Jobs

Now with everyone focused on the jobs front I wanted to share a few of my thoughts as I've read the headlines.

First, I thought that Jobs were supposed to be the focus the whole time? Wasn't that what the point of the second stimulus (the first under President Obama) was for? I thought that was the whole promise of we will create - adding in later the whole bit about saving - millions of jobs in less than a year. That's not to say I am bothered by their sudden turn, again, to the jobs focus, I just found it interesting that some in the media are portraying this as President Obama's first attempt.

Second, I like the points made by John Mauldin in his newsletter:

"In the '50s through the early '80s, recessions were typified by large layoffs at manufacturing businesses, as they had built up too much inventory. Businesses had increased capacity and often borrowed a little too much. Rising prices in the '70s, along with extremely high interest-rate costs, led to the two severe recessions of the early '80s, which Paul Volcker had to essentially force into existence, in order to begin the process of wringing inflation out of the economy.

"But, and this is important, as the economy improved, inventories were eventually worked through and employees were brought back to work. Things returned to normal. The economy would once again grow at a robust rate. Then, in the last two recessions, in the early '90s and early '00s, it took longer for employment to rise. A great part of this was because the manufacturing sector of national employment was becoming an ever smaller part of the economic pie. We were, and still are, turning into an economy driven by services.

"I should note that, on an absolute basis, manufacturing in the US has grown (going back to before this recession started.) We just produced more "stuff" with fewer employees. We became more productive. But this means that there are fewer jobs that will be brought "back" to make up for increasing sales than in past recessions. There are estimates out that as many as 2 million of the 8 million jobs lost are permanent job losses.

"We know that businesses have made large cuts in numbers of employees in order to address lower sales and to increase their profits. Increasing profits by cutting costs even as the "top-line" sales number is shrinking is not a growth strategy that can be sustained. It also eats into research and development and postpones growth."

In other words, if we are going to focus on jobs then we have to do so realistically. If 2 million jobs were permanently lost then how are we going to allow and encourage the creation of 2 million new jobs? We all know that students are currently being prepared for jobs that don't currently exist. There are tons of ideas out there which we don't even know are possibilities at this point.

I think all of this brings up my main point: The real question that government should be asking itself as it tries to come up with ideas on job creation is - In what ways can we get out of the way of job creation in the private sector? I think that they would all do well to read Gallup's World Poll studies on how "Brain Gain" works and more importantly right now (since we are beginning to experience this) how to avoid "Brain Drain."

I am slightly encourage to see some Supply-Side rhetoric coming from President Obama's recent speeches. However, I am not dumb enough to think that the current legislative body will follow through even on the tiniest bit of what could and should happen to get government out of the way. I think that our only hope for new jobs will be for the Legislature to change this coming election.