The magic trick the economy can’t do

When the monthly unemployment figures come out, we become a nation of economists. But it doesn’t take a degree in economics to realize that things are bad in the economy right now.

Unemployment last month reached 9.2%, and those are just the people who still want to be in the labor force. The actual percentage of people without jobs might be almost twice that.

Third District Rep. Erik Paulsen took to the floor of an empty U.S. House of Representatives this morning to offer his solution…

A close look at the economic argument reveals a complexity — in the sense that a chicken-and-egg scenario is complex — that most politicians’ speeches don’t address. Lower taxes and lower spending by government means smaller government. Smaller government requires fewer employees. Fewer employees requires more unemployment.

That’s the reality behind the numbers released today.

According to the Labor Department, private businesses added jobs last month (though it was the fewest number in a year):

Within professional and business services, employment in professional and technical services increased in June (+24,000). This industry has added 245,000 jobs since a recent low in March 2010. Employment in temporary help services changed little over the month and has shown little movement on net so far this year.

Health care employment continued to trend up in June (+14,000), with the largest gain in ambulatory health care services. Over the prior 12 months, health care had added an average of 24,000 jobs per month.

In June, employment in mining rose by 8,000, with most of the gain occurring in support activities for mining. Employment in mining has increased by 128,000 since a recent low in October 2009.

Employment in leisure and hospitality edged up (+34,000) in June and has grown by 279,000 since a recent low in January 2010.

What sector of the economy is shedding jobs like there’s no tomorrow? Government. According to the Labor Department:

Employment in government continued to trend down over the month (-39,000). Federal employment declined by 14,000 in June. Employment in both state government and local government continued to trend down over the month and has been falling since the second half of 2008.

There’s no question that private hiring could be much better than it is. But at a time when Congress is debating whether to increase the national debt, it’s difficult to see how the private sector is going to add jobs, government spending is going to drop, and taxes are going to be lower, all while avoiding enough pink slips for government workers to make the unemployment rate in the nation climb.

It didn’t happen in June.

  • It’s an ugly trap we are in, Bob.

  • Al

    But Bob, government doesn’t create jobs. I heard Republicans say it on MPR. How could government give people pink slips if it didn’t create jobs in the first place?

  • matt

    NY times had a nice piece yesterday about chicken/egg type discussions or moreso choosing which facts you base your argument on. Paulsen is no different on how he gets from A>B and ignoring the 300 million points in between.

    http://opinionator.blogs.nytimes.com/category/the-stone/

    Ezra Klein offers this piece on how the debt limit debate may be hampering hiring via expectations

    http://is.gd/PM9l5m

    In the end you have govt running 18-20% (not including state and local) of the economy and they are, for the most part, hapless morons that cannot logicaly connect the dots or see the next 3 steps of any action they take (or don’t take).

    Central planning is next to impossible in an authoritarian state, put it in a “democratic” state and you increase the probability of failure by a factor of 10.

  • lucy

    So what if, and correct me if I am off base here, we stop supporting corporations that support the Republican side?

    There might be some lovely data base somewhere that collects the data of where campaign funding, and other supports come from, ect for certain, (cough cough conservative) parties.

    Time to exclude the excluders. Instead of waiting for campaign time to expose the source of the rotting economy why not create media right now, only the target of mud slinging would be the corporations.

  • lucy

    and another thing,

    Do you think that the loss of employment has something to do with the loss of neccessity in certain labor skills or the fact that technology has replaced those skills completely and has created a void?

    There are only so many positions out there to fill. What happens to those close to retirement age who have nothing to support themselves on?

    Not only do we need support for those who are disabled but also for those who have been permanently displaced.

    There is enough for everyone on this planet so lets stop pretending that there isn’t.

  • vjacobsen

    I’m right there with you lucy, but it gets dizzying and depressing. The list gets longer and longer and longer….even Whole Foods could be included on that list!

    It’s like we’re being held hostage: Corporations won’t (though, presumably have the cash to do so if you look at their balance sheets), and half of the country working their hardest to kill jobs and decrease pay. All for what?

  • Bob Collins

    Matt, you’re restating an argument that’s not relevant. It’s not that I’m favoring or not favoring a particularly strategy for the role of government.

    But we are what we are and the question is what is the process by which we get to wherever it is you want to be?

    What is the plan in the most realistic of terms. What is the acceptable damage in the process, how long would the process take and what are the relationships between imposition of a policy, and the full positive and negative effects therein.

    We’ve got to get away from this tendency to just say someone’s position is mistaken and get down to the reality of transitioning to a desired outcome..

  • MR

    Bob,

    I would say that your last point is the most frustrating for me about the current shutdown. All we ever talk about is the immediate budget situation and the current crises. Even when talking about cuts, we only talk about the really immediate effects of them, not about any potential long-term effects. We’ve lost “that vision thing,” and seemingly can’t wrap our heads around the fact that some things that are worth doing take time, and often take money over a long period of time.

  • lucy

    Well,

    yah…

    vjacobson

    Your problem lies with thinking that just because the name Whole Foods implies ‘goodness’ doesn’t mean that they are all-about- the-humanity.

    You should know about this, its about the uncontrollable ego and the idea of being superior and having more…

  • Bob Collins

    We’ve been having the philosophical debate so long that we haven’t had the practical debate. You ask someone HOW a particularly political philosophy can be implemented and what the real-world effects of it are every step of the way, and they lapse back into the philosophical argument because it’s become rote in this country to repeat it over and over and over, again.

    At some point, and overall implementation strategy has to be considered.

    “Just lower taxes and you’ll create jobs” is a slogan; it’s not an actual answer. Every action is going to have REactions and we need to examine what they are, when they are, and what is acceptable.

  • matt

    Bob,

    Funny, I thought I was agreeing with you…

  • Bob Collins

    Nothing is more irrelevant than agreeing with me. (g) Turn back while you still can!

  • lucy

    Bob,

    There are no fixes. The economic system is broken.

    It has been nothing more than creating money when it is ‘deemed’ needed by a few that really run our government. I am talking about money to fund war, money to lfund the banks. Where does THAT money come from?

    clearly shutting down the government is a good idea either.

  • lucy

    The majority of this planet lives in economic uncertainty.

    Who is willing to pay the *price* that comes with assured economic stability? It is most like joining a mob family.

    It is the minority who are assured economic security. They will see to it that it remains that way.