Monday, January 11, 2010

It doesn't look good for jobs - and for Obama

Business Times - 12 Jan 2010


It doesn't look good for jobs - and for Obama

A weak job market is slowing the momentum of the economic recovery

By LEON HADAR
WASHINGTON CORRESPONDENT

FIRST, let us go to the bad news: the US Labor Department report issued on Friday indicated that with 85,000 jobs lost last month, the American jobless rate was unchanged at 10 per cent in December. These numbers have disappointed Obama administration officials and some economists who had expected fewer losses of about 10,000, with optimists predicting a slight growth in employment.

US officials have tried to spin the depressing news as not-so-bad news, suggesting that taking into consideration the job growth in November - according to revised figures, 4,000 jobs were added in that month - points to a process of 'stabilisation' of the American economy.

'Today's employment report, though a setback from November, is consistent with the gradual labour market stabilisation we have been seeing over the last several months,' Christina Romer, chair of President Obama's Council of Economic Advisers, said in a statement.

'In a broad sense the trend toward moderating job loss is continuing,' Ms Romer said. 'Compared with the unexpectedly good report for November, December's job loss is a slight setback,' she noted, adding, however, that the unemployment rate remained still 'unacceptably high'.

But then there was the very bad news: The broader estimation of the US underemployment rate issued by the Labor Department - which added to the official unemployment rate the number of those who cannot find full-time jobs and those who have stopped looking for work - remained very high at more than 17 per cent.

And if one analyses the numbers, consider the very, very bad news. '1 in 5 Working-Age American Men Don't Have Job,' screamed the headline in The Huffington Post. The analysis pointed out that the figures provided by the Labor Department, illustrate 'the extraordinary toll this recession has taken on male-dominated professions in particular', since men are more likely to work in sectors like manufacturing and construction that have been more sensitive to the recent economic downturn - which has been particularly brutal on those industries.

In fact, most of the job losses in December were in the areas of construction, manufacturing (27,000) and wholesale trade. It is not surprising, therefore, that some observers are calling the current recession a 'mancession'. Indeed, the Labor Department report indicates that only about 80 per cent of men aged 25-54 had jobs in December, which is an historic low.

The only bright spot in this picture has been in the area of temporary work, with about nine million Americans working currently part time. Indeed, some analysts predict that despite the signs that the recession is coming to the end and the economy is staring to grow, many businesses, who remain concerned about the long-term resilience of the recovery, will only hire part-time workers in the coming months.

The problem is that a weak job market as well as the continuing problem facing that housing sector only feed into the economic insecurity of consumers who are delaying big item purchases; and that in turn slows the momentum of the economic recovery.

For President Barack Obama and the Democratic Party the bad news about unemployment could not have come at a worse time, just as the White House is trying to deal with the criticism of its handling of the Christmas Day terrorist attempt and to win Congressional approval of a controversial healthcare reform bill.

The president's approval ratings are at an all-time low and a few Democratic lawmakers have indicated that they were not planning to run again for their Congressional seats in this year's election.

With millions of Americans out of a job, there is a better-than-even chance that the Democrats will lose their majority in the Senate where they now have 60 seats. They are also likely to find their hold over the House of Representatives weakened. Hence, the pressure on the administration to demonstrate its commitment to create new jobs ASAP.

That explains why Mr Obama announced on Friday a US$2.3 billion tax credit scheme to create clean-tech manufacturing jobs. According to the plan, 183 projects in 43 states will create tens of thousands of high quality clean energy jobs and the domestic manufacturing of advanced clean energy technologies including smart grid, solar, wind and efficiency and energy management technologies.

According to the White House, the new tax credits would create 17,000 new US jobs and would be matched by an additional US$5 billion in private capital, said the White House.

'Building a robust clean energy sector is how we will create the jobs of the future,' said Mr Obama. 'The Recovery Act awards I am announcing today will help close the clean energy gap that has grown between America and other nations while creating good jobs, reducing our carbon emissions and increasing our energy security.'

The White House has also indicated that it wanted a new round of stimulus spending of about US$150 billion to create jobs and further strengthen the economy. But it is not clear that Mr Obama will have enough support for his plan on Capitol Hill where Republicans and some conservative Democrats have expressed opposition to new government spending that will increase the deficit and could ignite inflationary pressures.

Indeed, one of the main worries of Mr Obama and the Democrats is that in the face of warnings about inflation, the Federal Reserve will start raising interest rates even if unemployment remained high.

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.

2 comments:

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