GDP Growth @ 3.5%

http://www.nytimes.com/2009/11/07/business/economy/07jobs.html?emc=eta1

http://online.wsj.com/article_email/SB10001424052748704013004574517303668357682-lMyQjAxMDA5MDAwNjEwNDYyWj.html

Here's the good news: third quarter GDP grew by 3.5%. Here's the good news in the bad news: nonfarm payrolls dropped 190,000 last month which is a substantial improvement over January's 741,000 drop. More good news in the bad news: U.S. worker productivity has "surged" (one study had it at 6.1% in the third quarter) but only because, where the economy is coming back, employers are reluctant to hire (causing many to settle for part-time work because companies won't hire full time). More bad news: the "underemployment rate", which includes part-time workers, the jobless, and those who have given up on searching, was 17.5% in October (the highest since 1994). More bad news: the official unemployment rate has broken the 10% barrier on its way up to 10.2%, 5.3 percentage points higher than December 2007 with the actual number of unemployed up 8.2 million people since then. More good news: manufacturers added jobs for the first time in 15 months in October (largely by bringing in temporary workers or recalling laid off workers). More good news: the first sign of a recovery in jobs is when companies begin bringing in temporary workers (seed previous "good news").

So, where is the consumer in all of this? Answer: unemployed. What drives the U.S. economy? Consumer demand. Many economists use "job creation" as the measure of how well the economy is doing, and, in the past, 100,000 to 150,000 jobs per month ("created") is about what the economy has needed to reflect healthy growth. Right now, the 190,000 negative number mentioned above has got to get back to a positive 100/150,000 (jobs created) monthly. That would be a positive job swing of 290/340,000 jobs per month to get back to a "plus" 100/150. Where's that going to come from and how soon?

And, while we don't talk politics here, we're not sure that President Obama's trip to get his Nobel (for "promoting peace"?), or his trip to Copenhagen to appease the "global warmers", should come ahead of something real like: are people employed, and do our economic policies promote that. As we have indicated here before, "unemployment" is the lagging indicator.

As was pointed out in the WSJ "Opinion" article attached, nearly all net job creation since 1980 occurred in firms less than 5 years old. A recently released Kaufman Foundation report shows that two-thirds of jobs created were in such firms. Given this, without new businesses, job creation in the American economy would have been "negative" for a significant number of years.

However; there are many young companies that never expand or get off the ground because of regulatory or economic barriers. Policy makers should be eliminating these barriers and creating incentives to foster the creation and growth of new businesses. Here are four suggestions:

* Welcome immigrants seeking scientific training at our universities (between 1995 and 2005, immigrants founded or co-founded 25% of all U.S. high tech firms);
* Unleash America's academic entrepreneurs (currently, university professors are limited in their technology licensing efforts);
* Provide easier access to capital (a fundamental revision of bank capital standards is needed from both a regulatory and an innovative point of view);
* Make it easier for companies seeking capital to go public (Sarbanes-Oxley has made it far more expensive for smaller companies than was originally intended).

As the stimulus money makes its way thru the economy, something real has to replace it. If most of the jobs are being created in young innovative businesses, then simple measures to "deregulate" around those businesses could be an inexpensive and highly productive way to create jobs.