The Good News and the Bad News for the Economy

First, the good news.  The September jobs’ report wasn’t nearly as bleak as some were expecting.  The private sector added 137,000 jobs, with the public sector losing 34,000.  That’s a net gain of 103,000 jobs.  In deed, since January 2010, the private sector has added 2.6 million jobs, while the public sector has cut or lost 503,000.  So much for the Right’s “theory” that all the jobs that were being created were in the government.  Clearly, based on this data, along with the upper revisions for July and August, we don’t appear to be headed into a double-dip recession.  For now, the doomsayers will have to find a new scab to pick.

However, that’s about as good as it gets.  As I have pointed out in earlier postings, while the economy continues to add jobs, the amount is insufficient to reduce the abysmal unemployment numbers.  And that’s because the U.S. population grows at just under 100,000 per month.  So adding around that number in jobs just keeps things at status quo, which, if you’re a Democrat these days – especially a particular one who just happens to be the President – is hardly reassuring news.  The fact is that, in order to make a significant dent in the unemployment numbers, the economy has to add between 200,000 and 300,000 jobs per month net.

No matter how you slice it or dice it, telling voters that, “Well at least things aren’t getting any worse,” is not a very good strategy for winning their hearts and minds.  In fact it’s a recipe for disaster.  In order to prevail next fall, the President and Democrats must make the case that they are proactively trying to help the economy and, in so doing, help the nation.

Ironically, their greatest weapon may in fact be the jobs’ numbers themselves.  They confirm what many economists – including Paul Krugman – have been saying for two years now: that cutting government jobs, while popular among certain groups, is actually making things worse.  It is increasing the overall unemployment rate, which is hurting demand, which is stunting private sector growth.  They are all inter-related.  Demand, not capital, is the key.  So long as consumers are hesitant to spend money, businesses will be reluctant to hire more workers, and nothing makes a consumer more hesitant to part with money than the prospect of getting canned.

It’s a vicious cycle and, so long as the slash and burn mindset continues to prevail in Washington, I’m afraid we’re going to remain stuck in it for quite some time.  That’s the bad news.