Bad Jobs

We are in uncharted economic territory just now. The most recent jobs report was terrible. The unemployment number ticked down a bit, to 8.1%. President Obama is touting that as good news on the campaign trail, which is what I would advise him to do were I advising him.

Unfortunately, the economy created only 115,000 jobs in April, well below expectations and far below the level that would be needed to move back to where we were when the recent recession began. This level of job creation doesn't even keep up with population growth.

One of the reasons that unemployment went down is because more people stopped looking for work and so don't show up in the figure. Civilian work force participation is now lower than it has been since 1981. We have lost the last 30 years.

Pictures speak louder than words. Here is the chart:

What this shows us is that the current decline in jobs is unique. Most recessions since WWII are V shaped: declines in jobs that were sharp, deep, and short, followed by robust gains. It used to be assumed that this was a healthy process, which is why a recession was sometimes called a "correction".

The recessions beginning in 1990 and 2001 were different. Job losses went on longer but were much shallower than previous recessions. That is especially true for the recession beginning in 2001.

The current line of job losses combines the worst of both. It is much deeper than previous recessions, has now gone on longer than the longest of previous recessions, and it is very far from returning to the point where the recession began. This is the first recession in recent history that has failed to generate a recovery. At the current rate, there will be no recovery or, if there is one, it will take decades.

If you are expecting me to say that it's all Obama's fault, prepare to be disappointed. Obama's policies have not be different in any significant regard from George W. Bush's policies. If anything, Obama doubled down on Dubya. The only thing we can say for certain is that, so far, the Bush/Obama economic strategy has come a cropper.

Maybe Paul Krugman is right. Maybe spending during peace time at WWII levels is just not enough stimulus. Government should spend much faster and go into debt much deeper. Perhaps that will do the trick. Maybe I am right. Maybe a half century of fiscal irresponsibility is finally catching up with us. Government should take steps to put its fiscal house in order.

What is not at question is this: President Obama is running with the worst economic record in post war history. That record is not merely worse in degree, but worse in kind. Perhaps we should judge Obama and his presumptive opponent not by how they treat dogs but by what they proposed to do over the next four years to address the economic situation. It is pretty clear that Obama is going to propose nothing. It is not at all clear that Romney has any real alternatives. This is not, I suspect, the point on which the election will be decided. It is merely the point on which it should be decided.

Comments

[larry kurtz]

Waffles for breakfast, Doc?

http://southdakotapolitics.blogs.com/south_dakota_politics/2012/04/the-fiscal-crisis-goes-to-college.html

[LK]

I certainly agree with your concluding sentences. I would add that one needs to ask whether any alternatives Romney offers will make the situation worse. His former partner at Bain has some troubleing ideas. I suspect Romney shares more of them than he willing to let on.

http://www.nytimes.com/2012/05/06/magazine/romneys-former-bain-partner-makes-a-case-for-inequality.html?_r=2&pagewanted=all

[Bill Fleming]

Krugman is right (if I heard him correctly) in that you can't try doing both solutions (austerity AND stimulus) at once and expect anything but tepid results. The Keynsian solution would have included more stimulous, more public sector jobs and some tax increases. Too weak a fix results in to slow a recovery (kind of like not completing your full course of antibiotics.)
Economics is obviously not my first subject, but having run a business for 25+ years I do get it that you have to cut expenses AND raise income to get out of a hole, that cash flows and P&L's are different than balance sheets, and that the two former have to improve significantly and sustainably long before you can expect to see any positive impact on the latter.

I know I keep saying this and annoying you, KB, but the United States of America DOES NOT have a problem with its net worth, no matter how hard conservatives would like to pretend and make us believe that it does.

[duggersd]

Bill, the problem with your statement about cutting expenses and raising income to get out of hole is that in business if you raise income by just increasing your prices, if your competitors do not follow suit, you will not increase income. You raise income by becoming more competitive than your competitors.
Tax cuts for everybody has increased tax receipts in the past. Cuts of capital gains taxes have been very productive in increasing tax receipts. The exception to the capital gains thing is when there is an announced capital gains increase, tax payers sell off before the new rates go into effect.
This administration has put the brakes on jobs by increasing regulation and the threat of increased taxes. People ask why do businesses sit on all of that capital. Do you believe it might have something to do with rate of return? Is any coincidence that the rate of new jobs has decreased since the monstrosity of a health care system was passed?
You have been in business for 25+ years. If the government came in and told you they were going to confiscate 60% of your income in taxes, how hard would you work to make money?

