BLS Employment Release: Talking Points: October 5, 2012:
W00T!! W00T!! W00T!!: This is the household survey that we have been waiting for. This is the household survey we seek: +863,000 jump in the number of employed on the household survey.
Unfortunately, the establishment survey is no great shakes: only +114,000
Over all, the labor-market pattern remains the pattern of the past two years.
The U.S. economy continues to grow--but not at a pace fast enough to rapidly reduce the number of people without jobs.
Employment grows, but the number without jobs does not diminish or diminishes only slowly.
The number of unemployed is continuing to fall--but that is mostly because people are dropping out of the labor force.
The U.S. economy is thus doing much better than our partner industrialized nations across the North Atlantic--where the number of workers without jobs is increasing again, and where there economies are again in recession.
Job growth is inadequate because spending is too low: aggregate demand is less than aggregate supply, less than the economy's productive potential.
Business's willingness to spend is boosted by the Federal Reserve's extraordinarily low interest rates and retarded by fear that recession will come again. These offset each other. Business confidence and spending is not a source of strong recovery, but it is not a drag on the economy right now.
Housing construction is a big drag on the economy. Few people are willing to build houses because they fear when they try to sell them they will be competing with a new wave of forced foreclosure sales. The failure to rework and refinance underwater loans is the biggest source of slow recovery.
For this, blame Rick Santelli and the Tea Party--the fear that somebody might be getting something they don't deserve has kept the government from doing its proper job to deal with the aftermath of the financial crisis, and paralyzed housing finance and housing construction for four years.
Government is a big drag on the economy. Governments are still firing a lot of people.
This is the second major policy error. In the Bible, Joseph tells Pharaoh that the government should run very large surpluses during boom years and then spend and run very large deficits during bust years. But right now we have a government that knows not Joseph.
Clinton ran big surpluses (and Gore was planning to run big surpluses) during boom years. George W. Bush deliberately threw that policy away. Now we are in the position where we ought to run even bigger deficits until the economy recovers, but we are not sure if we can afford to.
Four years ago I would have said that the odds were 50-50 that we could afford to run bigger deficits until the economy recovers. Now I think the odds are 90-10. That's a risk worth taking to boost spending and put people back to work.
Now it is time for the government to remember Genesis 41:36, and the story of Joseph and Pharoah's dream.
