Certainly, the December jobs report could have been worse, although 155,000 jobs per month will not keep pace with population growth and 7.8 percent is nothing to write home about. But this is not good enough, if we are to return to anything resembling pre-recession growth and job creation. The number of long-term unemployed held steady at 4.8 million, and the U-6 (under-employment) rate remained at 14.4 percent.
Jim Pethokoukis reminds us that “at that pace, the US won’t return to pre-Great Recession employment levels until after 2025. . . . Indeed, if the labor force participation rate last month, 63.6%, were the same as in December 2011, 64.0%, the ‘official’ or U-3 unemployment rate today would be 8.4%, only a bit better than the December 2011 rate of 8.5%.” As for take-home pay, he notes that the “average hourly earnings rose by just 2.1% over 2012, about the same as inflation. That means real wage growth was pretty much flat.”
It is not surprising there is such a big gap between reality (7.8 percent unemployment) and what the Obama team promised at this stage (5.2 percent unemployment). There have been no policies aimed at jump-starting job creation. Whatever you think of the fiscal cliff deal, it doesn’t promote growth, investment or hiring. And if there were any doubt, we now know that the Keynesian “multiplier” (i.e., $1 spent generates something greater than $1 in growth) is bunk and in fact we get less growth for every dollar spent. (“we find no evidence that multipliers are higher during periods of slack in quarterly U.S. data from 1890 to 2010. In all states, multipliers appear to be between 0.6 and 0.7.”)
This is one reason to support tax reform. Lower rates generate more investment and growth, and removal of credits, deductions and other tax expenditures eliminates inefficiencies in the economy. It is also reason to redouble efforts to expand trade, accelerate energy production (including approval of the Keystone XL pipeline) and scour regulations to remove job-inhibiting rules. Of course, Obamacare remains a weight around the leg of employers, perhaps pushing down employment permanently.
What does Obama say he wants to do? Hiring 100,000 more teachers (how about 100,000 more police officers to protect the schools?), as he proposed, isn’t going to reverse our economic fortunes. It may or may not be a good thing to send 1 million people to community college (maybe technical training school would be better). Raising tax rates on the rich sure won’t help employment. So what exactly is the president doing to increase job growth now? You got me.