Hiring by Private Sector, Offset by Government Layoff

by Don Azarias
October 30, 2010

There’s no relief in sight for the economic crisis that’s being exacerbated by weak hiring by private sector in September and the unrelenting layoffs of federal, state, municipal and other local government workers in nearly three decades. While companies added an estimated 75,000 jobs last month, it’s hardly enough to bring much relief to the nation’s 15 million unemployed. The government layoff resulted in a net loss of 95,000 jobs. It seems like the die is cast for the majority of the incumbent Democratic lawmakers facing the midterm elections. However, congressional Republicans should not be too overconfident of their chances because majority of the American voters are calling for the heads of almost all incumbent lawmakers regardless of party affiliation.

Voter frustration over jobs threatens to cost Democrats’ control of the House and, perhaps, even the Senate. Opinion polls suggest Republicans will take control of the U.S. House of Representatives, which may give them a platform to pursue their agenda of restricting government spending to reduce a record budget deficit.

Republicans are insisting that Democrats are leading the nation in the wrong direction. They were quick to insist that the latest government report only underscored the weakness of Democratic big-government and tax policies. The jobs report is “the final verdict on the failed policies of this White House and Democratic Congress as voters head to the polls,” asserted GOP party chief Michael Steele.
According to the Labor Department’s last monthly jobs report before the November election, unemployment remained stuck at 9.6 percent. The jobless rate has been at or above 9.5 percent for a year and two months, the longest stretch since the Great Depression. To make matters worse, the unemployment rate is projected to rise to 9.7 percent from 9.6 percent, according to some economists. Also, some economists are saying that the unemployment rate could top 10 percent by next year. Meanwhile, employers, faced with slow sales and a weak economy, see little reason to add to their work forces.

The unemployment rate can rise even when the economy is adding jobs – if the jobs aren’t enough to keep up with the growing population. Private-sector job creation of 125,000 net new jobs is needed just to keep up with population growth. That growth stems from young people seeking their first jobs and new immigrants looking for work. Even more jobs will be needed to absorb many of the 1.1 million Americans who have stopped looking for work and won’t resume their search until hiring picks up. Analysts estimate that employers would have to create as many as 300,000 net jobs each month to reduce the unemployment rate to 8 percent within two years. That figure takes into account both population growth and the return of some discouraged job seekers.

Polls show little public appetite for additional congressional spending on stimulus, and a darkening view of Obama’s ability to deal with the economy. An AP-GfK poll last month showed people disapprove of his handling of the economy by a 58 percent to 42 percent margin. A new CBS poll shows approval at just 38 percent. “Both parties are culpable,” said Ross Baker, a congressional scholar at Rutgers University. “But Democrats are more vulnerable. After all, they control all the political branches of government.” GOP leaders have been taunting Democrats with “where are the jobs?” Private businesses did add 64,000 jobs in September, but that was the weakest showing since June.

Most Americans, polls show, believe the country remains mired in recession. Congress, meanwhile, has left town until after the midterms, failing to decide what to do about wide-ranging Bush-era tax cuts that are due to expire on January 1, 2011. As it stands now, most Americans would face a tax increase next year. Uncertainty over those tax cuts itself is contributing to the lack of hiring as businesses, especially small ones, attempt to figure out what their tax burdens will be next year. Obama and Democratic leaders want to let the tax cuts expire for wealthier Americans but extend them for the middle class. Republicans and some Democrats want to extend them for everybody, arguing that this is no time for any tax hikes. The jobless level remains high even though Washington has hurled trillions of dollars at the problem. The efforts include an $814 billion stimulus package and the $700 billion financial institution bailout.

The combination of weak hiring by businesses and more governments layoffs expected means unemployment could rise to 10 percent again this year or next. When Obama took office in January 2009, the unemployment rate was 7.7 percent.

Republicans pointed to the weak jobs report as evidence of Democrats’ failed economic policies. They argued that the $814 billion stimulus has contributed to bloated federal deficits but done little to create jobs. 

In an Associated Press-GfK poll taken in September, 92 percent of Americans said the economy was an extremely or very important issue. And 79 percent said the economy was in bad shape, compared with 15 percent who said it was healthy.

The Fed will likely buy billions more in government debt to further drive down rates on mortgages, corporate loans and other debt. The idea is that even cheaper loans might get Americans to increase spending and boost the economy.  

The recession wiped out nearly 8 million jobs, the most of any downturn since World War II. “The areas where private job growth was the strongest are industries that aren’t usually considered high-quality employment,” said Michael Feroli, economist at JPMorgan Chase Bank. “The labor market remains stuck in the mud.”

And now the question is, “How long will it remain stuck?” And, once again, those top economists and analysts are providing different answers. Enough of those experts. 

Leave a Reply

Most Popular