Jack Rasmus

COMMENTARY: The May Jobs report released last friday, June 3, threw cold water on all the hype of preceding months that the job recovery was underway. As this writer has been pointing out in several preceding posts, the jobs situation was far worse than being reported in recent months and would soon collapse once again. The reasons were a retreat of the economy on many major fronts. The post below examines official Obama administration responses to the May report and corporate perspectives as well, from the US Chamber of Commerce and Wall St. Journal. Both the administration and corporate America reveal neither has any solution to the jobs crisis, which will almost certainly continue to deteriorate further and in turn cause further problems in the housing foreclosures and state-city fiscal crises. (Watch for the next posting, ‘Liberal Economists on the May Jobs Report’, and equal confusion on what to do about the problem)

OBAMA AND CORPORATE RESPONSES TO THE MAY JOBS REPORT by Jack Rasmus, June 4, 2011

Over the past six months this writer has been warning, in various publications and blogposts, that the job crisis in the US was not abating but rather was about to get worse. This message ran directly counter to mainstream media and policymakers who had been hyping March and April employment numbers reporting average monthly job growth of 220,000. It was explained these numbers were inaccurate and distorted by various questionable statistical methods for estimating job creation used by the US Labor Department, and that a deeper look behind the numbers showed a jobs picture that not only was not improving but was about to get worse. This months Labor Department report on May jobs confirms it has.

On friday, June 3, the Labor Department released its numbers for May confirming this writers predictions. Officially, non-farm employment grew only 54,000 in May, barely a third of the 150,000 needed each month to absorb new workers entering the economy. But these official numbers are actually much worse than even reported.

If this writers previous critique of Labor Department job estimates for the past three months, as explained in prior publications below is correct, then there were actual net job losses between 100,000 and 150,000 in May, i.e. far worse than even the paltry gain of 54,000.

Other evidence corroborates the view that the May jobs picture is worse than even reported. For example, the Labor Departments May report shows that full time jobs fell by 142,000 last month, essentially erasing all prior full time job gains that occurred between January and April 2011. For the last five months, the economy added a mere 14,000 full time jobs, according to Labor Department data.

In contrast to full time job stagnation the past five months, part time job creation continued to accelerate. Since January a total of 417,000 part time jobs have been created. In other words, to the extent jobs were being created at all, they have been reduced pay (often no benefits) part time jobs. The unemployment rate has barely budged since January because, in calculating the rate, part time jobs are considered the equivalent of full time jobs. But behind the facade of job creation, a churning of jobs from full time to part time continues to occur.

Other indicators of the continuing deterioration of the job market buried deep in the May report include the increase of 361,000 in the long term unemployed last month alone; the layoff of 103,000 teachers in just one month at the State level (with no doubt hundreds of thousands more at the local level education to occur this June); and the government sector shedding jobs at the annual rate of 350,000 even before federal deficit cuts begin in earnest. On the private sector side, the much touted expansion of the manufacturing sector, and manufacturing jobs, for the past year has now reversed. Manufacturing has begun losing jobs instead of adding.

The response of the Obama administration, business groups, and their economists to the May jobs report is revealing.

Obama administration spin-doctors are saying its only one month. You cant call it a trend. Obama’s chairman of the council of economic advisors, ex-businessman Austin Goolsbee, response is there are always bumps on the road to recovery. Or, like Obama himself, speaking before Chrysler workers, they quickly change the subject and point to the paltry1.8 million jobs created the past 17 months, conveniently ignoring the fact that 1.8 million is barely 100,000 jobs a month and well below the monthly job creation necessary just to absorb new entrants to the workforce. Since Obama came into office, 1.75 million workers have also left the labor force. That 1.75 is roughly the net number of 1.8 million jobs the administration brags have been created on its watch. So the same number that got jobs is about equivalent to those who gave up and left the labor force because they couldn’ t find jobs. Yet another example how the US job markets are churning and basically stagnant for two years.

