Monday, September 07, 2009

Jobless Recovery

There was a time when liberals were deeply concerned about a jobless recovery.

The latest employment numbers were released today and the news is not good, 93,000 jobs lost in August. We learned from the FED yesterday that the jobless recovery is real. Additionally, the NY Federal Reserve Bank released a study showing that many of the lost jobs will never return.

The pResident (sic) can technically claim the economy is improving but that does nothing to help the 9 million Americans currently unemployed.

But that was soooo 2003. In 2009, we are faced with a real jobless recovery, and unemployment stands at 9.7%, higher than at any time in the last quarter century.
The large companies are gradually recovering as a result of major cost-cutting, inventory reduction, and a lean-and-mean return to profitability and high productivity. So the payroll survey registered a 216,000 job loss, the smallest drop in over a year.

However, the household survey, which picks up small, owner-operated, LLC/S-Corp-type businesses, registered a devastating 392,000 job loss, which follows losses of 155,000 and 374,000 in the prior two months. This is the source of the unemployment-rate jump, as 466,000 newly unemployed were scored in the report.

Companies are always slow to rehire once they start laying off. Typically, they will offer overtime to current employees first, then hire part-timers and contractors and finally full-time workers. So, those 6.9 million unemployed (not counting those not currently looking) will have a long wait to find a full-time job.
Uncle Sam has borrowed $388 billion in the second quarter and is scheduled to borrow $406 billion in the third quarter and nearly $500 billion in the fourth. In order to provide $152 billion in so-called fiscal stimulus, the government is draining close to $800 billion from the private-sector savings supply — $800 billion that will not be invested in new-business enterprises, including small businesses.

Borrowing from Peter to redistribute to Paul is not fiscal stimulus. It’s a fiscal depressant. Small businesses are having enough trouble getting their hands on credit. And now they can’t find enough capital for new start-ups. The government prospers, but the small-business sector sinks.

Then there are all the tax and regulatory threats related to health-care and energy reform. Until Mr. Obama retreats from his plan for a government takeover of the health-care sector, and a cap-and-trade program that will cripple the energy sector, the cost of hiring the new job will continue to rise.

The threat of higher payroll taxes and energy costs is more than enough to deter new hiring. Taxes on upper-end investors are going to rise, too, and there may be a health-care surtax on top of that. And don’t forget that small businesses pay the top personal tax rate, which is going up. Oh, and how about the recent minimum-wage hike? Yet another business cost.

President Obama has promised to sock it to "the rich," but "the rich" includes an awful lot of small business owners: the doughnut shop operators, hair dressers, lawn mowing services, Subway franchises, auto shops anod others, who will be most affected by tax hikes and by health care taxes. That means these businesses either go bust or stop hiring people.

But all of this was evident before last November, when many people were enamored with socking it to the rich. Little did they realize that they were those rich people.