Nonfarm payrolls—the basic measure of employment in the United States—did not grow in August. Even though there were 17,000 new jobs added to the private sector, a similar number came off federal, state, and local government payrolls for net zero growth. This is the worst jobs number since September of 2010, the last time we had a net loss of jobs, and the unemployment rate stayed at 9.1 percent. To make it worse, numbers for June and July were both revised downward by a third, with 58,000 less jobs than previous estimates for the two months had suggested. Oh, and average weekly earnings fell $2.61 to $652.25 in August.
Next week the President plans to give a big jobs speech, though he should be aware up front that nothing can be done quickly to this ship around. We need several hundred thousand new jobs each month in order for the unemployment rate just to start falling—unless people leave the labor force in droves, which wouldn't make for a real jobs recovery.
On Monday we will have a column titled "The Jobs Speech President Obama Should Give" that will outline our view on what can be done. But as a preview, we'll note the following:
- You can not talk about jobs in a vacuum. The labor market, economic status, and Federal Reserve's monetary policy are all interlinked.
- Government initiatives that will lead to sustainable employment will have to be programs or laws that eliminate barriers to market activity, spending money on a "Cash for Caulkers"-styled program won't help. So no policy initiative should be designed just to encourage employment—we should be looking to promote economic freedom.
- The expectations of the American people need to be realistic. If we added 3 million jobs today unemployment would still be around 7 percent, and that is likely still an unacceptable number (unless we've become so used to the unemployment rate being between 9 percent and 10 percent that we have mental inflation problems). Given that just 200,000 jobs a month seems like a pipe dream equivalent to the Detroit Lions winning the Super Bowl this year, we should be anticipating a long road ahead—and the more the President conveys this message, the more likely he can avoid populist anger in the run up to his re-election a year from now.
- We must recognize that robust economic growth will not return until the deluge of debt in the system is drained away, and that also means a slow pace for the jobs recovery. Moreover, we won’t see recovery of the economy or the jobs market until the household debt problem goes away—not just because it would mean recovery for the housing industry, but because it would eventually mean more household consumption and investment once the deleveraging gets worked through.
Again, we'll have a lot more on Monday, so check back.
In the meantime, as another preview, I will point you to Jon Huntsman, republican candidate for president, and the jobs plan that he released yesterday. It isn't perfect, but few things are. The ideas in the plan though are very similar to many that we will propose. And it is the best thing to come out of the GOP so far: Huntsman—A Time to Compete.
The Wall Street Journal also gushed over the Huntsman plan, which could help to give some life to the campaign of the former Utah governor and ambassador to China. It is worth reading and then comparing to what Obama says next week.