At best, the job market has been flat for two years now, providing one doesn’t count the four month collapse of jobs last summer 2010–a sinkhole more than a mere ‘bump’–or the repeat of last summers job collapse, i.e. another sinkhole now coming in 2011.

The Wall St. Journal and US Chamber of Commerce have giddily grabbed the May jobs report and are now hyping it. The Chambers answer to the now abundantly evident jobs relapse is that Washington is stifling hiring and failing to alleviate the uncertainty businesses are feeling by creating a mountain of new regulations and foot-dragging on free trade agreements. More deregulation, more free trade is thus their answer to creating jobs, despite the fact that evidence is overwhelming that both deregulation and free trade result in net job loss not job gain.

The Chambers economists conveniently ignore the fact that big business is sitting on a $2 trillion cash hoard, having been the sole beneficiary along with big investors of the $13 trillion bailout by the Obama administration and the Federal Reserve since 2008. That’s a $2 trillion cash hoard that they refuse to spend to create jobs here in the U.S. That’s a cash hoard that this writer has been predicting is earmarked for stock buybacks, dividend payouts, and mergers and acquisitions–and not for job creation. Meanwhile, at the other end of the business spectrum small businesses (which are responsible for half of all job creation in the US) are unable to expand and add jobs because big banks refuse to lend to them. Despite a $1 trillion in excess reserves, the banks have been reducing their lending to small businesses since the end of the recession in mid-2009.

The Wall St. Journal editorialists have taken on the Administrations mere bumps in the road incredulous explanation and are also hammering it. Like their Chamber of Commerce cousins, they too blame the lack of job creation on a so-called climate of hostility toward job creators that still prevails in Washington. Some hostility. Having spent trillions on business tax cuts, corporate subsidies, and corporate bailouts that have left $2 trillion in cash on hand for Big Business America is hardly an indication of hostility toward big banks and businesses.

The Journals solution is not only less regulation of the banks, and more gutting of agencies like the National Labor Relations Board and the EPA, but a return to Reagan economic policies of the 1980s. That is, the same policies that gave us millions more temp and part time workers, the offshoring of our manufacturing base and loss of 10 million good paying jobs, the virtual destruction of pension plans, de-unionization of much of the work force, free trade treaties, the housing and junk bond speculative bubbles and multi-billion dollar bailouts in the 1980s and 1990s, and, not least, the beginning of escalating multi-billion dollar annual trade and budget deficits. All that is the legacy of Reagan. In other words, all those policies that led to the epic recession that began in 2007-08, $13 trillion in bailouts of banks and businesses, and the stagnant recovery in which the US economy is now immersed. Despite Reagan’s abysmal economic record and legacy, the Journals solution to the jobs crisis is to repeat it all again. Without it, business confidence will continue to decline and job creation remain stagnant, they maintain.

However, recovery of the economy and jobs is not a question of restoring business confidence and it wont end by going back to policies (Reagan) that in fact are the root cause of today’s crisis. The fundamental problem today is that Obama policies of the past two years have bailed out big corporations and big banks, filling their coffers with trillions of dollars of taxpayer money (and choking government with record debt in the process), but Obama policies have also let those same corporations and investors sit on their cash hoards instead of investing in job creation. Moreover, it appears the Obama administration is intent on continuing the same failed strategy. As Goolsbee, its chairman of economic advisors, insists: The main driver of recovery at this point has got to be the private sector. But that driver has failed. So what now?

Our prediction is the jobs crisis will continue to get worse, business media and interest groups will continue to hammer the administration with telling political effect, and the Obama team in the coming months will continue to offer feeble excuses and explanations. This will go on until it is realized the only way out of the jobs crisis is for the government to engage in direct job creation and to launch its own job creation programs, financed by a fundamental restructuring the tax system and by spending the $2 trillion corporate cash hoard itself directly on job creation so long as Big Corporations and Big Banks continue to refuse to do so.