Friday’s job report, which showed that 165,000 jobs were created in April and the unemployment rate dropped to 7.5 percent, was greeted by many news outlets as wonderful news. It’s not clear to me why.
I’ll happily concede that the jobs report indicates that the economy is not in immediate danger of lurching into another recession. And it’s true that the stock market is doing very well, with the Dow having crossed 15,000 for the first time.
Today’s Gallup poll found that on a list of 12 voting priorities, raising taxes on the wealthy comes in last place, with 49 percent of respondents saying it’s “very” or “extremely” important.
The first five, in order, are “creating good jobs” (92 percent), “reducing corruption in federal government” (87 percent), “reducing the federal budget deficit” (86 percent), “dealing with terrorism and other international threats” (86 percent) and “ensuring the long-term stability of Social Security and Medicaid” (85 percent). Gallup concludes with this analysis:
Americans’ to-do list for the president on Jan. 20, 2013 — whether it be Obama or Romney — includes creating good jobs, reducing government corruption, and reducing the federal budget deficit. Supporters of both candidates agree about the importance of jobs and corruption, while the deficit is a higher priority for Romney supporters than Obama supporters. In turn, Obama supporters believe the next president should have healthcare, Social Security and Medicare, and public education among his highest priorities.
Job creation has certainly been and will continue to be a major topic during the remainder of the campaign. And both candidates will surely need to outline their plans for reducing the federal budget deficit. However, it is unclear whether government corruption will become a major issue in the campaign, even though Americans see reducing it as an important goal.
Last week, I wrote about how the sequester will trigger the WARN Act, which requires employers to warn staff of pending layoffs a minimum of 60 days in advance. That means potentially hundreds of thousands of public and private sector workers would receive layoff warning notices on November 2 — 60 days before sequestration hits, and just five days before the presidential election.
Needless to say, this is a BFD for President Obama. So you may not be too shocked to learn that the administration might be pressuring employers to delay these notices until after Election Day. HotAir’s Tina Korbe flags this key item in Sen. Jim Inhofe’s floor speech last week:
“I have every reason to believe, because I’ve heard from people in industry, that the president of the United States is trying to get them to avoid sending pink slips out until after the November 7 election,” said Inhofe. “I would remind him that we have something called the Workers Adjustment and Retraining Notification Act, the WARN Act. It requires these companies to give 60 days’ notice of pending layoffs.
“Since sequestration will take place on January 2, these workers must be notified of their pink slip by November 2. This is what I’d like to remind those companies: they don’t have to wait. If they want to notify workers today, they can do that. I think it is imperative that the workers who are going to be laid off work as a result of the Obama Sequestration be notified in advance of the November election. We’re going to do everything we can to make sure that happens.”
President Obama’s outsourcing talking points have been silly and intellectually dishonest even by the standards of political rhetoric, which is saying something. Bain Capital isn’t in the business of creating jobs, it’s in the business of maximizing return on capital. Its principals would be violating their fiduciary duty to their investors if they maximized U.S. job creation instead. Investing overseas is not outsourcing. Outsourcing results in lower costs (otherwise, why outsource?) which means lower prices, which means that American consumers have more money to spend on other goods and services, which creates more American jobs. And so on and on.
But there is a major outsourcer running for president, one who has prevented tens of thousands of American jobs from being created and who has sent those jobs overseas instead. It is not Mitt Romney.
Obama’s obsession with “green energy,” and opposition to traditional fuels such as coal, oil, and natural gas, has resulted in a significant drop in permits for drilling on federal land. These permits increased 58 percent under President Clinton, 116 percent under Bush and are down 36 percent under Obama. But energy is a fundamental economic input. So, for every barrel of oil that is not explored for here, it is explored for in some other country. Every well not drilled here, is drilled there.
And that means that good jobs that could be American ones are not, because Obama won’t let those jobs be created here. On a visit to Brazil, he told the Brazilian president that he looked forward to America being a big customer for the oil coming out of Brazil’s spectacular new offshore oil fields. There is considerable evidence that we, too, have spectacular offshore oil fields. But Obama would rather see Brazilian oilfield workers be paid good wages than American ones.
On Monday, President Obama slammed Mitt Romney’s economic plan before an Ohio audience: “By eliminating taxes on corporations’ foreign income,” said Obama, “Governor Romney’s plan would actually encourage companies to shift more of their operations to foreign tax havens, creating 800,000 jobs in those other countries.”
Forget the campaign implications and forget the fact-check analysis. Simply take Obama’s accusation at face value. He is acknowledging—no, trumpeting—that cutting corporate taxes creates jobs. Eight hundred thousand of them.
