June Jobs Figures: Economic Indicators and the Republican Jobs Blockade

Jobs figures released Friday were dismal by any measure. 18,000 net jobs were created in June, while the private sector added 57,000 new jobs and government payroll declined by 39,000 jobs. Whether you are looking at the overall 18,000 number or the private sector growth of 57,000, while the latter number is better, the growth is anemic. The questions after that kind of a jobs report naturally paint a frightening picture: is the economic recovery over? Are we headed for a double dip recession? [Chart credit: NY Times.]

Indicators: But the question must also be asked whether the anemic numbers are the lagging indicator, as jobs often are. Lagging indicator, that is, in this case, of the path the recovery is taking. There was never any questions that the path to recovery will be pretty tough and bumpy. So if we take the long view, and assume jobs to be the lagging indicator, how does it stack up with other indicators?

Politicians: The next question is about politicians. What are they doing? What can they do? What can the President do? What can Congress do?

I am going to do a bit of an exploration and analyses of each of these questions. I will try not to make them mind-numbingly boring, but you will have to bear with me and get through the piece. (Warning, wonkish post ahead!)

Numbers and Indicators:

Jobs are the most important index, especially if you are looking for one. But job creation is spurred by several factors, and most jobs posted do not get filled immediately. There are economic activities that foretell future, or near-future hiring. Measures like consumer spending, (given our consumer driven economy), hiring index - i.e. businesses hiring vs. those letting go, small business activity (small businesses create most new jobs), etc. are all important when we are talking about the job situation rather than the number of people added to the payroll in a single month.

First, are consumers shopping? That is the part of the economy that has been the most in flux, preventing a roaring recovery. People have had their paychecks reduced (if not completely eliminated), and struggled with just the necessities of life. Another factor pulling down consumer spending from the get-go of the economic catastrophe we experienced in 2008 was the consumer credit crunch.

But despite the dismal job numbers, 85% of retailers reported better-than-expected gains in sales.
Shoppers are shopping, but they're also looking for bargains. Deep discounts and falling gas prices helped boost June retail sales, with 85% of retailers reporting that results exceeded expectations. Sales at stores open at least a year rose by 7.2% compared with the same period last year, led by strong discount retailers’ performance, including Costco and Target.
There is no doubt that shoppers are looking for bargains, and that discounts and bargain pricing is one of the principle factors driving the growth in sales. While this means that consumers are a tougher sale now, it also means two rather positive things for the economy and job creation: first, it means for the right price, consumers will spend. Second, the fact that retailers are offering these discounts (and succeeding in selling) means that they want to move inventory off the shelves. When the discounts are successful in making the sale to consumers, and inventories fly off, retailers will then buy new inventory. Which means someone has got to make those products, someone's got to deliver them, someone's got to stack the shelves at the stores, and someone's got to ring the cash register.

The consumer credit crunch might also be finally easing, as consumer credit was up for the eighth straight month in May. Consumers - and banks - have been tight with credit cards as well, but in May, credit card debt was up, for only the second time in 33 months. If we put the raise in retail sales together with the modestly expanding consumer credit, the likely conclusion is that consumers are getting more comfortable with spending (at the right price) even if they have to borrow a little. That can only be good news for jobs, if only modestly.

Gallup reported last week that the US job creation index is now at its highest since September of 2008. September of 2008, if you remember was when all hell broke loose and everything started nose-diving (although the Bush recession was already well in progress by then).

job creation index highest since Sept 2008

The +15 index means basically that 15 percentage point more employers are hiring than letting go (33% hiring, 18% letting go). What does this mean? It means that companies are hiring, and as time goes on, more are hiring and fewer are letting go. This trend and number also seem to be confirmed by last week's drop in initial unemployment claims.

Yet another jobs precursor that has now returned to pre-crash level is small business borrowing, which has surged to its highest level since July of 2008. One of the biggest obstacles to job creation, even as consumer spending inched up, was the fact that despite their willingness to produce more, small businesses could not get loans. Big banks are still not looking kindly on small businesses, but thanks in part to last year's small business jobs bill, community banks and credit unions are now expanding their lending to small business. If small businesses are borrowing, it means they are planning to hire people, purchase inventory (which means more business-to-business commerce, generating more jobs), and so forth. Small businesses generate 64% of new jobs, and they do not sit on trillions of cash as multinational behemoths do. So if they are borrowing, they are doing so in order to produce and create jobs.

Foretelling more signs of hope for the job market, US manufacturing index headed back up in June after a slump in May.

Does all this erase the jobs report and worry over it? Certainly not; nor should it. However, there seem to be enough indicators to show that the June jobs data is pointing towards the end of a trend of slowdown of economic activity and growth, rather than towards a double-dip economic contraction. That may be why economists at top financial institutions expect unemployment to fall significantly throughout the rest of this year and throughout 2012:
In Friday's poll, the median of forecasts from 14 of the 18 economists who answered the primary dealer poll was for the U.S. unemployment rate to dip to 8.7 percent by the end of 2011.

The median of forecasts from 17 of the dealers was for a further dip to 8.4 percent by the middle of 2012, while the median from 18 of the dealers was a rate of 8.1 percent by the end of 2012.

