U.S. Dismal Jobs Picture, the Fed’s Misguided Money Printing Medicine

Economics / Employment Aug 06, 2010 - 08:12 AM
By: Mike_Larson

Economics

Can we just stop sugarcoating the issue? Dispense with the happy talk? Instead, let’s cut to the chase here: This job market sucks. Plain and simple.

By this stage in a true economic recovery, the country would be creating hundreds of thousands of jobs — month in and month out. But we aren’t. Not by a long shot!

According to the Labor Department, we’ve added an average of less than 100,000 private jobs (meaning, ex-Census hiring) a month so far in 2010. The markets will get a look at the official July figures around the same time you receive this e-mail. But I doubt it’ll show much improvement.

After all, the ADP Employer Services report out Wednesday showed yet another paltry month of job creation — just 42,000 after an even more pathetic 19,000 in June. Considering we lost a whopping 8.4 million jobs during the first phase of the recession, at this pace it would take ALMOST 17 YEARS to get back to where we were before the recession!

Moreover, the outplacement firm Challenger, Gray & Christmas said companies announced roughly 41,700 layoffs in July. That was up 6 percent from June and the third month in a row of gains.

To top it all off, initial jobless claims just jumped 19,000 to 479,000. That’s a three-month high. More than 3.9 million Americans have exhausted traditional benefits and are only receiving aid because of the emergency extensions passed by Congress.

Is it any wonder then …

* That GDP rose by just 2.4 percent in the second quarter, down from 3.7 percent in the first?
* Or that the ISM Manufacturing index dropped to a seven-month low in July?
* Or that pending home sales fell another 2.6 percent in June after a 29.9 percent implosion in May?
* Or that factory orders fell 1.2 percent in June after a 1.8 percent decline in May?

Fed’s Solution? “QE2″
In so many words, the Fed has promised to push the over-drive button on the printing presses.
In so many words, the Fed has promised to push the over-drive button on the printing presses.

Confronted with a continued drought in meaningful job creation, the Federal Reserve is threatening to do the one thing it knows how to do: Crank up the printing presses!

Federal Reserve Chairman Ben Bernanke went before the House Banking Committee in late July. He blathered on for a while about the economy, warning that high unemployment, anemic housing markets, and a reduction in the pace of inventory building could cause growth to decelerate.

Then he fired off this statement:

“We remain prepared to take further policy actions as needed to foster a return to full utilization of our nation’s productive potential in a context of price stability.â€