"A fire bell in the night, awakening me and filling me with dread."
That was how Thomas Jefferson in retirement described the rising sectional frictions in 1820; and it is how Washington policymakers should have been shaken from their complacency by the economic news yesterday.
The monthly jobs report was worse than expected, and continues an ominous trend: growth in the economy continues to be anemic, without the robust activity that has characterized past recoveries, and is necessary to stimulate real job creation. As the result, the stock market- already spooked by European fiscal woes- took a tumble of over 3% , as the Dow sagged under 10,000.
At first glance, the creation of over 400,000 new jobs and the slight decline in the official jobless rate (to a still painful 9.7%) was welcome news, and the Obama Administration was quick to paint it as a positive development. Coupled with uptics in factory orders and new home sales, and a fresh report of a slight (10,000) decline in new jobless claims, the report was offered as fresh evidence of forward motion in the economy.
The market wasn’t buying it.
Embedded in the numbers were much grimmer realities. Only 40,000 of the new jobs were created in the private sector, down from nearly 220,000 created in the private economy in April. Almost all of the new jobs created last month were for census workers- low paying, temporary government positions that will evaporate in a matter of weeks. Economists had predicted that at least 100,000 more jobs were going to be created in private industry last month. This means that the economy is continuing to under-perform, which is especially bad news for hard hit communities like Erie, and struggling regions like Western Pennsylvania.
This jobs report is one of a growing set of telltales that suggest we need a more decisive and convincing economic policy in Washington to create a new climate of economic growth. Advocates of the status quo- high spending, high deficits, and ultimately higher taxes- are now defending the failed Big Government model by grading the current economic recovery on a curve, cueing up new stimulus initiatives and boutique jobs programs, and blaming an increasingly remote Bush Administration. These are at best distractions, and potentially harmful.
No policymaker should make snap decisions based on a single report. In my view, however, this is time to take stock of how to get our economy growing again and restore confidence in America’s economic leadership. The fact that we are at a critical crossroads in our road back to economic health means that we need leadership now to control federal spending, reform entitlements, and reform the tax code, as a predicate to reducing the bloated federal deficit and bringing down our national debt relative to the economy. Pro-growth initiatives should include market friendly energy policies and regulatory restraint, along with regulatory reform in the financial arena to restore confidence in the markets.
The fact that these issues are becoming even more urgent on the eve of an angry national election, and at a time when the Obama Administration is reeling over its handling of the Gulf oil spill, is inconvenient timing, but hardly a case for inertia. Washington needs to rethink its policies now, and act while it can.
Do you agree? And where should Washington’s policies be changed?