What About Jobs?

INVESTOR'S BUSINESS DAILY ^ | Monday, September 9, 2002

[sixmil]

Economy: Friday's news that payrolls actually grew in August was welcome. But you might want to keep the champagne on ice.

Yes, the economy managed to tack on 39,000 new jobs in August. July's total was revised up to 67,000 from the piddling 6,000 first estimated. And the unemployment rate fell to a five-month low of 5.7%.

But how many of those new jobs were in the private sector, the only place where job creation is meaningful? None. In fact, government accounted for 41,000 of the new positions. Which means the private sector lost 2,000. And in manufacturing, which has been hurt worst in this recession, another 68,000 jobs disappeared.

We don't think there really is much to debate at this point. This is a jobless recovery. We've had no net job growth this year.

As the chart shows, this decade isn't off to a very good start when it comes to jobs.

We've churned out about 13,000 new jobs a month since the start of 2000 - about a tenth of the monthly pace of past decades. That's an abysmal performance.

Put into perspective, just to keep up with the growing labor force the U.S. has to create about 120,000 jobs a month. Anything less than that is, essentially, going backward.

Economist Donald Straszheim, head of Straszheim Global Advisors, estimated last week that the economy is roughly 2.1 million jobs short of where it should be. That affects everyone, not just those without jobs. We all pay the cost in lost economic growth.

Not everything is so glum. Factory orders are up. And productivity still seems to be rising. Personal incomes, too.

And, judging from the stock market's gain on Friday, Wall Street sees the jobs report as a good sign. After the release of the August jobs report, investors in the fed funds futures market slashed the probability of a Fed interest rate cut this month from 50% to about 20% in the space of a few minutes.

But is that bullish sentiment justified?

Eleven rate cuts by the Fed have failed to generate much economic growth. Or many jobs, for that matter. Now we're hearing that the White House may scuttle a package of tax cuts aimed at investors - who have suffered as much as anyone in this recession - unless it can get the Democrats to go along. We won't hold our breath.

All of this is bad news. The time for the Fed to cut rates is now - not next year, when it may be too late to stop a double-dip recession.

And if Congress won't cut taxes now when we need it, we have another suggestion: Maybe those who have lost jobs in recent months or watched their portfolios shrivel to nothing will remember Congress' failure to act when they go to the polls in November.

[sixmil]

Bush and Congress, please get serious and chop the gubmint down to size. You're just giving the dumocrats an issue if you don't.

[staytrue]

how many of those new jobs were in the private sector, the only place where job creation is meaningful? None

You correctly highlighted the most important part of the article. Private sector jobs are where people do something that someone finds useful and is willing to voluntarily pay money for. Government sector jobs, are jobs that create nothing and are jobs where people tell other people to do things that they would not ordinarily do. Furthermore, Government jobs are payed for with tax dollars. In other words, people are forced to pay for these jobs and money is rarely given voluntarily.