Obama's 2.5 Million Job Stimulus: We Need a Scalpel, Not a Shotgun 20 comments
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The New York Times painted the picture:
The number of people out of the labor force — meaning that they were neither working nor looking for work and that the government did not consider them unemployed — jumped by 637,000 last month, the Labor Department said. The number of part-time workers who said they wanted full-time work — all counted as fully employed — rose by an additional 621,000. Take these people into account, and the job market may be in its worst condition since the early 1980s. It is still deteriorating rapidly, too.
Friday’s worse than expected unemployment report sent the Dow up 3.09%. Sad, isn’t it, that the message Wall Street keeps sending to Main Street is one of greed over compassion (or even logic).
Statistically, in the last 12 months, one million jobs evaporated:
click to enlarge
The rise in unemployment since November 2007 is over 3,000,000 people according to the BLS. Of course this increase does not account for people who have just given up looking for jobs during this period.
Additional Employment Unreported Statistics
Many retirees have been hard hit by this recession depending how they invested their money. BusinessWeek reported:
Seniors who thought they were set for life just a year ago now face the prospect of going back to work for two, five, even 10 years. They're sprucing up their résumés, calling old work contacts, and flocking to employment sites. There are no reliable stats yet on how many retirees are looking for work, but there are clear signs the number is growing. RetirementJobs.com, the largest career site for people over 50, saw traffic more than double, from 250,000 visitors in July to 600,000 in November. In April, before the worst of the market downturn, a survey conducted by the seniors group AARP found that 17% of responding retirees over 50 were considering or already going back to work.
Since 2000, the employment/population ratio began falling after growing for many decades. Had this ratio not changed, there would be over 1 million additional jobs in this November 2007 to 2008 period. What caused this shift in the employment model? According to the New York Times:
Already, the share of men older than 20 with jobs was at its lowest point last month since 1983, and very close to the low point of the last 60 years. The share of women with jobs is lower than it was eight years ago, which never happened in previous decades.
The Cost of Obama’s 2.5 Million Jobs
The cost of each employee to a company is much larger than the wages the employee receives. Besides the hidden insurances and taxes levied, a company has overhead and profit. Most jobs, especially in infrastructure, require more than a shovel. There are tools and equipment the employee must use.
Depending on the type of job, the cost of each man hour can easily exceed $100. To directly create 2.5 million jobs cost $600 billion per year. If you actually wanted to build something you need to add the cost of the materials, and the cost of government to manage.
Even if you buy into Keynesian job creation multipliers to create 2.5 million direct and indirect jobs, you would need to spend at least $400 billion per year. I do not think the multipliers work for created employment in a recessed economy with slack capacity.
Will the 2.5 Million Jobs Be the Right Jobs?
This is not 1929 and this recession will not look like the Great Depression even if a depression occurs. There were no social safety nets during the Great Depression so the government created many “make work” projects for people to be able to eat. The government used a shotgun approach to create jobs.
Going back to the 2.5 million jobs lost in the past year, the construction industry accounted for less than 500,000 of the losses. We should be careful in spending money creating jobs. We need to ensure that we are creating jobs useful 10 years down the road.
The newly elected government is swiftly trying to put together a stimulus plan. Because of all of the expenditures to date to fight this recession, it is feared piling on more and more debt will prevent economic recovery. I recommend waiting on new stimulus programs until this recession plays out more, and we can be very surgical in stimulating the economy. This is the time for a scalpel, not a shotgun.
Disclosures: None
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This article has 20 comments:
We can only hope Obama wants to be a surgeon, not a duck hunter.
Public infrastructure
Schooling and education
Environmental sector
Social aspects
Clean up political system
I think these might seem a little socialistic, but are they really bad, and did the banks, auto and steel industry in the private sector as opposed to government do any better ?
Ferguson has an excellent idea as well. Why can't this new workforce also repair foreclosed homes that have been trashed? Not necessarily replace expensive marble, but at the very least put up new drywall, fix damage, etc?
Rather, I would consider a meaningful set of bullets in order to make the perceived shotgun work out well.
Let's consider and discuss the bullets then, let's be less generally negative and more propositive!
We need a shotgun and a scalpel. A scalpel for the long term, but in the short term we are in a mess. Take a look at the baltic dry index. We need to get goods moving again, trust restored, and demand back up in the world economies. It'll take a shotgun to make that happen...
We need a shotgun and a scalpel. A scalpel for the long term, but in the short term we are in a mess. Take a look at the baltic dry index. We need to get goods moving again, trust restored, and demand back up in the world economies. It'll take a shotgun to make that happen...
$100 bucks an hour? Now the figure quoted for auto workers at $79 seems like a bargain all of a sudden, doesn't it? Are you sure you are not pulling these figures out a hat for self serving reasons?
if the nation expects response to major strategic problems, the nation must demand detail plans and timeframes because major manpower and dollars must be commited and available.
if these actions happened, we would not now be searching for stimulus plans. they would be known and underway with some reasonable sizing and timetable.
if we are to have stimulus, use it toward our known/discussed priorities
1) The country can't afford it...debt-GDP was ~ 70% end of sep08. Tag on a bunch more ambitious relief programs and that figure jumps fast. When Hoover embarked on what was later termed FDR's New Deal, debt-GDP was 20%..lots of room for growth there.
2) There's a good deal of evidence pointing to the New Deal prolonging the Depression. Job creation doesn't equal wealth creation, and there are consequences to widespread resource shifts from private to public sector.
You can see Obama's actual broadcast and more commentary here:
www.thefreedomfactory..../
Do all of that and watch businesses move back to the US and watch the stock markets return to 15000 in no time. Get out of the way and git er done.
Jolly Rancher
Unfortunately for some older job seekers who may not have worked for a quite awhile, a scalpel may end up getting used for something else. There's only so many jobs that will available.
It should work fine,I have to hope for,being a Massachusettes Plastering Contractor big I have big expectations in the new GOV