Simple explanation–why there aren’t more jobs

Let’s put this in terms that even an economics professor can understand:

Why is the recovery so anemic? Why is the employment-labor force ratio hovering around 58 ½ percent, instead of 62 ½ percent as it was until around 2008? In other words, why are we 9 or 10 million jobs behind where we should be if the same proportion of the workforce were employed as was normal until just 5 years ago? Why is it that, despite the Fed giving away money and loans available at the lowest rates in history, companies are not taking risks or expanding jobs here?

Back in late 2008 and early 2009, in an economic hailstorm, when the job creators in the private sector hunkered down awaiting the initiatives of the incoming Obama Administration, they expected tangible steps to jumpstart the private economy. After all, that’s where jobs are created. What did they get? The Administration’s first priority was health care reform that created immense uncertainty that lasts to this day – excepting only the absolute certainty that labor costs would increase. Added to that were new reporting and compliance costs in other areas of endeavor, so that enterprises could “prove” to the government’s satisfaction that they were not violating various laws and regulations. Added to that were measures that gave preferences to our most inefficient industries, whether in the form of wealth transfers from shareholders and investors to the ossified automobile industry, or from all taxpayers to the incredibly inefficient solar and wind industries peopled with Administration cronies. And did we forget the stimulus package trumpeted as “infrastructure” that was no such thing? To top that off, the President dished out some serious demagoguery over the airwaves against “wealthy fatcats” – never mind that milllions of small business owners qualify as “the wealthy” in his lexicon.

Despite incredibly low interest rates, the risk-takers aren’t buying. If you are the CEO of a Fortune 500 concern, are you going to gear up to hire more Americans and suffer more mandates – not just the ones you know about, but the ones you cannot yet imagine? Not likely.  The Fortune 500 companies aren’t borrowing, and if they are, they are acting rationally by investing overseas. And they are sitting on wads of cash, much of which they cannot even repatriate to the U.S. in the form of dividends to U.S. shareholders. If you are the owner of a small company, are you going to take risks by expanding?  No, your first priority is to cut overhead, not increase it; your second priority is to stay under the 50-employee limit so you don’t run into the Affordable Care Act.

There, does that explain it?

After four years, it’s time — at long last, and having been safely re-elected – for the President to own the consequences of his foolhardiness and (we hope) to chart a new path.  Who’ll give odds on that?

8 thoughts on “Simple explanation–why there aren’t more jobs

  1. Nicely done. A concise primer on what ails this economy. Too bad the Republicans could not have made their argument so clear and understandable. On the other hand, it probably would not have mattered, because only a minority of U.S. voters really want to understand the economic pickle that we are in. To answer your question about giving odds on a change in course from the Administration, the answer is “no thanks.” The president wants to keep spending in order to fundamentally change our economy into a Euro-style social welfare state. He can only do that with higher taxes on the “wealthy.” Greece beckons.

  2. Lee, enjoying your column. Can’t comment on the merits. Good catching up. But, your attempt to claim to be reasonable flies in the face of all I know about you! 🙂

  3. Your arguments appear to be more based in ideology than in facts. First, the Fortune 500 are not the source of job creation, historically job creation comes from mid-sized enterprises…not the big guys NOR the small guys. Second, if companies are not hiring it is because they do not see demand for their products, not because of some new regulation. The private sector lobbies love to scream about regulation, but the fact is the Obama administration is the first to actually set up an office in the White House charged with eliminating stupid regulations. The other issue we are facing is inadequate training of our potential workforce…it is education that drives employment. Our lousy educational system is catching up with us. Low wage, low skill jobs have been shipped overseas. High skill jobs are available…millions of openings are going unfilled. We need public/private sector partnerships to train people, apprenticeships, etc.
    And it is not because of health care reform. So far studies show that companies are not giving up health care coverage under the new law, and now employees can get their own coverage for the first time. All that will be an economic boost, as employees can take their insurance with them and make our economy more dynamic…no more staying in a job you hate just to not lose insurance…and we now need many more doctors, many more nurses, many more nurse-practitioners now than before.
    Thanks to the President’s job policies, we saved the auto imdustry and millions of jobs it drives, it is now growing again, fueling economic recovery, and has paid back the taxpayers. I didn’t like it ideologically but I admit it was needed and it worked. And the loans to green energy companies and the like have, on balance, been profitable. I don’t like the ideology either but it does appear to have produced more winners than losers, and a better overall track record than most VCs experience.
    It would make far more sense to enact a global carbon tax agreement, and put a price on carbon, and let the market decide who should attract capital, but we just aren’t there yet politically and meanwhile we do need to try to save the planet for human habitation.
    The biggest reason the economic growth has been so anemic is the dramatic cuts in government spending, which have put the brakes on. Had lunch recently with one of the top money managers in the history of Wall Street, and he told me his firm estimates the drag on GDP from the sequester alone at 2%…2%!!! And that was just the coup de grace….all Congress thinks about is spending cuts on “entitlements”…but meanwhile huge agriculture subsidies to big business sail through. Our economic problems have one source: the Republican House of Representatives…none of whom could pass an Econ 101 final exam.

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