Only 69,000 jobs were created in May, the worst number in a year, and far below what economists had been expecting (the consensus forecast was for about 150,000 new jobs). Meanwhile, the unemployment rate ticked up to 8.2 percent from 8.1. That’s the first actual increase in unemployment in 11 months. Stock market futures, already considerably down, plunged further with the news. Gold ticked up, and the ten-year bond fell to a record low of 1.46 percent (i.e., lend the federal government $1,000 and they will pay you a snappy $14.60 in interest per year).
The recovery, mediocre at best, has now appeared to stall, especially with jobs numbers for March and April revised downward (April’s were cut from 115,000 to 77,000, March’s from 154,000 to 143,000.) Europe’s numbers were even more dismal, with euro-zone unemployment now at 11 percent, the worst since the number was first calculated in 1995.
With Europe teetering on the edge of a financial meltdown, the head of the European Central Bank is telling political leaders to do something and do it now:
In a warning to political leaders, Mr. Draghi told members of the European Parliament on Thursday that the central bank is reaching the limits of its powers and now it is up to politicians to move quickly and decisively because the survival of the euro, the Continent’s common currency, is at stake. The structure of the currency union, he said, had become “unsustainable unless further steps are undertaken.”
These numbers are a disaster for the Obama re-election campaign. Indeed, unless they improve and improve soon, and unless European leaders take Lady Macbeth’s advice and screw their courage to the sticking place—not something for which European leaders have been noted of late—a year from now a Romney administration may be talking about the difficulty of dealing with the mess they inherited.
If the stock market is truly a leading indicator (and it tends to be one of the more reliable ones), then the Obama campaign had better start worrying. May has been a brutal month for the Dow. It closed May 1 at 13,279. As it approached noon today, it’s at 12,360, down 59 on the day. That’s a decline of 7.1 percent for the month, wiping out all the gains since Jan. 1.
The reasons, of course, are not hard to find: the crisis in Europe, lackluster economic data in general, a sharp drop in consumer confidence in May, an uptick in weekly jobless claims, and more.
Perhaps the biggest news is the drop in bond rates. The benchmark ten-year treasury bond is currently yielding 1.53 percent. On July 1 last year, the ten-year treasury was yielding 3.2 percent, more than twice as much. This is good news and bad news. The good news is that the federal government can finance its huge deficits more easily (and consumers can borrow more cheaply as well: mortgage rates are at near record lows). But the bad news is that bond yields go down for two reasons: a slowing economy and/or a financial crisis. As nervous investors seek safe haven, demand for treasuries rises, pushing down yields. (French and German bond rates are also very low for the same reason, yielding 2.35 percent and an astonishing 1.24 percent respectively.)
According to a recent Washington Post story,
The proportion of Americans in their prime working years who have jobs is smaller than it has been at any time in the 23 years before the recession, according to federal statistics, reflecting the profound and lasting effects that the downturn has had on the nation’s economic prospects.
By this measure, the jobs situation has improved little in recent years. The percentage of workers between the ages of 25 and 54 who have jobs now stands at 75.7 percent, just a percentage point over what it was at the downturn’s worst, according to federal statistics.
Before the recession the proportion hovered at 80 percent.
While the unemployment rate may be the most closely watched gauge of the economy in the presidential campaign, this measure of prime-age workers captures more of the ongoing turbulence in the job market. It reflects “missing workers” who have stopped looking for work and aren’t included in the unemployment rate.
During their prime years, Americans are supposed to be building careers and wealth to prepare for their retirement. Instead, as the indicator reveals, huge numbers are on the sidelines.
“What it shows is that we are still near the bottom of a very big hole that opened in the recession,” said Heidi Shierholz, an economist at the Economic Policy Institute, a left-leaning think tank.
The Post story goes on to point out that the percentage of prime-age men who are working is smaller now than it has been in any time before the recession, going all the way back to 1948, while the proportion of prime-age women is at a low not seen since 1988. A 50-year-old heating and AC technician from Alexandria, Virginia, was out of work in 2009 but found a job right away. He was laid off again about six months ago and, standing outside the Alexandria unemployment office, said it seems harder this time around.
The monthly jobs report, released on the first Friday of every month, came out at 8:30 this morning, and it isn’t pretty. While the unemployment rate ticked down to 8.1 percent, that was largely because people dropped out of the workforce rather than people finding jobs. The broader measure of unemployment, which counts people in part-time jobs who would rather work full-time, remains at a dismal 14.5 percent. The percentage of the population in the workforce dropped to a 30-year low at 64.3 percent, as 522,000 people left the labor force.
Only 115,000 new jobs were created last month (130,000 in the private sector, while government lost 15,000 jobs) and, thanks to population growth, the country needs 125,000 new jobs a month just to keep the unemployment rate steady.
