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Outside View: Economy adds 117,000 jobs
by Peter Morici
College Park, Md. (UPI) Aug 5, 2011

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The U.S. economy added 117,000 jobs in July, data from the U.S. Department of Labor indicate. While not a stellar performance, those were more jobs than were expected by forecasters and more than the 46,000 posted in June.

Healthcare, retail, manufacturing, mining and construction posted decent gains, while finance and information systems posted small losses.

Government employment fell by 39,000 and private sector jobs growth was 154,000. The shutdown of government services in Minnesota greatly increased government job losses and most of those will be regained in the August count.

Jobs creation remains inadequate to keep unemployment from rising in the months ahead, especially considering the mass layoffs recently announced in banking and pharmaceuticals that will be effected in the months ahead.

The unemployment rate did fall from 9.2 percent in June to 9.1 percent, despite the fact that at least 130,000 jobs are needed each to keep up with growth in the adult population and labor force. Many adults quit looking for work and weren't counted among the unemployed.

Factoring in those discouraged adults and others working part time for lack of full time opportunities, the unemployment rate is about 16 percent. Adding college graduates in low-skill positions, like counterwork at Starbucks, and the unemployment rate is closer to 20 percent.

The economy must add 13.9 million jobs over the next three years -- 386,000 each month -- to bring unemployment down to 6 percent. Considering continuing layoffs at state and local governments and federal spending cuts, the private sector jobs must increase at least 410,000 a month to accomplish that goal.

Growth in the range of 4-5 percent is needed to get unemployment down to 6 percent over the next several years. Recent gross domestic product data put first half growth at less than 1 percent.

Jobs creation remains weak, because temporary tax cuts, stimulus spending and large federal deficits don't address structural problems holding back dynamic growth and jobs creation -- the huge trade deficit and dysfunctional energy policies.

Oil and trade with China account for nearly the entire $600 billion trade deficit. This deficit is a tax on domestic demand that erases the benefits of tax cuts and stimulus spending.

Simply, dollars sent aboard to purchase oil and consumer goods from China, that don't return to purchase U.S. exports are lost purchasing power. Consequently, the U.S. economy is expanding at less than 1 percent a year instead of the 5 percent pace that is possible after emerging from a deep recession and with such high unemployment.

Without prompt efforts to produce more domestic oil and redress the trade imbalance with China, the U.S. economy cannot grow and create enough jobs.

(Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former chief economist at the U.S. International Trade Commission.)

(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

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China says debt financing unlikely 'to save' US, EU
Beijing (AFP) Aug 6, 2011 - China said Friday that debt deals in the United States and in Europe would not be enough to save their economies and "concrete steps" must be taken to rebalance the global economy.

"The only way the Americans have come up with to improve economic growth has been to take on new loans to repay the old ones," a blistering commentary published on the official Xinhua news agency said.

"To eat May's grain in April, however, will never be a permanent solution to a problem," the report said.

China warned on Wednesday that Washington's efforts to raise the US limit on borrowing had failed to defuse America's "debt bomb" and signalled that Beijing would further diversify its holdings away from the dollar.

After months of bitter negotiations with his Republican rivals, US President Barack Obama finally signed an emergency bill on Tuesday that averted what would have been a disastrous debt default for the world's biggest economy.

Beijing's latest comments rounded on Thursday's 500-point drop in the Dow Jones industrial index, noting that it had exposed "the plight of western economies and their deep structural defects."

"The United States has long been maintaining economic growth and excessive consumption by means of debt financing, hence masses of economic bubbles, which eventually triggered the financial crisis," the commentary said.

The commentary also took aim at the European Union, whose members recently constructed a deal to stave off a sovereign debt crisis in Greece in fear that it would be a harbinger to a wider and deeper credit malaise in the eurozone.

"The current bailouts offered by international bodies such as the EU are in a sense, to 'rob Peter to pay Paul'," it said.

"Only by introducing reform can they save themselves; only with a sound economic structure can they assume responsibility for the world economy."

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