Nov. job news is good, but one month is not a trend

Nov. job news is good, but one month is not a trend

WASHINGTON, December 6, 2014 — The Bureau of Labor Statistics (BLS) announced that 321,000 new non-farm jobs were created in November, the best monthly gain in almost three years.

This is welcome news… but it is far from a “boom” in employment, and problems lie ahead.

According to the BLS, in January 2012, the economy added 360,000 jobs and the Obama Administration is using the same glowing terms to describe November’s numbers they used to crow about January 2012.

Only from February to the end of 2012, monthly job gains averaged about 175,000 per month, falling as low as 88,000 in July 2012.

So while we welcome the good news and hope it continues, but economists often say, “one month does not a trend make.”

There are signs that hiring may fall in 2015, mostly due to the Obamacare employer mandate kicking in and to the thousands of regulations that the Obama Administration has recently implemented:

  • Starting in January, every company with at least 50 employees must offer health insurance to each employee or face a fine of up to $3,000 per full-time employee.
  • An employer who doesn’t offer insurance will pay $2,000 per full-time employee minus the first 30, meaning that an employer who goes from 49 to 50 employees will either have to buy insurance or pay a $40,000 fine, $2,000x(50-30).
  • Added costs will result in fewer small companies hiring workers and many businesses with just over 50 employees firing the extra workers or making them part-time with less than 30 hours.

Remember, those small companies being taxed out of existence – it is those small companies that add the majority of new jobs. As the companies go, so will the jobs.

Another negative factor influencing the job market is that the economy will not be able to keep pace with the growth that was experienced in the second and third quarters of this year, when real economic growth was almost 4 percent.

In the first quarter of this year we had a 2 percent decline in real GDP. In the first two months of the fourth quarter growth has slowed so that, depending on what happens in December, real growth will likely be in the 2.5 percent range. This will yield just over 2 percent growth for the year.

Can government policy help to increase economic growth?

It can, and it will if we reverse and correct some policies that have increased social welfare programs that benefit the lowest 15 percent of income earners while zapping disposable income from the rest of us.

And we need to overhaul the income tax system.

Today politicians from both parties realize that the implementation of the Affordable Care Act at a time when the economy needed help recovering, was a burden too heavy for a recession-bound economy to handle. It is like watching a runner trip and fall on the track, and instead of trying to help her up, we keep placing additional weight on her shoulders making it harder for her to right herself.

Even with both houses of Congress soon to be dominated by a party that generally supports tax code revisions, and even with the President saying he too supports revisions, a growth oriented tax code overhaul is very unlikely.

At a minimum, the majority of representatives in the House, the Senate and the executive branch may agree that the corporate tax rate is too high and must be lowered.

This high rate reduces the amount of investment capital needed for expansion and causes large companies to relocate their headquarters outside of the U.S., where corporate tax rates are much lower.

Burger King, for instance, purchased Canadian company Tim Horton. From a strategy position this seems logical; Burger King is weak in the breakfast market but strong in the lunch and dinner market, while Tim Horton is exactly the opposite, offering strong breakfast choices.

But maybe the real motivation for the purchase was that Burger King could relocate their corporate offices to Canada and pay a 26 percent tax rate instead of the 36 percent rate in the U.S. On billions in profit, the 10 percent difference amounts to saving Burger King hundreds of millions of dollars.

And takes American jobs to Canada.

The personal income tax system is also a mess with too many brackets and too many deductions. It is so complicated that the four million words in the tax code are completely understood by virtually no one. It is oft said no one files a completely legal tax return.

Because of philosophical differences, changes will be difficult.

The Obama Administration says it is focusing on helping the economy grow and provide good jobs for the middle class, but actions speak louder than words.

Allowing illegal immigrants to legally stay in the U.S. will reduce the number of jobs for American citizens.

Raising the minimum wage may appear to help low income workers, but that too will reduce the number of jobs available and put upward pressure on consumer prices, which eventually leads to fewer goods and services purchased and a reduction in growth.

With the new House and Senate members being sworn in next month, let’s hope Congress really focuses on growth and job creation so that we start seeing 400,000 or 500,000 or more jobs created monthly.

That would be a real employment boom.

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