Friday, March 4, 2011

The New Normal on Unemployment

The pundits cheered today's unemployment rate, which was reported to be 8.9 percent. After adjustments for January, net job creation was an anemic 180,000 -- a pitiful number for this stage of an economic recovery. The fact that a number this bad was greeted with applause says a lot about how low expectations for the economy have become since the Obama presidency began. Obama was quick to note that 1.5 million jobs have been added since last year -- an abysmal record for the second year of a recovery by any standard. If Obama is proud of this number, he must have given up hope for any kind of serious growth in employment levels or economic recovery.

To create jobs, it is crucial to make labor affordable. Everything the Obama Administration and its Congressional allies have done so far has made labor much more expensive. That's the failed European strategy, an area of the world that thinks that double digit unemployment is perfectly acceptable. Young folks in Europe have no real future -- the rich get richer and the young have lost hope. Most European children stay in their families' homes until they reach mid 30s. The wealthiest families in Europe are the same families that dominated European wealth 50 years ago. There is no economic mobility in Europe. Is that where we are headed?

Don't forget that in the "bad old days," that Obama doesn't want to see returned, unemployment dipped below 4 percent at times and was typically below 6 percent during the preceding 25 years. Gee, we certainly don't want to return to that, do we?

Booms and busts are part of life. Trying to eliminate busts by the heavy hand of government with bailouts, excessive regulations and payoffs to public employee supporters is absurd policy. But, it is the Obama way. What Obama means by "investments" is to spend money to reward his supporters. That's basically what the stimulus package was all about. Obama's proposed budget proposes more of the same.

Lets go back to booms and busts. They were certainly a lot better than this. The opportunities that were abundant in the 1980s and 1990s have vanished with the new normal of the Obama era. We need to go back to the bad old days.

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