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Obama must accept responsibility for the sluggish jobs picture

job-fair-2012-text

A job fair in New York. (Reuters)

The Labor Department reported Friday that the economy added 162,000 jobs in July, after adding 188,000 in June. Unemployment fell to 7.4 percent, largely because 240,000 adults left the labor force.

Businesses continued the shift toward contingent workers. In July, 103,000 more Americans reported working part-time.

The growing importance of services like retailing and hospitality, and the rigidity and visceral anti-business campaigns of unions drive this trend; however, Obama Care’s mandates for employer paid health insurance coverage also impel the use of more part-time workers.

The Obama administration’s anti-business regulatory policies and rhetoric are creating a crisis of confidence in the business community.

Overall, the jobs count may be up but for most working families and recent college graduates the situation is grim. If you add in discouraged adults and part-timers who want full-time employment, the unemployment rate then becomes 14.0 percent. And, for many years, inflation-adjusted wages have been falling and income inequality has been rising.

President Obama’s policies and attitudes toward business carry some considerable burden of responsibility. Those have institutionalized a buyers’ market for day labor and damned many recent college graduates to a lifetime of debt as they can’t find jobs that would allow them to pay off burdensome student loans.

Even with more full time positions, the pace of jobs creation is well short of what is needed. About 360,000 jobs would lower unemployment to 6 percent, but that would require GDP growth in the range of 4 to 5 percent. Over the last four years, the pace has been a paltry 2.2 percent.

Stronger growth is possible. Four years into the Reagan recovery, after a deeper recession than Obama inherited, GDP was advancing at a 5.1 percent annual pace, and jobs creation was quite robust.

Near term, defense cutbacks that President Obama extracted from Congress last fall have subtracted some $62 billion from federal purchases. An additional $42 billion in sequestration cuts, and $200 billion in higher taxes demanded by the president, are further reducing government consumer spending in the second and third quarters.  

Longer term, more rapid growth requires importing less and exporting more. Dealing with the $540 billion trade deficit requires drilling for more oil offshore and in Alaska, and substantively addressing China and Japan’s undervalued currencies and other protectionist policies. 

Obama has flat out refused to even discuss proposals from liberal and conservative economists alike on these issues.  

Healthy growth also requires sound stewardship at the Federal Reserve -- not a new chairman bent on inflating the country out of its problems, or inclined to support left-wing causes aligned with those hostile to business.

What's essential to get things moving is right sizing business regulations to make investing in new jobs less expensive. Yes, regulatory protections are needed to protect the environment, consumers and financial stability but those must be delivered cost effectively to add genuine value.
Overall the president must cultivate a climate more receptive to domestic investment, instead of treating private-sector leaders as likely recidivists to a white collar prison for those guilty of environmental and other crimes against the people. 

The administration’s anti-business regulatory policies and rhetoric are creating a crisis of confidence in the business community as surely as George Bush’s neglect cultivated arrogant and tragic risk taking on Wall Street.

Overall, to create more jobs means that the White House needs to trim tax increases and spending cuts, and engage in more realistic and less-ideological trade, energy and regulatory policies. Sadly, these are words the White House and many on Capitol Hill simply does not want to hear.

Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. He is the five time winner of the MarketWatch best forecaster award. Follow him on Twitter @PMorici1.

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