Going Right Where They Sent Us
So the national unemployment rate is 0.3% shy of 10%, and economists are debating when, not whether, it will achieve double-digits. In Rhode Island, which has been in double-digits for quite some time, already, the experts continue their reluctant predictive marches toward my initial gut estimate of 14-15%. And worst of all, usage of the term “jobless recovery,” perhaps calling forth that terrifying creature, the W-shaped recovery, has moved from whisper to indoor-voice.
Oddly, for all the distinguishing between young workers and older workers, employed, unemployed, and not-looking, discouraged workers, few reports are differentiating between employers in an attempt to explain how the economy can grow without creating jobs. One wonders whether the reason has something to do with the subsequent conclusion, to which Larry Kudlow comes based on this picture:
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.
In a nutshell, this is without question now the Obama administration’s recession:
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.
So while the government doles out money for transfer payments and one-time temporary tax credits, the ensuing increase in the private-sector tax-and-financing burden becomes a complete deterrent to new job creation, as well as capital formation.
Kudlow suggests that Obama and the Congressional Democrats could perhaps spur recovery simply by backing off their mad-dash for government power. Similarly, Rhode Island’s General Assembly could hand their ostensible constituents hope of a quick turnaround if legislators would signal soon and decisively that the state has learned the error of its ways and intends to make itself the most business-and-taxpayer-friendly cut of land in the Northeast.
Neither of those conversions is very likely, of course, which means that our highest priority, as individuals, should be to find something buoyant to hold onto, and to grab it tightly.