WASHINGTON, Nov. 9, 2015 − On Friday the Bureau of Labor Statistics (BLS) reported that the economy added 271,000 jobs in October. That easily beat official forecasts, and major news outlets, like the New York Times, called this a sign of a “surprisingly robust” job market.
The NYT also asserted that the implied economic growth had “momentum.” While the October jobs report was not bad, a more objective examination of these figures must conclude that one month does not make a trend. In other words, the October jobs report was not bad, but…
Economists usually do not jump to any conclusions simply based on one month of positive data. In the past, there have been a number of months where the data looked good, only to be followed by a series of months where the jobs number was simply awful.
For instance, the recession is said to have officially ended in June 2009. In May 2010, the economy added a whopping 518,000 jobs. The media declared that the administration’s policies were working and we were on our way to prosperity. But in the following months of June, July, August and September 2010, the economy lost 70,000 jobs per month.
In February, March and April 2011, the economy added an average of 260,000 jobs per month. The news media again declared that the recession was certainly over and we were really on our way to growth and prosperity. But then, job growth dropped so dramatically that by August 2011, only 52,000 jobs were added. The economy grew by less than 2 percent that year.
In January and February 2012, 260,000 jobs were added in each month. By June of that year, only about 60,000 jobs were added to the employment rolls. Once again the economy took two steps forward, then two steps back, leaving the country with a nearly stagnant employment number.
While we all welcome news that 271,000 jobs were added to the economy last month, this is hardly the sign of a strong and growing economy. It is merely a sign that we had one not-bad month of job creation, which followed two months of poor job creation during which only about 140,000 jobs were added per month.
In November of 2014, the economy added 423,000 jobs. Had that rate continued for at least a few months in succession, then one might be able to justify the conclusion that the American economy was truly growing. But job growth decelerated once again. By March 2015, the job market was stagnating, as only 119,000 jobs were added that month. Unsurprisingly, our anemic economy grew by about one half of one percent in the first quarter of this year.
While economic growth did increase to almost 4 percent in the second quarter of this year, growth fell to 1.5 percent in the third calendar quarter. Most economists are predicting growth of 2 percent in the fourth quarter so that growth for the year will be about 2 percent, yet another objectively poor showing.
Once again, it is becoming increasingly obvious that government policy actions should be geared toward long term economic growth. But instead of placing growth as its top priority, the current administration’s key policy priorities include reducing
global warming climate change; curing perceived social injustices such as “income inequality” and a minimum wage that’s allegedly too low; raising taxes on the highest income earners; increasing the size and cost of income transfer programs like food stamps and welfare; and providing free or subsidized health insurance to those who can’t afford it.
While those policies may (arguably) be beneficial, all can be achieved in time and without undue burden on the American taxpayer − once the economy is strong and growing and providing opportunity for all Americans. Instead of encouraging economic growth, the current administration actually keeps adding barriers to growth, which have resulted in an average U.S. growth rate of about 2.2 percent over the past six years.
Economic growth is absolutely essential to cure our chronic economic problems. Growth would create more jobs, which in turn reduces the unemployment rate and tends to increase wages as employers find it harder to find good new hires at their current rate of compensation.
Economic growth, in turn, will increase tax revenue for the government without the need for raising tax rates. Economic growth will reduce government spending on income maintenance programs because fewer people will need that help.
Most of all, economic growth would provide opportunity for Americans to contribute to the economy, which increases personal income and provides for a higher standard of living as well as a higher quality of life.
The current positive jobs report is welcome. But it is not a sign that our economic troubles are over. The report is merely a signal that we just experienced one month of “not bad” job growth. But what we really need to achieve full economic recovery are consecutive months during 400,000 or 500,000 or 600,000 jobs are created. That would really signal that the American economy is back on track, especially if that rate remained consistent for many months.