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Obviously, I’ve been away for awhile. Actually not physically, I just felt like a long overdue break fro blogging was warranted. I don’t know if it’s going to result in any better content quality but I sure enjoyed the chance to just sit back, read a bit and reflect. So, with that explanation, let me offer up a thought or two on the latest round of economic news.

The big news was of course the employment report for May. You know the numbers — unemployment rate back up above 9%, 54,000 net new jobs and 89,000 new private sector jobs. By any measure a staggeringly bad report, and one which naturally has all the usual suspects crying for the federal government to come out swinging, never mind that their previous roundhouses have accomplished little aside from accelerating the nation’s slide into fiscal destitution.

Add to the employment report data showing decreasing world wide economic growth, a continuing depression in US housing, consumers who had barely been holding their heads above water getting zapped by gasoline and food price inflation and one is entitled to ask where is the recovery, or maybe more to the point, did we ever really have one. And in the midst of all this we have a government prematurely politicized by the 2012 elections and utterly preoccupied with reducing unsustainable deficits either through spending reductions or tax increases. Neither of which, naturally, will work to the advantage of the economy.

So, as noted above, a great hue and cry is going out to do something. Infrastructure banks, more aid to state governments, eliminating the payroll tax, QE3 or even another massive dose of fiscal stimulus. While the tactics differ, the strategy is the same — throw money at the problem. As we know, it’s highly debatable how much good if any was achieved the first time around.

All of which leads me to suggest that perhaps the best strategy is to leave the problem alone. However messy, the dog fight between the Republicans and Democrats over the shape and size of the federal government will eventually lead to some compromise which provides for a responsible structure. Appropriating big dollars in an attempt to once more goose growth will just dig a deeper hole and muck up the slow march to some sort of solution.

Realistically we have somewhere between 5% and 10% of the population who are suffering mightily from a lack of employment opportunities. The ultimate figure depends upon your definition of full employment and whether you use the U-3 or U-6 measure. Quite possibly and through no fault of their own, many of these workers are not ever going to find employment comparable to what they lost, no matter how much stimulus is applied. Their skills no longer match the needs of the economy. It’s a tragedy and society needs to provide for their welfare, but we are beyond the point at which we can afford to jeopardize the future welfare of the other 90%.

By now it’s fairly obvious that economic recovery in any meaningful sense is going to be a long time coming. When it does arrive it is quite likely to be in an economy significantly different than the one we left behind in the Aughts. The single most effective thing that government can do now is to restore some fiscal order to the nation so that when we do evolve to a new order it can flourish without dragging the sea anchor of bloated government finances. Forget about more stimulus and get on with the work of digging the country out of debt.

Source: Unemployment and Stimulus: Maybe No Action Is the Best Action