What March’s Job and Wage Numbers Mean
In March, 192,000 jobs were added in the United States, down from 197,000 in February and still well below the pace needed to lower underemployment to respectable levels. The mediocre results are consistent with a broadly underperforming economy.
In the manufacturing sector, 1,000 jobs were lost, and the government stalled. Other than construction, which gained 19,000 employees, most new positions were in lower-paying activities, such as leisure and hospitality, support activities in health care, retail, and temporary business services.
Hourly earnings fell, indicating good jobs continue to be scarce. In 2013, gross domestic product grew only 1.9 percent, thanks to the $200 billion tax increase in January and spending cuts by the federal government, but after a slow first quarter, most economists expected the pace to accelerate to 3 percent by the second half of this year.
Meanwhile, improved prospects are raising home values and Congress isn’t likely to approve the higher taxes President Obama has in his budget proposal. Job creation is likely to be in the range of 200,000 per month, but should the president get the higher taxes he wants, the situation would worsen.
Global growth is rebalancing from Asia to the Atlantic community, as Europe shakes off the worst of its sovereign and bank debt problems, which will reduce vulnerabilities to dodgy financial practices and economic nationalism in places such as China, Japan, and Latin America.
Though the shenanigans on Wall Street ranging from high-speed traders stealing from ordinary investors to the endless imagination of the casino gamblers at the big banks continue to threaten financial stability, the Federal Reserve and other U.S. regulatory agencies are proving more diligence than during the Bush years.
This spring more robust household formation should push housing starts above 1 million this year for the first time since 2007. The burdens of student debt require that many new dwellings be apartments, but surging residential construction will boost sales of pickup trucks so ubiquitous on construction sites, and employment in industries supporting housing and motor vehicles.
In February, unemployment was steady at 6.7 percent, and the percentage of adults employed or seeking a job—the so-called participation rate—rose slightly but remains well below pre-recession levels.
Factoring in adults on the sidelines who say they would seek employment if conditions were better and part-timers desiring full-time work, the jobless rate becomes 12.7 percent and that likely understates the scope of the problem. One in six men between ages 25 and 54 are jobless, and many displaced spouses in formerly two-earner families have become reconciled to permanent unemployment.
The economy needs to add about 340,000 jobs each month to push unemployment down to an acceptable level but that would require GDP growth in the range of 4 percent to 5 percent. Instead, slow growth and job creation pin down wages and frustrate the unemployed and new high school and college graduates.
Over the last four and a half years, the pace of GDP growth has been a paltry 2.3 percent, about the same as during the Bush expansion. President Reagan inherited a much tougher unemployment situation than Obama, and yet he managed 4.8 percent growth and created many more jobs.
The defining difference between the recent two disappointing economic recoveries and the strong record of the 1980s has been the predisposition of presidents from both parties to champion politically expedient remedies: bailouts and entitlements that steal money from promising research and development, public infrastructure, and private investment in order to bolster inefficient automakers and hospitals, abusive banks and traders, and decadent universities and other nonprofits.
In addition, the failure to properly craft and enforce trade agreements with China, Japan, and Germany, and to develop oil and gas offshore and in Alaska has imposed a $475 billion trade deficit and lowers growth by two percentage points a year.
With a lighter but still effective touch to regulation, fewer entitlements that discourage job seekers and employers alike, and recognition that America must play to its strengths in a globalized economy, well meaning but ill-conceived economic policies will continue to beat down growth and the hopes and dreams of American workers.
Peter Morici, professor at the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Previously he served as director of the Office of Economics at the U.S. International Trade Commission.Follow @pmorici1
"Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times."