Conservative Principles Now

The February report showed that, although the labor market is still treading water, there is room for optimism. After all, almost every industry except for construction is either adding jobs or is flat. Job growth in the service sector was positive thanks to health care and temporary services. Manufacturing and retail trade were basically flat over the past month. The economy still shed jobs, but this reduction was the result of steep job cuts in the construction industry, many of which can likely be attributed to last month’s epic blizzards. Overall, the employment picture continues to improve; job creation is occurring in more and more business sectors.

Another sign of improvement is that, in addition to the continued surge in temporary services, the household survey showed solid employment growth. In the household survey, the number of new jobs created was enough to keep the unemployment rate constant, despite an increase in the labor force. In other words, job creation was equal to the number of new workers in the labor market.

While the official unemployment rate was flat at 9.7 percent, the unemployment rate of discouraged workers went from 10.3 percent to 10.4 percent. In the last two months, over 250,000 workers dropped out of the labor force to become “discouraged workers” — the largest two-month increase since the survey’s creation in 1994. This increase in discouraged workers is likely one of the main reasons that the number of workers unemployed by 27 weeks fell by 180,000 last month.

This report reinforces my prediction that the labor market will turn positive in the spring. However, this coming labor market recovery is likely to be sluggish as job creation numbers remain low — the result of business’s reluctance to add to payroll in the current economic and political climate.

Cross-posted at The Corner.

President Obama announced a renewed focus on jobs in his State of the Union address.  His budget stated (PDF) “it is critical that we take steps to jump-start job creation”. He’s right, of course. He is also explicitly admitted the failure of last year’s $862 billion “jump-start” stimulus program.  On March 4, the House passed yet another admission of failure as it moved a $17.6 billion mini jobs bill built around an ineffective hiring tax credit and highway spending.  Why another bill?  Because even politicians cannot duck the data forever, such as today’s jobs report released by the Labor Department which means the Obama jobs deficit stands at 8.3 million workers.

According to the latest report (PDF), the U.S. economy shed another 36,000 jobs in February.  The unemployment rate stands at 9.7 percent, almost double the rate thought consistent with full employment.  Further, the only reason the unemployment rate isn’t higher still is that millions of Americans have left the workforce altogether as shown by a drop in the labor force participation rate to 64.8 percent from a peak in 2007 of 66.4 percent.

The economy’s continued poor performance means President Obama is falling further and further behind on his promise to create millions of new jobs.  Obama promised that if elected he would create 3.5 million jobs by the end of 2010 through new economic policies, beginning with the enactment of a massive economic stimulus package. Accompanying his jobs promise, the President also emphasized accountability and measuring his presidency by results. The result of the President’s jobs promise means total employment which in February stood at 129.5 million should be at least 137.8 million by the end of 2010, leaving the Obama jobs deficit at almost 8.3 million jobs.

Fortunately, the economy’s natural resilience spurred by powerful monetary stimulus from the Federal Reserve means the economy is growing again, albeit at a slow trend pace.  Consequently, job losses may persist for months to come.  Even the Administration’s rosy forecast for economic growth for the next two years leaves the unemployment rate around 10 percent through all of 2010 well into 2011.  By his own official forecast and by his own standard, the Obama jobs deficit attests that his policies have failed and will continue to fail.

The federal government can stimulate the economy in the short term not by increased spending and borrowing but rather by improving incentives and the general economic environment.  Businesses invest not when they are manipulated by Washington, but when they are confident enough to take risks in pursuit of opportunity.  Individuals and businesses across the nation see tremendous opportunities for starting new businesses, investment, hiring new workers, expanding into new markets. Understandably, many are holding back due to concerns about the economy.  However, many others are holding back due to concerns about the threatening policies from Washington while others are holding back because existing tax and regulatory burdens are already excessive.  For private sector job creation to “jumpstart” in the President’s words, the first step is to fire Washington’s job destruction machine.   The President and his allies need not repudiate their ideology, as helpful as that would be, but they do need to hit the pause button on their anti-growth policies.