The Republican Jobs Blockade

It doesn't help the job situation, of course, when there is an entire political party aiming to destroy the American economy for political gain. I mean hell, Teabagger favorite Rep. Michele Bachmann admitted as much last week. The President in his statement after June's jobs report as well as in the weekly address preceding that, outlined jobs bills the Congress can pass right now but that the Republican majority in the House refuse to pass. The President is quite mindful that despite the debt limit chatter in Washington, it's the jobs that is the most important issue (full transcript available on WhiteHouse.gov):



If you listen carefully, you will hear the President lay out specific programs and bills that Congress can pass right now, but is refusing to do.
  • Extend the payroll tax cut. There are a lot of middle-class families who could use the security of knowing that the tax cut the President signed in December will be around for another year. 
  • Pass a bipartisan infrastructure bill. There are over a million construction workers out of work after the housing boom went bust, just as a lot of America needs rebuilding. The two can be connected by helping private companies rebuild our roads and bridges and railways. 
  • Pass the patent reform bill to give our entrepreneurs the chance to get their job-creating ideas to market faster by streamlining the patent process. 
  • Pass the trade agreements that will help businesses sell more American-made goods and services to Asia and South America, supporting thousands of jobs here at home.
I know a lot of us keep wanting to see the President propose a Works Progress Administration (FDR) style program. Aside from being reminded that the WPA was funded by a Congress with 322 Democrats in the House and 69 Democrats in a 96-member Senate (plus 2 members of the Minnesota Farmer-Labor party, which was later integrated into the Democratic party), we can also see that the President has proposed an infrastructure bill to employ a million out-of-work construction workers. But the Republicans in Congress refuse to act. Congress is dragging its feet on patent reform - something that could cut red tape and spur innovation. I have covered the President's trade agreements before, and how they protect labor and environmental standards while helping American jobs.

John Boehner took the Speaker's gavel in January, and since then, Republicans have done nothing on jobs. As Minority Leader Pelosi put it on Friday,
In the six months since Republicans have been in charge of the House, they have failed to bring a single jobs bill to the floor or offer a clear jobs plan. Democrats have forced ten votes on job-creation measures in this Congress – and Republicans have voted ‘no’ each time.

“Democrats know that creating jobs must be job number one for this Congress, yet Republicans continue to push their plan to end Medicare in order to give billions in tax breaks to Big Oil and corporations that ship American jobs overseas. And now, they are putting our entire economy at risk – by threatening to let our nation default for the first time, injecting uncertainty into the economy, and demanding we balance our budget on the backs of seniors and the middle class.
The former Speaker also previously pointed out not just the Republican ignoring of the jobs situation, but their willingness to kill 3 million jobs as they opposed Democratic measures to create more jobs.

Pelosi laid out the GOP bills to kill 3 million jobs:
And the GOP's blockade of Democratic jobs measures proposed through the "Make it in America" agenda:
The only votes this Congress has taken to create jobs have been on Democratic bills, which were either voted down by Republicans or which Republicans voted against even considering:
  • An American jobs effort to end government contracts rewarding corporations that ship American jobs overseas. [Vote 19]
  • Build America Bonds to Create Jobs Now Act – leveraging public dollars to strengthen the private sector, growing our economy by rebuilding America’s schools, hospitals, and transit projects, supported by American businesses, the construction industry, mayors and governors. [Vote 38, Vote 30, Vote 189]
  • American Jobs Matter Act – to give preference in federal contracts to U.S. manufacturers that create jobs here at home. [Vote 257]
  • National Manufacturing Strategy Act, which calls on the President to lay out a plan to help ensure American manufacturers can compete, grow, and thrive. [Vote 279]
  • Advanced Vehicle Manufacturing Technology Act to help ensure the cars of the future are built here in the U.S., by investing in a broad range of near-term and long-term vehicle technologies to improve fuel efficiency, support domestic research and manufacturing, and lead to greater consumer choice of vehicle technologies and fuels. [Vote 310]
  • Currency Reform for Fair Trade Act to provide our government with effective tools to address unfair currency manipulation by countries like China, which could help create 1 million American manufacturing jobs by leveling the international playing field for American workers and businesses. [Vote 9, Vote 199]
The plain fact, the sad reality is incredibly hard to avoid, and it is that the Republicans in Washington by and large have set their goal to be the undermining of President Obama and the Democrats, rather than job creation and economic growth. In fact, as their "leaders" like Bachmann keep letting it slip, it is the political interest of the Republican party for the economy to worsen (or at least, they think it is), and their members of Congress are shameless about pursuing an agenda that hurts the American people in the hopes that it will help them politically.

Conclusion

So that is the set of circumstances under which we are looking at the jobs picture. We are looking at a situation in which the economy is improving and jobs precursors are starting to look up, while we also have a whole political party in DC actively undermining job creation and economic growth (this isn't a matter of opinion - the GOP has proved it by their votes). The President is as concerned as anyone about creating jobs, and he is doing what he can, including urging Congress to fund massive infrastructure projects. The President cannot do it alone, however.

If we want the jobs picture to improve - or even for it to keep developing for the better without more obstruction from the GOP - we have to become active. We have to contact not just our member of Congress but the GOP leadership. Go to Speaker.gov and give John Boehner a piece of your mind. Tell him to stop blocking Democratic jobs proposals and take leadership for an infrastructure bill. Tell him it's time to put America first.