Posted on 09/05/2009 5:31:05 AM PDT by Kaslin
The jobless-recovery theme re-emerged on Friday with the arrival of a disappointing employment report. The daunting number was the unemployment rate, which jumped from 9.4 percent in July to 9.7 percent in August. This is a big-versus-small-business issue. Sort of the haves versus the have-nots.
The large companies are gradually recovering as a result of major cost-cutting, inventory reduction, and a lean-and-mean return to profitability and high productivity. So the payroll survey registered a 216,000 job loss, the smallest drop in over a year.
However, the household survey, which picks up small, owner-operated, LLC/S-Corp-type businesses, registered a devastating 392,000 job loss, which follows losses of 155,000 and 374,000 in the prior two months. This is the source of the unemployment-rate jump, as 466,000 newly unemployed were scored in the report.
So while the big companies are getting healthier, the smaller firms are being left in the dust. Unfortunately, small businesses provide most of the new job creation in the United States.
Veep Joe Biden is out there saying the Obama stimulus plan has saved or created 150,000 jobs in the administration’s first 100 days and another 600,000 in its second 100 days. But he sure isn’t talking about small-business jobs.
In fact, it’s hard to know what he’s talking about. Uncle Sam has borrowed $388 billion in the second quarter and is scheduled to borrow $406 billion in the third quarter and nearly $500 billion in the fourth. In order to provide $152 billion in so-called fiscal stimulus, the government is draining close to $800 billion from the private-sector savings supply -- $800 billion that will not be invested in new-business enterprises, including small businesses.
Borrowing from Peter to redistribute to Paul is not fiscal stimulus. It’s a fiscal depressant. Small businesses are having enough trouble getting their hands on credit. And now they can’t find enough capital for new start-ups. The government prospers, but the small-business sector sinks.
Then there are all the tax and regulatory threats related to health-care and energy reform. Until Mr. Obama retreats from his plan for a government takeover of the health-care sector, and a cap-and-trade program that will cripple the energy sector, the cost of hiring the new job will continue to rise.
The threat of higher payroll taxes and energy costs is more than enough to deter new hiring. Taxes on upper-end investors are going to rise, too, and there may be a health-care surtax on top of that. And don’t forget that small businesses pay the top personal tax rate, which is going up. Oh, and how about the recent minimum-wage hike? Yet another business cost.
So while the government doles out money for transfer payments and one-time temporary tax credits, the ensuing increase in the private-sector tax-and-financing burden becomes a complete deterrent to new job creation, as well as capital formation.
We’re going to recover. Improved ISM reports for manufacturing and services, along with better profitability for big corporations, suggest we’re looking at a mild, V-shaped recovery of 3 percent. But it will be a jobless recovery.
Of course, if Mr. Obama pulls the plug on his new government-insurance plan, and all the spending, taxing, borrowing, and regulating that goes along with it, the stock market will rally at least 500 points -- at least. Investors understand that an Obama retreat on government-run health care will lead to stronger economic growth for America’s vibrant health-care industry -- and small businesses in general.
With all this, why is Wall Street so shocked by the recent gold rally, with the yellow metal marching back toward $1,000 an ounce? The run into gold is a clear revolt against paper money and financial profligacy.
The Federal Reserve’s monetarist experiment to balloon the money supply will backfire with much higher future inflation unless the economy is capable of generating enough new investment and jobs to produce the goods to absorb all the new money. Indeed, this is a worldwide problem. Too much cash chasing too few goods.
The G-20 finance ministers are meeting in Pittsburgh this weekend, although nobody there has an exit strategy from the money explosion that has been aimed at solving the financial meltdown. None of the big countries have plans to reduce marginal tax rates to promote economic-growth incentives. There is no golden anchor of currency value, and no exit strategy from the potential inflation effects of the new-world monetarism.
The bottom line is that governments today have no financial discipline. And while growth will reappear, it may be a meager sort, with incipient inflation pressures plaguing the new recovery.
