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POLITICAL ECONOMY
Outside View: Slowing growth clouds U.S. jobs outlook
by Peter Morici
College Park, Md. (UPI) Nov 7, 2013


disclaimer: image is for illustration purposes only

The U.S. Labor Department is expected to report Friday the U.S. economy added 120,000 jobs in October, less than the 148,000 recorded in September and the trend for months prior. Unemployment should remain about 7.2 percent.

The government shutdown and uncertainty about its precise effects on the data cloud Bureau of Labor Statistics estimates and forecasters' projections. However a slowing economy is having a more significant, damaging effect on the jobs outlook.

Since January, 456,000 additional Americans report working part-time, while only 525,000 more say they obtained full-time positions. In large measure, the part-time economy is driven by a weak economy, Obamacare health insurance coverage mandates, and a large supply of immigrant workers.

All push down wages in industries like construction, retailing and restaurants and widen income inequality.

Importantly, housing and auto sales have flattened. In both sectors, producers have emphasized higher-priced offerings with more features to boost profits. These strategies are now up against higher interest rates, nervousness about future stock market gains and a sense that Western economies are unable to break out of their funk.

Also, the financial and legal sectors continue to restructure, in part reflecting post-financial crisis expectations for permanently slower growth. Dodd-Frank regulations are compelling many small-town and regional banks to combine and cut jobs. Big banks face huge settlements in litigation with the U.S. Justice Department and federal regulatory agencies regarding mortgage-back securities and other issues surrounding the financial crisis and more recent abuses, such as in foreign exchange trading.

Furloughed government workers have received back pay; however, a robust recovery in retail sales isn't expected. The upcoming holiday sales won't be much better than last year.

Forecasters expect the U.S. Commerce Department to report the economy grew at about 2 percent in the third quarter, down from 2.5 in the second. Commerce as to release its flash gross domestic product estimate Thursday but it may be subject to wide fluctuations in revised reports over the next several weeks.

Not surprising, businesses across the economy remain cautious about adding additional full-time employees. Particularly hard hit are older workers seeking employment, whose added benefits costs would drive up group insurance rates and the long-term unemployed, who carry steep training costs when hired. Many in these categories have quit looking for work altogether until conditions improve.

Recent graduates are taking unpaid internships and part-time jobs to meet minimal living expenses and putting off marriage and household formation. These dampen housing, furniture and appliance sales and employment.

Were the percentage of adults working or looking for work today the same as when the recovery began, the unemployment rate would be an estimated 9.8 percent. Adding discouraged adults who have quit looking for work altogether and part-timers who want full-time employment, the unemployment rate is 13.6 percent.

Even with more full-time positions, the pace of jobs creation is well short of the estimated 360,000 needed each month to lower unemployment to 6 percent over three years. That pace would require GDP growth in the range of 4-5 percent.

Stronger growth is possible. Four years into the Reagan recovery, after a deeper recession than President Barack Obama inherited, GDP was advancing at a 5.1 percent annual pace, and jobs creation was robust.

Unnecessary oil imports and trade deficits on manufactured products from China and other Asian countries tax demand for U.S. goods and services, slow growth and subtract more than 4 million jobs.

Absent U.S. policies to develop readily available oil offshore and in Alaska and effectively confront Asian governments about purposefully undervalued currencies and protectionism, the trade deficit will continue to steal growth and U.S. jobs.

The increased cost and slow pace of regulatory reviews curb investment spending. Robust assessments necessary to protect consumers and the environment must be at minimum cost and timely to add genuine value. Otherwise, excessive compliance costs send jobs to Asia and impose great social costs.

Absent smarter energy, trade and regulatory policies, slow growth and high unemployment in the United States are becoming permanent.

(Peter Morici, an economist and professor at the University of Maryland Robert H. Smith School of Business, is a widely published columnist. Follow him on Twitter: @pmorici1)

(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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