President Obama says of his “American Jobs Act” that “There should be nothing controversial about this piece of legislation. Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans.” That seems like a very fair statement on the face of it. There’s nothing about this package that is particularly new or bold in any way at all – it represents a minimal effort to create jobs.
The latest proposal is almost certainly what Obama thought he could get passed more than what the economy really needs. Let’s see if even that is possible before we get too excited.
Yesterday, the latest unemployment initial claims number came out, the barometer that shows us in real time the state of jobs and, by extension, the economy. It’s back up to a seasonally adjusted 414k people losing their job last week, a number very close to the 430k that seems to represent break-even with the pace of job creation elsewhere. The early part of the summer saw this dip below 400k in a show of some strength, meaning that we were adding a net of something around 120k jobs every month. That’s been cut in half today.
There is a deficit of at least 8 million jobs right now, maybe quite a lot more. We need job creation more on the order of 500k per month to start making a dent in that, or an initial claims figure of 300k per week. It’s nowhere near that level. That’s what Obama and Congress need to manage, and even without the details it’s unlikely that the proposal will get us anywhere near that.
The most interesting feature of Obama’s proposal is aid to state and local government to prevent more job loss at those levels. A full $35 billion is proposed for just this purpose, concentrating on saving jobs for 280k teachers. It almost appears that the administration is also looking at initial claims, making sure that things don’t get worse more than working to make them better.
The bulk of the American Jobs Act is a series of tax cuts that will not have much immediate effect.
That’s why this represents a relatively minimal effort – one that might well be crafted more to pass the Congress than to do anything to transform the economy in any substantial way.
On the same day Ben Bernanke spoke to the Economic Club of Minnesota in Minneapolis, saying that any future growth would be up to government policies. The Chairman is facing increasing resistance, even in public, for more action by the Federal Reserve. There’s little more that the Fed can do on its own without something from the government. What Obama appears to be trying to deliver is just enough to meet that call for action.
All together, the speeches and data yesterday add up to one very clear message – the economy is stuck in neutral and the best we can hope for is a small nudge in a positive direction. There is clearly no “recovery” right around the corner. No one is in a position to change things overnight. That probably will scare the stock market and individual consumers once the message sinks in, but this may be the turning point in the Managed Depression. We have an acknowledgment that the conventional methods are, at best, going to get us to hold even.
The American Jobs Act could be important if it represents a beginning. If our leadership is finally becoming serious about the crisis this could be a turning point. If that doesn’t happen it’s really just two years late and a few hundred billion dollars short.
What comes next? I’ve stated my own ideas for radical transformation before. Tell the world you think. Could this be a new start in our national dialogue and efforts for serious change? What else would you like to see?