Barack Obama=Jimmy Carter 2.0
And therein lies the biggest lie. The payroll survey doesn't mean squat. New unemployment enrollees are running over 500,000 per WEEK! That equates to over two million per month, yet the payroll survey says we only lost 200,000 jobs. Does anyone believe that businesses have hired people to NEW positions (not replacements) to the tune of 1.8 million per month? If so, I have a bridge for sale. Contact me with your best cash offer.
Kudlow’s the eternal optimist. A V shaped recovery would be great, but I think it’s looking likelier that it’s going to be a W, or double dip recession. Don’t think we’ll see 666 on the S & P again, but it’s likely we’ll have a major pullback in the market during the next couple of months.
I think Kudlow is correct in asserting that if Obamacare dies, there will be a sigh of relief and a nice rally will ensue. Similar result if Cap and Tax dies.
The numbers don’t add-up. We lost more jobs in July than August, but the unemployment rate went from 9.5% to 9.4% in July. In August with an alleged lost of 216K jobs, the unemployment rate goes from 9.4% to 9.7%?? Small businesses lose 392K jobs, yet the grand total is 216K lost??
We are going to have a W shaped recovery for GDP and an L shaped recovery for job gains. Straight down to over 10% unemployment and then flat lining along at 10% as GDP returns to very low positive growth. We are going to look like Euroland with persistent 10% unemployment and low GDP growth as the Odious One is going to submerge us in Euroland socialist BS. Regionally, things will get better in the south and worse in the north, thanks to unions.
Wait until next month, after the effects of the “Cash for Clunkers” ending is felt.
“In fact, it’s hard to know what he’s talking about.”
LOL!, But this is generally the case with Mr. Biden, no?
Larry sounds a lot gloomier than when last I heard him.
I’ll just say this, things need to pick up soon, but nobody “on the street” in Northern NJ at least thinks that’s going to happen.
Obviously the economic crash was not Obama’s fault, but this stagnation definately is.
The scary part is that I’m quite sure he is too self-absorbed to do anything to correct his course.
It is going to be a very long 3 1/2 years, but hopefully we can get the dem majority out next year which should help.
This analysis is “right on target.” The numbers he quotes on small business employment are just beginning to be felt. I’ll say it again, the ripple effects have yet to be acknowleged. These people losing their jobs/businesses also have mortgages, car payments, etc. The general health of the economy revolves more around the health of small business than it does on the DJ 30 industrials....
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Obama Says A Baby Is A Punishment
Obama: “If they make a mistake, I don’t want them punished with a baby.”
Simply put, you can’t trust Labor Department statistics. The outfit has been politicized to the extent that every month bad news is masked, and a few weeks after the first report the data is revised upward.
By Ambrose Evans-Pritchard
September 4th, 2009
If arch-bear Nouriel Roubini has really thrown in the towel on our Great Contraction – as often claimed – this was not obvious here on the shores of Lake Como in Italy.
Speaking at the Ambrosetti Workshop – a sort of Davos/Bliderberg for food-loving policy elites – he said the best we can hope for is a long-hard slog for two or three years, with a rising risk of a double dip into “W-shaped” recession.
The poll of the 200 or so participants at the Villa D’Este (an ultra-posh hotel on the lake: Telegraph hacks stay up the hill in cheaper digs) found that the great majority expect the crisis to end in the second half of 2010. This is much later than the implicit assumption of the markets, which expect rate rises by January.
[snip]
>The numbers don’t add-up. >
If you haven’t seen the open content on SGS, you may be interested in info regarding how gvt stats have been manipulated:
http://www.shadowstats.com/section/primers
http://www.shadowstats.com/alternate_data
http://madconomist.com/data-fudging-101-the-history-of-us-government-statistics-manipulation
I agree. I don’t understand how Kudlow and others can think we’ll have a jobless recovery. In fact, in our economy, which is 70% consumption based, I don’t see how it’s possible to have a jobless recovery. Without jobs, how are people supposed to consume?
Jobless recovery may be one of those terms which should go the way of the buggy whip. We’re not a manufacturing and agriculture based economy any longer, so with high employment, we’re sunk.
Gee, imagine what the real figure must be.
25%? 30%?
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