Turning the Corner: Look at Jobs, Jobs, Jobs
What comes first — consumer confidence or robust job creation?
It's a bit of a chicken-and-egg argument, but many people think we'll know the economy is coming back with consistently improving consumer confidence numbers. So much of our economy is predicated on consumer optimism — as much as 70%, according to some economic gurus — that before we see enough hiring to bring down the unemployment rate, they say we need to see people head back to the stores.
My view is that it's difficult to have confidence when you're unemployed, and that's why the focus of government policy should be on known job-creators.
Federal Reserve Chairman Ben Bernanke says the recession is over, but that's not really clear to me. What is clear is that we've avoided the abyss of total economic collapse. What is not clear is how long it will take for the economy to hum. Really hum, as in creating 150,000 or more jobs per month. We now are losing more than that each month.
The recent announcement by Milwaukee-based Harley-Davidson that it will stop the production of its Buell motorcycle line, following a deeply disturbing quarterly earnings report, is one sign that we still have a long way to go. After seeing profits dip by 84% in the third quarter, Harley said it would cut 100 salaried and 80 hourly positions, most of them by Dec. 18.
Judging by our recent online poll, IB readers view robust job creation as the telltale metric that the economy is rebounding. Job creation, cited thus far by 37% of poll respondents, has received more votes than expanding gross domestic product and strong consumer confidence.
I'm with that 37%, especially when the truest measure of unemployment, which includes discouraged workers, now stands at 17%. Barring a miracle, we should expect another somber holiday season in terms of retail spending.
The bulk of the federal stimulus money should be spent next year, which should help, but many of those jobs, related to construction projects, are temporary. They are not the result of sustained job creation, which only happens with a transformative event like the information technology revolution of the 1990s or the across-the-board tax cuts that jolted the economy back to life in the 1980s, or simply avoiding trouble like too much toxic debt.
I've said this before, and I'll say it again: The stimulus bill contains necessary long-term investments, particularly with respect to alternative energy and information technology development (rural broadband and health care IT). While necessary for future economic security and performance, they promote sustained job creation only around the margins.
In the absence of a brand new economic driver like the Internet and software development, that means allowing the people who do have jobs, especially those in the middle class, to keep even more of their hard-earned money. It also means alleviating, not adding, to the burdens — tax, regulatory, and otherwise — on employers.