U.S. recovery now not jobless, only homeless

January 6, 2012

By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The U.S. recovery is no longer jobless – only homeless. Despite the 200,000 jobs added last month and another drop in unemployment, job creation is still slower than in recent recoveries. That’s partly because the weak housing market means few new construction jobs. Still, President Barack Obama can breathe easier.

Job gains were broadly spread, according to Friday’s report for December, with all major sectors except the government adding jobs and the unemployment rate declining to 8.5 percent, albeit partly due to another 50,000 people leaving the workforce. At this level, job creation is sufficient to absorb U.S. population growth and the headline unemployment rate is on track to decline further, potentially boosting Obama’s re-election chances in November.

Even so, the 1.6 million overall figure for jobs added in 2011 – combining 1.9 million new jobs in the private sector and cuts in government – lags even the relatively feeble recovery of the early 2000s. In 2004, for instance, over 2 million jobs were created. Approaching 3 million were added in 1993, and even more than that in 1983.

The continuing deep slump in the housing market is partly to blame. The construction sector added only 47,000 jobs last year, compared with close to 300,000 in both 2004 and 1993. More than 2 million construction jobs have evaporated since 2007, and the sector’s job count is back to its level in 1996, when the population was smaller.

Today’s modest but steady job growth with construction largely missing out resembles the post-recession pattern of 1961 to 1963, when total job gains averaged 1.2 million annually, only 73,000 of them in construction. That sluggish recovery was decried at the time and helped trigger President John F. Kennedy’s tax cut, finally enacted under Lyndon Johnson in February 1964. After that, recovery quickened into one of the last century’s strongest periods of growth.

The tax cut idea might not appeal much to Obama – and, to be fair, Kennedy was starting with a top marginal income tax rate of 91 percent. That aside, the current president might fancy the comparison with his iconic predecessor and with late 1960s growth just as much as he appreciates monthly job reports like this one.

Comments

Mr. Hutchinson,

You are looking at the world of today through glasses no good because your prescription has changed. No amount of cleaning the lenses will fix the actual problem.

In an economic system of supply and demand, the demand was artificially inflated for McMansions that the average American does not need and cannot afford for the twenty or thirty years of obscenely high payments. The ability of many Americans to purchase these monstrosities was diddled to the point that if you were breathing and had any job at all you probably “qualified”.

Now no one seems able or willing to “mark down” all this unsustainable garbage, many consumer’s month-to-month cash flow is on life support (which may mean ever more defaults and increases of “product”) and the residential construction “industry” has contracted 70-80% at a time when commercial and government construction is also highly constrained by a depressed level of economic activity.

With 20-20 hindsight few are surpruised that train ran off the tracks, but now we “debate” how to get back to where we were. That’s simply not going to happen. The world we live in has moved on and has changed.

Our economy, as it makes the transition to a “new normal” is going to be much different. Out of sheer necessity consumers will increasingly prioritize spending for “needs” and associated costs and replacement). There will be an increasing tendency for older Americans to “downsize” into smaller, more efficient homes they can pay for and take care of while they save more toward as they must plan to support an increasing share of their retirement.

This means that the present glut of huge houses with huge payments, huge tax bills, huge utility bills and huge maintenance burdens are left with fewer and fewer financially qualified potential buyers even as more and more of them come back “on the market” from foreclosures, etc. Those working in construction unable or unwilling to transition to the remodeling sector face the choice of remaining unemployed or retraining.

The government needs to get rid of Davis-Bacon, etc. so that the country can divert the obscene amounts it is paying able-bodied people for years to remain employed and put them back to work for society rebuilding our crumbling infrastructure. That’s the primary way in the short time government can “create jobs”.

We need to quit paying the unproductive of our society by the head to create ever more suckers on the public teat and divert that money also to rebuilding infrastructure. These tasks may not be “shovel ready”, but they should have been had our bureaucracy beed doing their job in good faith in recent years.

In short, public money needs to be spent intelligently and efficiently; however blastphemous that may seem to our bureaucrats with the checkbooks. Recovery from where we are is not going to result from a “tax cut” but from “waste cuts”, “union cuts” and “inefficiency cuts”. What are we waiting for?

Posted by OneOfTheSheep | Report as abusive
 

Since home prices doubled around the year 2000 and have now come down thirty percent, they are still overpriced considering that wages for the 99% have not grown or have gone down. When you add in the fact that utilities, food and transportation, not to mention health care which is in a class all its own, have all risen by double digits it is not surprising that few are willing to commit to buying a new home. In that scenario, a roof over your head at all looks pretty good. Still, construction jobs are the type of jobs America needs. They are relatively high-paying and don’t require a 100k dollar education to start. Public infrastructure is desperately needed but would have to be publicly funded. Everyone needs to pay their part in this. Let the tax cuts expire for all but the lowest bracket. That would be fair and get people back to work. We are still a rich nation. Let’s quit pointing the finger at some one else and get on with it.

Posted by lhathaway | Report as abusive
 

@Ihathaway,

This Congress and this President have successfully diverted your attention from the real problem. America is financially hemorrhaging at a rate the Band Aid you propose will not stop. A tourniquet is needed first.

It’s like those local school boards that propose school bus service cuts that will inconvenience and motivate parents before school bond elections. Common sense says school bus service should be high up as a priority within existing funds, but these people know that working parents will do whatever is necessary to come up with ADDITIONAL funds to get those buses rolling again where they would not do that for less painful reductions in educational expenditures. ADDITIONAL funds, not fiscal efficiency, is always their goal.

“We, the people” would be trying to put out a fire with gasoline if we allow this Congress and this President more tax revenue, which is the crack cocaine of bad government. They first must learn to separate this country’s needs from it’s wants and appropriately prioritize the expenditure of available funds before giving them more.

A raise will not resolve the ever-increasing problems of a family that can not or will not learn to live within it’s means. The finger pointing followed by decisive and remedial action is the only possible long term solution.

That said, I agree that rebuilding, properly maintaining and appropriately expanding and updating our crumbling infrastructure is overdue. This obvious national priority has long been ignored, and I believe this has been intentional. One or more of our “representatives” and/or their minions have NOT been acting competently or in good faith.

We need to identify and toss each and every one of these bad apples out of the barrel. Leaving them unidentified and in charge assures more such “problems” down the road. There is absolutely no reason these projects should not under way or at least “shovel ready” right now, and they aren’t!

Posted by OneOfTheSheep | Report as abusive
 

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