Jobs And The Economy: What Is The Difference?
When everyone gets all excited about variability in the monthly job statistics, they are creating angst over the symptoms, not the underlying illness. When I wrote my latest book, “Roadmap to Profitable Growth,” I was trying to raise the awareness of the underlying problems with the economy and jobs. There are far too few people in Washington, which truly understand the core problem–a lack of profitable revenue growth.
Then there is the myth that retail sales make up 70% of the US economy, and its ups and downs make all the difference in growth and jobs. That’s not true either. Personal consumption does make up 70% and is by far the largest driver in economic growth. However, retail sales is just one part of personal consumption – less than half of it. Retail sales do make a huge difference, but other consumer spending on non-retail needs i.e., services, health care, etc., have an equally large or larger impact.
The point of the foregoing two paragraphs is that growth – profitable growth – is the critical factor in the economy. The stock market has risen, driven by earnings fueled by outsourcing and cost reduction driven domestic profits and sizable foreign profits (of US companies). These sources of profitability driving the stock market climb are wearing thin. Companies may be able to squeeze out a bit more profit, but ultimately – and fairly soon – these companies will need profitable growth to keep the earnings and stock market value rising. (Since Europe is in even worse economic shape, investors also look to the US investments as a better bet.)
Returning to the jobs issue, growth in the private sector of the economy must precede any sustained growth in employment. Next, the decisions about how to employ more people – temporary, part-time, overtime, shortened work weeks (to avoid Obamacare) or regular jobs – are what drives the jobs data (BLS U-3 & U-6 numbers). The negative, uncertain, anti-business sentiment originating in the White House are working together to make employers nervous and reluctant to hire people for the longer term.
The same goes for lenders. A bank president recently shared a concern that making loans is still harder than it seems it should be. Why? Doubt; uncertainty; even fear of what the government will do next. There is plenty of money waiting to be loaned.
Reluctant employers and hesitant lenders make for a slow, erratic and anemic recovery. Add to this the cuts in government spending (the sequester, cuts by over-extended states/cities, and cutting excessive or wasteful Federal programs) still ripple through the economy, depressing jobs and then hitting incomes. Lower incomes mean less personal consumption and lower retail spending. These, in turn, lead to less demand and lowered need for hiring, and the cycle starts all over again.
It’s not that elected officials are either bad people, or incompetent, per se. It’s just that about half of the members of Congress have legal backgrounds, and less than a quarter have meaningful experience in actually running a private sector for-profit business. This leads to many poor decisions about how growth is truly created.
What happens next? Trying to solve these jobs problems, President Obama and his liberal allies resort to “creating jobs” by spending still more money – money the US doesn’t have and must borrow. Even if the government had the money, where does it get its money? By collecting taxes and fees from private sector wealth creators, and increasing taxes on any Americans still earning money from their own efforts (now down to about only 51-52% of Americans). Government has no source of income other than taxes/fees, borrowing, or simply printing more money, which leads to inflation later on.
In conclusion, those who have read this far, now have a far better understanding of jobs, economic growth and our sluggish US recovery. What recovery we have seen is in spite of President Obama’s actions instead of because of them. How sad.by