The unemployment situation here in the United States has become a central topic for political discussion since the credit crunch ensued in Wall Street back in 2008. Massive layoffs in private and public sector employment since 2008 have made an economic recovery for the U.S. all that more difficult in the face of rising commodities prices and flat to negative housing prices hurting the American consumer base. The incumbent President Obama has come under tremendous political fire from 2008 on the issue of reducing the stagnant unemployment rate, once above 10% in the U.S., to spur recovery after the collapse of Lehman Brothers and Bear Stearns hindered the U.S. economy. There is little credit given to President Obama for actually keeping the robust recovery in the U.S. labor market alive, vowing to maintain and keep the unemployment rate under 8% here in America, and setting forward a bold economic policy to create another 1 million public sector jobs as well as provide money to states to rehire over 450,000 teachers across the U.S.
President Obama has been very successful in his initiative to close the unemployment gap in his first term as president, creating 4.3 million private sector jobs from 2008 to 2012. Under President Bush, the economy stopped shedding private sector jobs in July of 2003 after being 30 months in office. From that point forward, the economy struggled to create 1.5 million private sector jobs, which accounted for roughly a 1.4 percent gain in private sector employment for the Bush Administration. At that point in President Bush's term, the total number of private sector jobs was still down 1.7 percent from where it began. At 8.2% unemployment, the U.S. public sector lost about 608,000 jobs since January of 2009. If you put those jobs back, the unemployment rate is said to drop to 7.8 percent. According to Ezra Klein's WonkBlog in the Washington Post, at that point in George W. Bush's administration, public sector employment had grown by 3.7 percent:
That would be equal to a bit over 800,000 jobs today. If you add in the total of these two hypothetical jobs figures to the current unemployment situation, the unemployment rate falls to 7.3 percent.
U.S investors, however, remain skeptical of an actual recovery in the labor market, as the jobs report for April-June of 2012 only showcases that the economy produced an average of just 75,000 jobs a month. This figure is now the weakest in three months, as well as the weakest since August-October of 2010. On average, the U.S. labor market is said to require roughly 220,000 jobs created month-on-month from July to October 2012 for unemployment to fall below 8% by election day. For American investors, the jobs report in June fell into an uncomfortable middle ground, but there is still hope on the horizon. The jobs data in June solidified a consistent longer-term trend that the economy has fallen into mid-2010 and mid-2011, respectively. The economy in subsequent years tried to get off to a relatively fast start, and then faded mid-year. Offering more support to the slowing numbers, the slowdowns in the two previous years lasted just four months each. President Obama also came out in June and addressed the issue of spurring employment where America needed it the most, revealing another optimistic jobs plan to bolster the weaker jobs report for April-June. This new jobs plan should keep U.S. investors at bay about a labor market recovery before November 2012. His new plan adds 1.9 million public sector jobs as well as gives support to a longer-term recovery in the U.S.employment sector.
In the medium term, President Bush is said to outshine President Obama statistically on the side of public sector employment, as in 2007, both the private sector and government jobs were growing. But of course, President Obama came out in June of 2012 to censor cynics who criticized his take on the American job recovery. President Obama put out his employment plan in June of 2012, to center on two key themes to spur public sector employment during his Administration: 1) putting millions of people directly back to work to rebuild America's tattered infrastructure, and 2) providing money to states to rehire over 450,000 teachers. Over the last two years, the private sector has grown at an average annual rate of 3.2 percent. President Obama has not gotten enough credit on helping revive the U.S. private sector either, as the private sector actually began to grow back in 2009, due in part to various stimulus programs.
By the end of 2011, the private sector was expanding at a healthy 4.5 percent annualized pace. As the first presidential term for the Obama Administration begins to unwind, and the 2012 Presidential Elections are just around the corner, Obama plans to fight back critics of his public sector record as well as give Romney's top advisors a run for their money. According to Republican economist Mark Zandi, Obama's job proposal would:
add 2 percentage points to GDP growth this year, add 1.9 million public sector jobs and cut the unemployment rate by an entire percentage point.
ColorLines reports, if Republicans had enacted the president's employment legislation when he proposed it back in 2011, the economy could have turned out 227,000 jobs in May of 2012 instead of the 69,000 jobs that almost threw the stock market into a frenzy back in May. President Obama also recognizes that these public sector job cuts have fallen disproportionately onto schools and teachers. The Wall Street Journal estimates that if these jobs still existed, the unemployment rate would be a full percentage rate lower than what it is today in the U.S.
The unemployment situation is really not as grim as many people make it out to be. While the Labor Department report in June was disappointing, it was still not weak enough to lock in further action by the Federal Reserve Bank at its next two-day meeting July 31 and August 1. Mitt Romney, advisor Bay Buchanan, came out on Monday, June 11, 2012, stating to CNN that President Obama's policies were at fault for job cuts in the public sector. However, Mitt Romney continues to come out in public and blast President Obama for wanting to hire more firefighters, police and teachers. While President Obama has now put an actual jobs plan on the table that should address areas of employment where America needs to spur employment the most as of today, Mitt Romney has promised to eliminate even more public sector jobs. The unemployment situation here in America has officially become a political football. Mitt Romney wants to send home 145,000 federal workers, according to his newly revised jobs plan, as he is now in the running for the highest office in the land. Not only has Mitt Romney opposed the President's current jobs plan to create 1 million public sector jobs, but Mitt Romney is actually calling for further job losses within the anemic public sector:
While job creation in Massachusetts lagged during Romney's tenure as Governor despite his promises, calling for job elimination when we're still digging out from the economic crisis is nothing short of stunning.
The U.S. continues to be an attractive hedge against all the uncertainty surrounding Europe, as Spain sets up for a formal bailout. Investors continue to stick by Fed Minutes, as Federal Reserve Chairman Ben Bernanke came out in a report last week to Congress on the current state of the U.S. economy. Bernanke painted a waning picture for the U.S. recovery, as his statement to Capitol Hill warned that political gridlock would also incur automatic budget cuts at the end of the U.S. fiscal year. Not resolving a budget impasse before the year is over would cause 1.25 million jobs lost in the U.S. and incur a recession for 2013. Investors were also hoping last week that the Chairman would signal to markets that the Federal Reserve Bank was ready to launch another round of bond purchases. U.S. growth slowed to roughly 2 percent in the first three months of 2012. As the unemployment debate exacerbates between Mitt Romney and President Obama, many Wall Street donors are siding with Mitt Romney to win the presidential elections in 2012 against the incumbent President Obama. I suppose this move would almost certainly incur another round of quantitative easing out of the Federal Reserve, as Mitt Romney's agenda for economic recovery within his tenure in the White House will almost certainly shave the 2 percentage points to GDP growth expected this year, as the Obama Employment Plan will be scrapped and "Obamacare" repealed.
Employment reports so far are not bad enough for Fed action, and I really don't think Mitt Romney is the smartest choice in 2012. The labor market is actually not all bad under an Obama presidency. The unemployment rate will only recover if everyone is on board with sound policy. This also means less pessimism on the part of Wall Street speculators.