WASHINGTON, April 4, 2015 — In March, the U.S. economy created 126,000 new jobs. This was the worst performance of this measure since December 2013, and it was far below the 269,000 jobs per month that the economy has been averaging over the past 12 months. In addition, the job numbers for January and February were revised downward by about 69,000 jobs.
Since job creation is mainly a function of growth in the economy, will the slow economic growth of the past six months lead to even poorer job numbers? Is this downward trajectory the start of a new trend?
The economy is indeed slowing. Making matters worse, instead of trying to grow the economy, federal government efforts and policies are actually contributing to the slow growth. Last fall, President Obama confidently said that we had “turned the page” on slow growth. He said this after seeing the GDP had increased by nearly 5 percent in the second and third quarters of 2014. Since then, however, growth has slowed.
In the fourth quarter GDP grew at a 2.2 percent rate, about half of the second and third quarter rates. In the first quarter of 2015, growth seems to have slowed further. While the data from March is incomplete, January and February were slow growth months. Retail sales fell 0.8 percent in January and 0.6 percent in February after a 0.4 percent drop in December. Most economists believe the economy grew less than 1 percent in the first quarter of 2015.
There are a number of reasons for the slow growth. For example, economists expected consumers to spend the extra $20 or so per week they’ve been saving from today’s lower gas prices. Instead, consumers chose to pay off credit cards or simply saved this small but helpful windfall.
Another problem: The U.S. dollar is very strong against other currencies, encouraging the purchase of imports and discouraging foreigners from purchase U.S. exports. A strong dollar reduces international demand for American-made products and tends to slow growth.
The Obamacare employer mandate now imposed on every company with at least 100 employees took effect on January 1 of this year, with the balance of the mandate for employers with at least 50 employees to take effect next January. By adding to the cost of a worker, the demand for workers will decrease and fewer workers will be hired, another significant headwind for job growth in the coming year.
The media often neglect to note that 2015 will be the eighth consecutive year that U.S. growth is less than 3 percent. The reason for this prolonged period of slow growth is that after the severe recession in 2007-2009, the administration did not concentrate on policies to achieve growth.
Instead, the administration ignored the economic situation, making use of its veto-proof Democrat majority in Congress to pass the job-killing Affordable Care Act and imposing numerous and onerous regulations on business, making it more difficult for them to expand. It implemented overly burdensome consumer protections that increased cost for business; it raised taxes on investment income, which reduces the amount available for growth; and it pushed through a nearly trillion-dollar stimulus package that did virtually nothing except provide payoffs to public employee unions for their continuing support.
When queried on how the stimulus was working, the president said, “I guess those shovel-ready jobs weren’t as shovel ready as we thought.”
During Obama’s first two years in office, he had a majority in the House of Representatives and a super-majority in the Senate, a rare situation he could have used to push through any growth-oriented program his party may have favored. But the social issues of the bottom 15 percent of all income earners were more important to him than the opportunities for growth that might have helped restore 85 percent of American workers to fiscal health.
Insofar as the current employment trend is concerned, economists know that one month does not make a trend. It is possible that job creation will increase in the coming months. But with the weight being placed on the shoulders of those smaller businesses that actually create the majority of U.S. jobs, a rebound in that significant sector still seems unlikely.
Even considering the nearly 3 million jobs added during 2014, we are still seeing a poor picture when it comes to predicting future growth and employment. While the official unemployment rate is 5.5 percent, the U-6 rate still stands at a discouraging 11 percent. This rate includes part-time workers who would rather work full-time and discouraged workers who have had such a difficult time finding a job they have simply stopped looking, in addition to those who’ve dropped off the unemployment rolls and are no longer counted. By comparison, the U-6 unemployment rate stood at 8 percent prior to the recession.
Until this administration gets serious about growing the U.S. economy, we will continue to witness prolonged periods of meager job growth, likely averaging less than 200,000 jobs per month this year. This rate barely exceeds population growth, indicating an economy that still has a long way to go before achieving the kind of pre-recession health that already seems a distant memory.