Good News About Jobs

http://www.nytimes.com/2012/01/07/business/economy/us-adds-200000-jobs-unemployment-rate-at-8-5.html?emc=eta1

http://www.nytimes.com/2011/12/30/opinion/keynes-was-right.html?emc=eta1


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"Strategic thinking is the bridge that links where you are to where you want to be." (John C. Maxwell)

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One of my students once told me that she didn't like reading my blog because the economic news, or job news, was so negative!

So, here's some good news: today's NY Times reports that the U.S. added 200,000 new jobs last month! That's Labor Department data which pretty much everybody respects.

The Labor Department also reported that the unemployment rate fell to 8.5% in December, from a revised 8.7% in November.

The employment report built on some other positive economic news: consumer confidence rose, manufacturing (and manufacturing jobs) is coming back up, small business is ramping up and for the sixth consecutive month the economy has added at least 100,000 jobs. And, how about auto news? U.S. auto sales were up 1 million units in 2011 (to 12.8 million) and are projected to go up another 1 million units in 2012. Any positive boost in consumer confidence pushes auto sales, plus, the average age of a car in the U.S. is now "11 years" (an all time record). Trade in values are at an all time high because there is a shortage of used cars so the economics of that industry begins to look real positive.

Weighing against that positive news would be issues like Congress potentially declining to continue extensions of the payroll tax break and unemployment benefits, loans from banks are still hard to come by, home values continue to drop and a potentially negative euro zone situation.

Diane Swonk (Mesirow Financial) points out that the positive news is not just small business creating jobs but also "new business" job creation and that's critical in the equation for this economy. Swonk went on to say that Labor Department numbers tend to underestimate growth in small business jobs and the self-employed, both of which can be indicators of a turnaround. Good!

So, how do we keep all this going? Well, it's probably not the right time for cutting back on spending ("Keynes Was Right" - Krugman - attached). "The boom, not the slump, is the right time for austerity at the Treasury." That's Keynes in 1937 as FDR was about to prove him right by doing the wrong thing: trying to balance the budget too soon, throwing the U.S. economy into a worse recession. Quoting Krugman: "Slashing government spending in a depressed economy depresses the economy further; austerity should wait until a strong recovery is under way."

So, the same thing happened again in 2010 and early 2011 when (quoting Krugman again), "...politicians and policy makers in much of the western world believed that they knew better, that we should focus on deficits, not jobs, even though our economies had barely begun to recover from the slump that followed the financial crisis. And, by acting on that anti-Keynesian belief, they ended up proving Keynes right all over again."

Krugman goes on to point out that the Obama stimulus package was way too small but the fact that it failed proves to the opposition that "government stimulus" doesn't work. In defense of Krugman, both he and Warren Buffet said at the time that the stimulus was way too small.

So, the real test of Keynesian economics, "..hasn't come from the half-hearted efforts of the U.S. federal government to boost the economy, which were largely offset by cuts at the state and local levels."

What I did not know was that in March 2011, the Republican staff of Congress's Joint Economic Committee released a report titled "Spend Less, Owe Less, Grow the Economy." It ridiculed concerns that cutting spending in a slump would worsen the slump, arguing that spending cuts would improve consumer and business confidence, and that this might well lead to faster, not slower, growth. Nobody agrees.

The bottom line, as Krugman points out, is that 2011 was a year in which the political elite obsessed over short-term deficits that aren't actually a problem!

The good news, as Krugman points out, is that President Obama has finally gone back to fighting premature austerity and, again according to Krugman, he seems to be winning the political battle.

Here's to a better 2012!