 million jobs short of Obama’s promises.

Foster explains that it was faulty reasoning behind Obama’s failed promises that resulted in such a massive shortfall:

This [Keynesian] theory of demand manipulation through deficit spending ignores the simplest of realities: Government spending must be financed. So to finance deficit spending, government must borrow from private markets, thereby reducing private demand by the same amount as deficit spending increases public demand. In effect, the theory says that if I take a dollar from my right pocket and put it in my left, then I’m a dollar richer. No wonder it always fails.

Foster thinks Obama’s promises were flawed from the beginning and that his policies are purposefully keeping the economy from growing:

Seemingly bent on perpetuating joblessness, Obama and his allies are seeking to raise some of the most damaging taxes possible. They seek to raise tax rates on the investors who are needed to provide seed corn for new businesses and on small businesses that use this seed corn to spur innovation and job growth. Foolish in the best of times, raising these economically punishing taxes in the face of high unemployment is indefensible.

He calls this deliberate promotion of failed economic policies “economic malpractice”:

The intentions of Obama and his congressional allies to raise tax rates on small businesses, on savers and investors, on the risk takers who propel the economy with their successes goes well beyond ideology to economic policy malpractice. 

As discouraging as the reports from these Heritage scholars may be, they could in fact be too optimistic about the economy recovering by 2017. With the unknowns facing the economy from the “fiscal cliff,” the coming wave of regulations, the ripple effect of Europe in recession, and the moving of jobs abroad to escape the ObamaCare mandates, unemployment staying close to double digits for the foreseeable future may very well become the “new normal" and a full recovery just wishful thinking. 

3 comments

  • Comment Link Gordon Freeman Sunday, 11 November 2012 03:50 posted by Gordon Freeman

    From my point of view there are only two explenation for the draconian regulations.

    (1) The Politician as well as general population believe from the general implied consensus that strict cumbersome complex environmental, social and economical regulations are truly needed in order to achieve higher standard of living. For example higher minimum wage, sure sounds good at first glance, same with environment regulation to protect water/air and equal pay or gender/race positive discrimination in order to achieve 50/50 male/female ratio or 33/33/33 white, asian, black ratio in the work place. Sounds good, Im for women right to work and against racism.

    But of course as all we TNA readers know its all stupidity and empirically false, true liberty for all genders and races comes from freedom to choose and own property.

    (2) Economic recession makes people more dependent on government, thus more the population will continue to vote for socialist politicians who will take away freedom to own property and give instead bread and circus. Remember socialists are all dependent on government, so they have no incentive to break free from their wellfare addiction and the politicians have absolutely no incentive to give people real jobs or oppurtunity to start their own business. Why would a crack dealer help a addict become clean?

    Of course this could all be a grand scam in order to make the world population into slaves by a united nations. But there are many factors that would indicate that the United Nations scam is being done just by a small elite of intellectuals and bureaurcrats within the UN and some people like Soros. But it doesnt seem they have direct influence over other governments, for example most nations in UN like China does policies that only benefit themselves, only the US and some western countries seems to be sacraficing themselves for the sake of other countries. And then you have politicians like Reagan who goes directly against the UN.

    I think its more likely that the economic policies taken are just done by socialist politicians just interested in securing their jobs and special interest, and not a grand UN plan. Though im not saying there is a UN agenda, i just dont think the little UN bureaucrats tyrants have as much control as we sometime think

  • Comment Link REMant Saturday, 10 November 2012 18:04 posted by REMant

    Foster seems to neglect the fact that a command economy need not seek external financing, tho most commonly find plunder more to their liking.

  • Comment Link Frank M. Pelteson Thursday, 08 November 2012 18:49 posted by Frank M. Pelteson

    The purpose of creating a lower standard of living in the United Sates is to bring the United States in line with the less fortunate nations of the world, in order to comfortably merge it with those nations.

    That is the goal of the INSIDERS who want to create a one-world socialist police state under the United Nations.

    This process will never be abandoned and it will take as long as it will take.

    Therefore there is no intention for the economy to recover, and there is an intention for the economy not to recover.

    For more on the INSIDERS play the 1970 video at http://www.youtube.com/watch?v=Q1ftkYlOlt0&feature=related .

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