by Larry Kudlow
Political advantage can be fleeting. A
couple of months ago, during the winter quarter, job gains looked to be picking
up, unemployment was easing lower, and President Obama’s reelection hopes
looked more secure. But things sure have changed.
 |
| BAD GUYS wear BLACK Cowboy hats..be |
In recent weeks, a whole bunch of new
economic stats have been pointing to a sputtering economy — maybe even an
inflation-prone, less-than-2-percent-growth recession. Stocks have dropped five
straight weeks, as they look toward slower growth, jobs, and profits out to
year end. And Friday’s jobs report didn’t buck these trends.
“Anemic” is the adjective being tossed
around the media. According to the Labor Department, nonfarm payrolls increased
a meager 54,000 in May, while private payrolls gained only 83,000. A week or
two ago, Wall Street expected 200,000-plus new jobs. Didn’t happen.
Perhaps the most telling weakness in
the jobs report comes from the household survey, which is made up of
self-employed workers. Think of mom-and-pop owned stores and small businesses.
Think of the Main Street entrepreneurial families who make up the backbone of
the economy, and for the matter the country. And they vote, too.
Well, household jobs increased a
paltry 105,000 in May, after falling 190,000 in April. The jobless rate is
determined by the household survey, and you really need a couple hundred
thousand new household jobs a month — at least — to lower unemployment. And you
really need about 300,000 household jobs a month to put a little torque behind
the Main Street economy. But with the lackluster May report, the unemployment
rate edged up to 9.1 percent from last month’s 9 percent and March’s 8.8
percent.
Suddenly President Obama has gone from
reelect to big trouble. The economic rug has been pulled out from underneath
him.
So what changed in the last couple of
months or so? Answer: A nasty oil-, gasoline-, and commodity-price shock. It’s
eating away at economic growth and jobs. It’s stalling the economy. And it has
cut into consumer real incomes and business profits.
Much of this problem can be traced to
the failure of the Federal Reserve’s QE2 pump-priming campaign. QE2 has not
produced growth, but it has produced inflation. In fact, the consumer price
index over the past four or five months has been running close to 6 percent
annually.
And most of that new Fed money has
served merely to depreciate the dollar. And most of those cheaper dollars are
on deposit at the Federal Reserve, where banks are earning 25 basis points for
safety and risk aversion. In other words, the majority of that new money is not
circulating throughout the economy. It’s a boneheaded Fed stimulus, and it has
done more harm than good.
That said, in a larger sense, the
failure to ignite small-business job creation has to be laid at the doorstep of
the Obama administration, and the economic policies that threaten higher taxes
and regulations virtually across the board. On Thursday this week, the
president again promised House Democrats to raise taxes on successful top
small-business owners. What a great new idea.
So mom and pop don’t feel like taking
a risk in this environment. Higher tax-and-regulatory costs have put these
entrepreneurs in survival mode. They’re playing their economic cards so close
to the vest, business activity has buttoned up tight.
What you want is for people to take
their suit jackets off, roll up their shirt sleeves, and go out there and
build. But people are hunkering down, not building.
Bear with me for few more jobs stats.
Since the household-survey employment
peak back in November 2007, 6.8 million jobs have been lost. Since the
so-called end of the recession in June 2009, 199,000 jobs, on balance, have
disappeared. And so far this year, household employment has increased by a
total of 573,000, which is about 115,000 a month. That’s only one-third of
what’s needed to bring down unemployment significantly.
The bottom line is that there hasn’t
really been a jobs recovery. President Obama is going to have to own that. But
the question is, both in Congress and on the campaign trail, does the GOP have
a pro-growth jobs program that will get Main Street mom and pops to roll up
their sleeves once again?
