The U.S. Department of Labor released its preliminary job numbers for the month of April this morning, and the news is moderately good:
The United States economy created 165,000 jobs in April, slightly more than forecasters had estimated, pushing the unemployment rate down modestly to 7.5 percent, the government reported Friday.
After starting off strong in 2013, the economy has been showing signs of weakness more recently, prompting experts to warn of a third consecutive spring swoon.
April’s rate of job creation compares with an average of 168,000 jobs added per month in the first quarter this year and 209,000 in the fourth quarter of 2012. Before Friday’s announcement, experts on Wall Street had estimated that 140,000 jobs were added.
So why am I feeling pessimistic?
The answer is simple: The sequester — a Washington-created crisis born of gridlock and a failure to understand the principles of economics — looms large, with economists like Diane Swonk, chief economist for Mesirow Financial in Chicago, telling The New York Times that
the economy would be showing much more momentum if it were not for the combination of higher payroll taxes that went into effect in January, as well as the process of automatic spending cuts known as sequestration that began to bite last month.
“What’s the biggest drag on the economy? The government,” Ms. Swonk said. “If the government simply did no harm, we could be at escape velocity.”
Without the impact of federal cuts and higher taxes, Ms. Swonk estimates, annual economic growth would be close to 4 percent, above the 2.5 percent pace she is expecting in 2013.
In The Washington Post, the jobs report was seen as good news.
“This is a good report,” said John Silvia, chief economist at Wells Fargo. “There’s a lot of strength… It’s good for the economy. It’s good for people’s income.”
The stronger job growth suggests that the federal budget cutting “does not mean recession,” Silvia said. “It does not mean a dramatic slowdown.”
That’s a huge stretch. The vast majority of cuts associated with sequestration have just gone into effect, with most of the harm being done to those already in need. We are about to witness a scaling back of federal aid to the uninsured and to those in poverty — even as Congress has managed to keep business fliers in the air.
As the government pulls back — as it spends less on everything from defense to aid to the poor — it also is taking money out of the economy at a time when the economy needs every dollar it can get, whether it be from the private or public sector.
Of course, the sequester is not really the problem — it’s the mindset behind the sequester that has continued to mire the nation in stagnation. And that is what we must call it. While we have continued to add jobs, we do so at an anemic pace — one that not only has not gained back the jobs lost during the 2008 meltdown, but has no chance at keeping up with population growth. Overall economic growth is glacial, wages are frozen in place for most, and the only people who seem to be doing well are corporations, which are raking in record profits but not sharing them with the broader workforce.
At the same time, we have bought into the false promise of austerity — the idea that we can slash government spending and trigger growth. There is no historical precedent for this happening during recessions and much real-life evidence to the contrary — Japan in the 1990s, the current state of the Eurozone and England, etc.
Rather than look for ways to trim government and deal with a deficit problem caused primarily by the revenue lost to mass unemployment, we should be looking for ways to invest in rebuilding the nation and aid those slammed the hardest by the economy’s punch.
Rebuilding schools, roads, bridges and other public infrastructure, expanding energy conservation measures and investing in green sources, rehiring teachers and police officers, and providing a strong social safety net will help create jobs and will put money in the pockets of those most likely to spend it.
We will not turn the economy around by pretending that the jobs held by public employees do not matter or that the things government spends money on are superfluous. We have to be smart in what we spend our money on (we already give the oil and gas company’s too much money, for instance, and we cannot abide by wasted resources), but we have to spend it.
Repeal the sequester and repeal the austerity mindset that has led us down this dark and dangerous road to stagnation.
Hank Kalet 