The Labor Department monthly employment report Friday will tell us a lot about the health of the economy—much of it not very good.
Forecasters expect the monthly tally of new jobs to come in at about 190,000. That’s well below last year’s pace and a figure significantly below that modest target would indicate the economy is at high risk of another recession.
Since the Obama recovery began, the economy has expanded at a paltry 2.2 percent annual pace, and factoring in recessions the overall rate of economic growth has been only 1.8 percent since the turn of the century. Consequently, in recent years new jobs have been created at about half the pace of the Reagan years.
During the Reagan-Clinton era, when more aggressive growth policies and deregulation were in the vogue, the economy grew at a 3.4 percent annual pace. Family incomes rose an average of $9,250, whereas during the George W. Bush-Barack Obama era, those have fallen about $4000.
Consumers, the engine of all advanced economies, continue to spend, but the strong dollar is pinning down exports and cheap imports are battering U.S. manufacturers. Businesses are becoming increasingly skeptical about expanding in the United States, and giants like Ford and Carrier are moving facilities to more business friendly Mexico.
Troubles in China can only be blamed to a point. Its miracle was fueled by a cheap currency—and that has pulled down U.S. growth by destabilizing American manufacturing—but also by government banks that finance factories that run perpetual losses to sell coffee makers and the like to American consumers. Both the recent Bush and Obama administrations can be blamed for not taking the kind of tough measures against Chinese protectionism advocated by Donald Trump and liberal New York Times columnist Paul Krugman.
At home, Dodd-Frank has hamstrung community banks with mindless regulations when they had little to do with the financial collapse. They simply cannot lend to local enterprises as they once did, and small businesses are closing more rapidly than they are opening. Hence a lot of those Silicon Valley innovations don’t translate into jobs in America and don’t get applied by emerging enterprises to foster productivity growth—the mother’s milk of rising living standards.
Hillary Clinton promises to get tough with China, but her obsession with “breaking down barriers” is a focus on battles long ago won. The hardly conservative Economist magazine has accused Democrats of misrepresenting the wage gap between men and women and “waxing indignant” about discrimination to cynically harvest female votes. It’s tough to find a business in America that believes discriminating against women or blacks would attract more customers or make them more efficient and profitable, except the Democratic get-out-the-vote machine.
On trade her proposed methods are vague and sound much like a continuation of Obama’s failed tactics. What’s more, her record as Secretary of State suggests the opposite. The U.S.-Korea Free Trade Agreement, implemented on her watch, has added $16 billion to the trade deficit and killed 130,000 jobs. And Obama similarly promised to get tough with China on a host of issues but simply failed to take tangible actions once in office.
Taking advantage of new technologies often requires moving workers across state lines and into cities. However, local governments have imposed employment licensing and land use regulations that push up apartment rents, and both make worker relocation and jobs creation much more difficult to accomplish.
We have heard a lot from Donald Trump about his views on getting tough on trade and immigration but not much about pulling out and burning the roots of federal and state bureaucratic fiefdoms that are rapidly turning America into the new France. — A paradise for the well-educated from top schools with access to power and the best jobs but a dungeon of low wages, tedious work and government handouts for the rest of us.
Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. He is the five time winner of the MarketWatch best forecaster award. Follow him on Twitter @PMorici1.