Will Jobless Rate Prove Dems' Doom?

Will Jobless Rate Prove Dems' Doom?
Donald Lambro
Tuesday, April 13, 2010

WASHINGTON -- President Obama and the Democrats have a lot of anger-inducing issues facing them this election year, including staggering debt, the deficit and an unpopular health-care law. But none is more painful and persistent than the nearly 10 percent jobless rate that continues to gnaw at his party's declining prospects.

The national unemployment rate remains at 9.7 percent despite meager job growth last month, and the consensus among economists and senior government analysts is that there won't be much, if any, improvement for the near future.

Stories about the severe jobless numbers are almost non-existent on the network nightly news shows, despite rates of between nearly 11 percent and more than 14 percent in at least 16 states.

Senior policymakers at the Federal Reserve talk of anemic job growth throughout this year and possibly into 2011. The Congressional Budget Office's economic forecasts for 2010 estimate that the unemployment rate will average 10.1 percent this year and 9.5 percent in 2011.

The nonpartisan CBO earlier this year said it did not expect the jobless rate to fall below 9 percent until 2012.

If this dismal outlook proves correct, it means that Obama's massive spending stimulus binge, which totals more than $1 trillion, will have failed to fix America's number-one calamity in the first two to three, and possibly four, years of his presidency.

"Some economists say the jobless rate will not recede to pre-recession levels near 5 percent for four more years," The Washington Post reported last week.

This gloomy prognosis isn't coming just from Republicans. Democrats at the Federal Reserve say they support continuing Fed Chairman Ben Bernanke's near-zero federal funds interest rate, because they do not see a pickup in employment this year or next under Obama's nonstimulative policies.

"The relatively modest pace of recovery, the continued high rate of unemployment, subdued inflation trends, and well-anchored inflation expectations together suggest that the need for highly accommodative monetary policies will not diminish soon," said Daniel Tarullo, Obama's only appointee to the Fed's board of governors, in a speech in New York.

The nation's labor force added 162,000 jobs in March. The White House said this proved its spending policies were working, but nothing could be further from the truth.

Temporary, government-created, taxpayer-paid census jobs account for 48,000 jobs, which will disappear when the census is completed in a few months.

More than 200,000 discouraged people who had left the ranks of job-seekers returned last month, which is why the jobless figure didn't budge. The White House argued that this was a good sign, because it showed Americans were more confident that the economy was turning around.

But as more of these once-discouraged workers reenter the job search, it will raise the unemployment rate, as there simply aren't enough jobs being created to absorb them all. Economists say there are 5.4 job seekers per opening, far higher than in previous recessions. The ratio was 2.8 per job opening in September of 2003.

When discouraged Americans who are no longer seeking a job -- and thus are not counted in the monthly employment survey -- are added to the real unemployment rate, it zooms to 17 percent.

While the White House was still crowing that their job-creation policies were working, the Labor Department announced last week that the number of workers filing for unemployment benefits jumped by 18,000 -- to 460,000 for the week ending April 3.

MFR Inc. chief economist Joshua Shapiro told his clients that the higher jobless claims raised new questions about whether non-farm payrolls were really "poised to begin sustained gains."

The fact of the matter is that the anemic 128,000 jobs the private sector produced last month is only an infinitesimal fraction of the 15 million who are unemployed and looking for work.

The first quarter's much-ballyhooed 5.6 percent economic growth rate was an aberration reflecting accounting adjustments on slower rates of drawdown in inventories, says economist Peter Morici at the University of Maryland's School of Business.

"Sustainable growth -- demand by private consumers, businesses for expansion and government -- only grew about two percent," Morici says in his latest analysis. "The present mix of policies from Washington won't accomplish the four or five percent growth needed."

Obama's weak trade policies, energy development and job tax credits are not going to produce the high levels of growth needed to produce the nearly 400,000 jobs per month that are needed to slay the unemployment monster.

Neither will the higher federal income tax rates that await investors and small businesses and corporations at the end of this year when Obama will let the Bush tax cuts expire. Throw in a raft of higher health-care costs, taxes, penalties, fees and mandates on businesses and individuals, and you have a poisonous fiscal brew that is a jobs-killer.

Our once-mighty free market economy is in for a long, painful period of sub-par economic growth until the American people decide that they are fed up and have had enough.