Last Week:
Disincentives to
Improving Skill Sets

Next Week:
A Nation of Laws,
Ruled by the Lawless

June 13, 2016

Last week President Obama took a “victory lap” arguing in a speech that his policies have brought the U.S. economy back from the brink. Then he continued to blame all the other economic weaknesses on trends that his predecessors left him.   Next FED Chairman Yellen said, "Although this recent labor market report was on balance concerning, let me emphasize that one should never attach too much significance to any single monthly report."  Then, last Friday, the Labor Department reported a job growth number of 39,000 versus the expected 170,000. The problem, again; is that they don't understand the current situation, or refuse to embrace truth.

Facts:

• Since 2007, Millions of working-age Americans have become discouraged and stopped looking for work; lowering the worker partition rate from 66 to 62%.  Real unemployment rates are closer to 15% not the headlined five percent.  And it’s taking a significantly longer time for workers to find new jobs today; being unemployed for at least six months is the norm. 
  
  
• There’s a huge gap between the weak growth in U.S. productivity and the pace of job creation.  In the last two quarters productivity declined at annual rates of 1.7% and 1% respectively.  
  
  
• This was followed by a several month pattern of declining job growth.  233,000 (February); 186,000 ( March); 123,000 (April) and only 38,000 jobs added to the economy in April.  A one month decline is one thing, a four month decline forewarns of serious problems. 
  
  
• Layoffs are occurring in the manufacturing and fabricating sectors. Goods-producing employment declined by 36,000, which was the steepest falloff since February 2010.  This is not just one data-point but a visible sign of an economic weakening trend.
  
  
• Typically the loss of manufacturing jobs is followed by losses in the service industries.  Did you know that head hunters – the people who help companies find qualified employees – have been making major layoffs?  That’s not a good sign and forecasts dark clouds on the horizon.
  

Don’t be surprised but the economic data suggests we are following the same path that we saw in November 1969,  May 1974,  December 1979,  October 1989,  November 2000, and May of 2007  which ended in job recessions.  This combination of job data has, without exception, ended in recession beginning four to six month later.  

So what is the solution?

First, we can start lowering our own debt.  This applies to our government as well as to each of us individually.

Second, get the government and it's addiction to more and more regulation out of the way -- of small business in particular -- and let companies do what they do best – increase productivity and create jobs.

Third, bring down the corporate tax rate.  Make it no higher than 15% so that we can start re-attracting business and financial investments back from other countries.

Although an exception to historical norms is possible, it’s not probable. Those who prepare now will be in a better position to face the challenges ahead

Mark and Bill and John