[Bill Fleming]

Not necessarily, duggerSD. Existing clients have, over the years, been firly tolerant of reasonable price increases, especially since the services are oftentimes superior to those they can get elsewhere, sometimes for any price (no brag, just fact.) But the real key to increasing income when necessary is to recruit a few more customers.

Next, the government isn't talking about increasing my takes to 60% of my income. Worst case scenario, it's talking about increasing them from maybe 33% to 37% or so. That's what's dishonest about you guys. You set your hair on fire and cry wolf when the fact is, you don't really know what you're talking about.

(...maybe that's because you both have government jobs? LOL.)

We have never once not hired anyone because we were uncertain about taxes.

Never.

We hire people when there is more demand for our services than we can supply, the demand looks sustainable, and thus we decide to grow the company to accomodate it.

Simple.

[Donald Pay]

"it is pretty clear that Obama is going to propose nothing," You mean beside what he's already proposed?

We know exactly the difference between the Republicans and the Democrats when it comes to jobs.

Romney has endorsed the Ryan budget, which is the Bush "trickle down" program on steroids. How well did that work? Tax benefits would be expanded for the wealthy and corporate interests, while the middle class would pay more in taxes, and have benefits cut. Romneys plan would devastate the middle class and favor the wealthy. Job losses would be huge, and we would sink into a depression.

Obama supports investments in education and research and development, infrastructure spending, and local public sector (teachers and cops/firefighters) support, efforts which largely go to the middle class. He pays for it by making the wealthy sacrifice for a change. It would create jobs and prevent another recession.

[Stan Gibilisco]

Interestingly, the job recovery, although slow, appears quite steady. The curve seems to lend itself to linear extrapolation. When I do that, I come up with a "forecast" that we should be back to pre-recession employment levels (based on the graph's metric) in about two and a half years.

Patience, patience, we can all use a dose of that. It takes longer to recover from pneumonia than it does from a common cold ...

Donald says, "He [Obama] pays for it by making the wealthy sacrifice for a change. It would create jobs and prevent another recession."

I ask, "How?"

I would also quote the French Presidential candidate Sarkozy, who struck out at his socialist rival by saying, "You want fewer rich people. I want fewer poor people."

Great line. But how does it play in the real world? We need more wealth to create more jobs, and more jobs to create the wealth. Sounds like a Catch-22 to me.

Yet, taxes for the rich have steadily gone down over the past two or three decades, while the wealth gap has steadily grown larger. "Tax the rich" will be an easy sell.

[Stan Gibilisco]

Hmmm. We have lots of people who would like to work but either can't find jobs or have given up trying. We also need a lot of infrastructure upgrading and repair that needs done. Lots of demand, lots of supply.

How can we make the connection?

We also happen to have lots of vacant houses, and lots of homeless people. Lots of supply, lots of demand.

How can we make the connection?

Oh, I can see my mind wandering in the direction of FDR even now. Horrors.

[duggersd]

Bill, let's look at just how far off I am. You say 37%. However remember President Obama wants to add another 5.6% surtax on millionaires. Now we are at 43%, or almost. Add to that another 15% self-employment tax for social security and medicare. That gets us up to 58%h, or so. In addition in our state we have a sales tax of 4% and property tax. You have property in the Great Sioux Reservation, right? This easily would get some tax payers over 60%. Add to that the taxes paid for state income tax in other states and it becomes easy to see why some people look at the rate of taxes and wonder why bother. That is the problem with you liberals. You only count federal taxes. I even bet you won't count the SS and Medicare as taxes either.
Your comment about increasing your prices is on target. You have to have a superior product in order to do so. If you increase your prices and your competitors do not but can provide the same service and the same level, then your income will not increase as much as it looks like it would on paper. Now about your comment about recruiting new customers. At least we can agree there. Tell me, what would it hurt to have more taxpayers? Currently the participation rate amongst taxpayers is as low as it has been since about 1980. More people employed equal more taxpayers. More taxpayers equal more tax revenues. Government often increases taxes on activities they want to discourage. That would be what happened when the state of SD increased the taxes on cigarettes. The idea was to cut the number of smokers, right? What happens when we increase the taxes on income? It discourages increasing income.

