Jobs report confirms better policies needed
By Peter Morici
web posted April 5, 2010
This past Friday the Labor Department announced the economy added 162,000 jobs, confirming my earlier, more conservative than the consensus forecast of 150,000.
As expected, temporary census jobs contributed a significant but not overwhelming 48,000 to the jobs total.
The private sector gained 128,000 new positions. This reflects moderate GDP growth—something in the range of three percent for the balance of 2010. Not enough to bring down unemployment, which remains at 9.7 percent.
As expected, manufacturing continued to show new verve, adding 17,000 jobs. After a long decline, America's factories have added some jobs each month for the last three months. They have a long way to go to recreate the more than five million factory jobs lost over the last decade.
In a big surprise, construction gained about 15,000 jobs. The residential sector stabilized, and gains in commercial construction likely reflected stimulus spending. The latter should not be view as permanent.
GDP growth must speed up to more than four percent to accomplish the jobs growth necessary to replace the more than eight million jobs lost during the Great Recession, and bring unemployment down to 6 percent over the next three years.
The 5.6 percent GDP gain posted in the fourth quarter of 2009 reflected accounting adjustments—mostly slower rates of draw down in inventories. Sustainable growth—demand by private consumers, businesses for expansion and government—only grew about two percent.
The present mix of policies from Washington won't accomplish the four or five percent growth needed.
Strong growth requires policies to fix the huge trade deficit on oil and with China, and the crisis among America's community banks, which finance small and medium sized businesses.
The president's recently announced policies to expand development of U.S. oil resources and build more fuel efficient vehicles are not nearly aggressive enough, and bow to environmentalists in ways that are counterproductive to keeping the oceans clean, reducing emissions and creating jobs.
Regarding China, the president continues to procrastinate about confronting Beijing on its undervalued currency and mercantilists trade policies. The president needs to define broad macroeconomic and general trade policies—such as a tax on dollar-yuan conversions and government procurement policies that offset Chinese protection.
Without stronger policies, GDP and employment growth with remain subpar, and Americans face a tough jobs market.
Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.