Written by Jeff Thredgold, President, Thredgold Economic Associates
One more time around the dismal American job creation track as employment data continues to disappoint. The combination of massive government spending and unprecedented monetary stimulus has largely failed to ignite the economy
Too bad such economic “steroids” have been packaged with the Administration’s anti-business rhetoric and actions of the past two years. The weak job data provides Republicans additional ammunition in their call for “change” in WashingtonDC, with the mid-term elections now just three weeks away
A Dismal Jobs Report
The struggling U.S. economy suffered a net loss of 95,000 jobs in September, much worse than the 5,000 net loss expected. As in recent months, the loss of temporary Census jobs contributed to the weak data, with the loss of another 76,000 jobs. The vast majority of these temp jobs—which overstated job gains earlier this year and understated them in recent months—are now behind us.
The shocker in the data was the loss of an estimated 83,000 jobs in the state & local government sector, most of these representing school teachers who were not rehired for the school year just begun. September cuts were the largest for state & local governments in 28 years, and painfully illustrate budget and funding pressures at the local level across the nation. Moreover, the National League of Cities projects that local governments will cut 480,000 jobs this year and next (The Associated Press).
The private sector added 64,000 jobs during September, slightly below expectations. Employment estimates of the prior two months were revised higher for private sector job gains and worse for the public sector.
The net result is that private sector job gains have averaged 96,000 monthly during 2010’s first nine months. While these gains are much better than during 2008 and 2009, the 96,000 average gain falls short of the 130,000 jobs needed monthly just to meet the needs of a rising population…just to meet the needs of a rising labor force…and just to keep the unemployment rate from rising even higher.
To have the massive economic stimulus of the past two years (deficits of $1,400,000,000,000 each year) and the unprecedented monetary stimulus we have had from the Federal Reserve—and to see weak job creation and pathetic overall economic growth is terrible. Such reality speaks to the failings of this Administration and this Congressional leadership team.
The nation’s jobless rate remained at 9.6% in September and has averaged 9.7% during 2010 to date. Most private and public sector estimates see the unemployment rate still exceeding 9.0% at the end of 2011. By way of comparison, the nation’s unemployment rate a year ago was 9.8%, while it was 6.2% in September 2008. The rate also averaged 4.6% during Septembers in 2006 and 2007.
Goods producing employment declined by 22,000 jobs in September. Manufacturing employment fell by 6,000 positions, while construction lost 21,000 jobs. Mining and logging employment rose by 5,000 jobs.
Private sector service providing employment rose in September by 86,000 positions. The professional & business services sector added 14,000 jobs, while the leisure & hospitality sector added 38,000 jobs. The education & health services sector added 17,000 positions in September. Overall government employment fell by 159,000 jobs during the month.
Dismal TidbitsThe U.S. jobless rate has been at 9.5% or higher for 14 consecutive months, the longest such span of high joblessness since the Great Depression
The U.S. Department of Labor provided an estimate of its February 2011 annual benchmark revision to data for the 12-month period ended in March 2010. Based on a more complete survey of state data, the estimate suggests that the Department will note that an additional 366,000 jobs were lost between March 2009 and March 2010
The “underemployment” rate, that which includes the unemployed, those working part-time who would prefer to work full-time, and those discouraged workers who have left the labor force but would accept a job if one were offered, rose to 17.1% in September from 16.7% in August…
…ouch times three
Another pathetic employment report, in spite of massive spending from government, suggests two things…
The Federal Reserve will soon enact another major round of monetary stimulus…and the Democrats are in serious trouble in the mid-term elections
1) The Fed to the Rescue
Federal Reserve Chair Ben Bernanke had indicated a few weeks back that the Fed would enact what Wall Street calls “QE2” if necessary to help the economy (to push long-term interest rates even lower). This program could begin in early November following the next Fed meeting on November 2-3. The program would likely include the purchase of roughly $500 billion to $1 trillion of additional mortgage-backed securities and longer-term U.S. Treasury and Agency securities.
Note that the Fed (under quantitative easing #1) already bought $1,700,000,000,000 of U.S. Treasury securities, U.S. Agency debt, and mortgage-backed securities in a program that ended in March 2010. The Fed’s intent was to push long-term interest rates lower, which succeeded.
In addition, long-term interest rates moved even lower since March as more signs of U.S. economic slowing, as well as more signs of possible deflation, emerged. Thirty-year fixed-rate conventional mortgages averaged 4.27% last week, and could move slightly lower in coming months if the Fed enacts its program. Note, however, that if bond market psychology shifts back to concerns about massive deficits and massive borrowing to fund those deficits, all bets are off.
2) Democratic Pain
There is no doubt that Democrats hoped the final jobs report before the November 2 elections would show solid American job gains and a declining unemployment rate…didn’t happen.
Last Friday’s employment report was a disaster for the party in control of the White House and the Congress. Barring the unexpected, you can expect to see more confident forecasts of Republicans taking control of the House of Representatives, with a rising chance of gaining control of the Senate.
It would be great if voters fervently supported Republican candidates and were excited about their plans to get government under control. This is clearly true with some supporters of Tea Party candidates. However, it seems the majority of voters will be casting ballots against the Democrats…against the party in control…against the Obama and Pelosi agenda…and against the massive explosion in the growth of government.