[Bill Fleming]

Well you can scratch that 15% off the Millionaires/Billionaires SS and Medicare taxes right away duggerSDS.

It's clear you don't have a clue about how those cats manage their money.

But let's just say that when guys like Romney and Buffett tell you they pay about 15% (or less) total on everything they make, (a far lower rate than their employees) they're not kidding.

In fact, 15% could well be a stretch.

[Bill Fleming]

p.s. DuggerSD, I get tired of being ornery to you when you say something ridiculous, so I'll be gentle this time. Your tobacco/taxes analogy is hopelessly, fatally flawed. I'll leave it to you to figure out why. If you're really, really stumped, maybe ask KB for help?

[duggersd]

Bill, notice my question "If the government came in and told you they were going to confiscate 60% of your income in taxes, how hard would you work to make money?" You will note I made no claim that the government wanted to take 60%. I only pointed out in a later post, that 60% is not that far off. So, the idea was not to cut down on the number of smokers? That was the argument I was hearing.

[Bill Fleming]

I would work as hard to make money as I do if they tell me they are going to "confiscate" 30% DuggerSD.

Maybe harder, because I would have to earn more.

At one time the tax rate on upper income folks was as high as 90%, but that clearly didn't stop people from becoming rich.

People don't stop smoking because of the tobacco tax. They stop (if they can) because it is bad for their health and the health of those around them, and because they get it that they'd be better off spending that money on something else.

Addicts who can't kick a habit will pay whatever the going price of the addictive substance is.

[duggersd]

Bill, you leave out some inconvenient facts. Very few people paid 90%. Why? Because people had loopholes. And I am not talking about confiscating 30%. I am talking about you being able to keep 40%.
As for the cigarette tax, part of the campaign had to do with fewer people smoking and smoking less. http://www.smokefreesd.org/Portals/Site1/pdf/Info/Incremental.pdf Note I did not say it was a fact people decreased smoking, only that the government taxes things they discourage.

[Bill Fleming]

Is that how you look at sales tax DuggerSD, and property tax? You know, those things that supply your paycheck? Like I said, your argument is fatally flawed. (And I'm being kind.)

[duggersd]

Bill, property tax and sales tax are the confiscation of money from the citizens to the government. That does not say I am against them, only telling what they are. Not fatally flawed and you are not being kind, but more obtuse or just plain refusing to concede. You still have not answered the question. How hard would you work if you only got to keep 40%?

[Bill Fleming]

If property tax and sales tax prevented people from buying things no one would own homes or anything in them. Your argument is moronic. I did answer the question. You must have missed it. I would have to work harder if I earned less. Every poor person knows this. Some people have as many as three jobs.

I will only concede that my politeness doesn't work on you, nor does my encouragement for you to think things through on your own. You appear to be completely incapable of it.

[Bill Fleming]

p.s duggerSD the taxes you pay are your investment in your society. You derive significant benefit from that community investment. You specifically have your job as an employee of the State for example. What cracks me up is when righty government workers, lobbyists, and elected officials claim that government doesn't create jobs. Baloney. Government created THEIR jobs.

[duggersd]

Bill, still changing the subject, I see (YAAAWWWWWWNNNNN). I do not mind paying taxes for legitimate government expenses. We still believe education is a government responsibility. If that changes and private schools take over, that is what I would do. But you still have not answered the question. I suspect because the answer you would give is what I believe it to be and you don't want to say it.

[Bill Fleming]

DuggerSD, this question? "How hard would you work if you only got to keep 40%?"

If so, then I have indeed answered it, and this will be for the 3rd time.

I would work even harder than I did if the %age I got to keep was 50% or 60%.

I like doing what I do. Plus I have personal financial goals, a budget to meet, and bills to pay.

[Bill Fleming]

I don't know why I keep answering you, Dugger. It's clear that you have gone daft.