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Who is the Forgotten Man today? Is it the coal miner whose employer was shuttered by the EPA? The construction worker hoping to build the Keystone Pipeline? Maybe it’s the salesclerk who was laid off because her boss feared having more than 50 people on the payroll as ObamaCare kicks in.
The most recent news on unemployment is bleak – only 157,000 jobs were added last month, and the unemployment rate rose again, to 7.9%. There are 23 million Americans unable to find full-time work. Many have been disadvantaged by the Obama administration’s liberal agenda. Others have simply been left behind as the president focuses on matters more significant to him – such as climate change and taxing the rich.
Our jobs shortage has disappeared as an issue – buried by a news community anxious to reelect President Obama. The White House has scuttled all discussions of employment and even of the economy.
In his second inaugural address, the president waxed enthusiastic about gay rights and the sanctity of our entitlements programs, and also proclaimed that America’s prosperity must “rest on the broad shoulders of a rising middle class.” How that class is supposed to rise when people can’t find jobs is a mystery – one that President Obama has yet to reveal.
Mr. Obama only in passing mentioned that “an economic recovery has begun.” Well, it certainly didn’t get very far in the fourth quarter. In fact, output took a nosedive in the final three months of the year, contracting by 0.1% as businesses pared inventories, exports tumbled and government spending took a hit. Doubtless activity will return to modest growth in the current quarter, but the economic news reminds us: something is not quite right in this recovery.
The underpinnings of an upturn are in place. The Federal Reserve met recently and confirmed its expectation of steady though slow expansion, and its intention to continue feeding that growth through ongoing monthly bond purchases of $85 billion. Housing, autos, renewed growth in China, a steadying Europe – all on the upswing. But, businesses large and small continue to resist hiring, even though profits are up and stock prices up even more.
How can that be? There are two reasonable explanations. The first stems from a hard look at where corporate profit gains are coming from. After the financial crash, businesses slimmed down, cut staffs and readied for the drop in demand. In time, as business picked up, companies discovered they didn’t need to replace laid-off workers; they could manage with less. And they did so—quite profitably.
Eventually companies began to hire, cautiously, as increased demand outstripped their lean capabilities; thus the modest increase in private sector hiring.
Simultaneously, the Federal Reserve handed out an unexpected bonus – lower interest rates. A chart contained in a recent presentation by Societe Generale (and published by The Economist) shows corporate net income recovering more robustly in 2010-12 than earnings before tax and interest. Lower interest rates boosted results – a factor that is unlikely to repeat. Earnings per share have been further bolstered by share buy-backs, financed by those same extra-low interest rates.
These financial high jinx may push stock prices higher but can’t provide much comfort to managements. They need to see demand – and revenues -- rise convincingly before they will add to staff. They also need confidence, which is the second missing ingredient.
That’s where President Obama’s leadership becomes a factor. After 9/11, President George W. Bush exhorted Americans to go on with their lives despite their fears, asking “continued participation and confidence in the American economy.” (Contrary to many erroneous re-tellings, including by New York Times columnist Thomas Friedman, Time magazine and others, Mr. Bush never urged us to go shopping.)
Two weeks after the attacks, in response to the flat-lining of the airline and hotel industries, Bush also encouraged people to travel, to “do your business around this country…take your families and enjoy life…” -- to show that we would not be defeated by those who had taken down the World Trade Towers. (Even so, six North American carriers went bankrupt in the five years after 9/11.)
It sounds almost hokey today, but the country was shaken; no one knew what to expect, and it would not have taken much to plunge the nation into an economic crisis. Indeed, the economy was already softening, and unemployment rising, when Bush took office. Instead, people rallied, they went out to dinner and – yes -- they went shopping.
After the attack on the World Trade Center, consumer confidence understandably collapsed -- it fell from 114 in August to a low of 85 in November. In December, confidence surged to 95, against all odds, and the country experienced but a mild recession. It was a stirring example of presidential leadership.
By comparison, consumer confidence in the U.S. most recently plunged to 59 in January, after falling for three months. This – in the face of a booming stock market. In the past five years, it hasn’t been able to top 73.1.
While many factors influence how people feel about their prospects, the tone for the country is set at the top.
Instead of cheerleading from President Obama, we get browbeating. Every time the nation’s economy has begun to get traction, Mr. Obama has engaged in a fight with Congress – over health care, the debt ceiling, appointments to the NLRB, environmental regulations – over one issue after another that keeps the country on edge.
He has lambasted the wealthy, and implied time and again that they, and business leaders, have succeeded by luck of the draw or – worse – through unfair practices.
Is it any wonder that one measure of confidence among the wealthy -- Pam Danziger’s Luxury Consumption Index – scored its second biggest loss in January since the start of 2008?
Now we face more wrangling over gun control, immigration, the sequester and tax reform. These issues divide the country, and it takes deft and positive leadership to make progress.
Unfortunately, President Obama seems to relish the political brawling and appears unable to rise above campaign mode. That is bad news for the country, and bad news for all those forgotten people who can’t find jobs.