US economy- How things coulda' been better- if only..

As everyone knows by now, May's job figures showed an increase of only 69,000 new jobs when so-called 'experts were predicting +155k or thereabouts.

It made us curious.. What was May's job figures for 2011?

"In yet another alarm bell of a weakening U.S. economy, the job market took a disappointing turn in May. The economy gained a mere 54,000 jobs in the month" --CNN Money

Interesting.

Last May, unemployment rose to 9.1%.  This year it rose from 8.1% to 8.2%

So what are we trying to say--   Are we telling readers to cut Obama some slack or to not over-react to yesterday's jobs report?

Hardly.  It was bad all-around..

But if you're really determined to read some optimistic positivity and hopium about May 2012's jobs report from those with agendas, here are some links for you:

Fortune: Some Hope Amid Gloomy Jobs Report

Yahoo Financial: Friday’s Economic Data Dump Wasn’t All Bad News

OK.. now back to Reality.

Like we discussed yesterday, how can anyone dare to expect hiring to pick up when there's been no motivation from government nor corporations to create jobs, and small to medium sized businesses being killed with taxes and regulations at every turn?

So where do things stand today June 2nd 2012?

Well...  the nation is in an economic rut.

The US is still in better shape than most of the global economies & certainly better than most of Europe.  And when the Euro crashes as a currency, everyone will be flocking to the US dollar as their safe haven.  But that doesn't mean we're on a good footing or anything close to 'recovery'.

So could things have been different-- is there anything that could have been done over the past 3-4 years to improve the economy so we'd be on a true path to sustainable recovery?

Oh, most definitely..

The following ideas would have put this nation in a better place economically, and to be clear, we are not Monday morning Quarterbacks-- we've written extensively on this for 21 months now...  Its just the powers that be didn't listen or was not so inclined to do anything actually to help the individual...

1)  Obama implementing FDR-like economic programs -- that would have dramatically increased hiring in all facets of life from building up infrastructure to academic areas to the arts.

This would have pushed unemployment drastically down and allowed people the means to pay their mortgages and other bills without dependence on a welfare check.  It would have dramatically lessened the number of people receiving unemployment, particularly on the state level where its a real burden to state budgets, and lessen the number of home foreclosures and bankruptcies.

2)  A Real stimulus plan -- one that was 3-5x times in size and scope of what was passed in 2010.  Back then, the Administration pushed a small stimulus with the goal that somehow this would trigger consumer confidence and create a self-sustaining recovery.  It did not.

Instead it was akin to someone needing a blood transfusion of 2 quarts and instead receiving half a pint with the body expected to take that small amount and recuperate magically from it.

3)  Debt Debit Card --  We discussed this often: Each American adult making $150k or less annually is issued a $10,000 'debit' card to be used to pay off existing debts--- mortgages, car loans, student loans...

 A full 100% of the $$ goes to the banks/lenders but unlike TARP and other bank subsidies, the consumer directly benefits-- $10k less personal debt per person.  If you want people spending, you have to unload some of their personal debt burden.

4)  Passing an economic 'Civil Rights Act' -- Something similar in scope to LBJ's 'Civil Rights Act of 1964'

However, instead of it being about racial, ethnic or social issues, the modern Civil Rights Act would be an economic 'Magna Carta'; a compact establishing economic fairness including perhaps a debtor's 'Bill of Rights', elimination of APR rates on all loans including credit cards, stricter controls on banking fees, etc...

5)  Corporate & Small/Medium Tax breaks for hiring -- BUT (and this is Key), the businesses Must demonstrate they've hired workers First and then get the deductions.

Currently tax breaks are given under the hope or assumption that businesses will take that savings and use it to create jobs.. Much like TARP was given in the hope banks would lend again but with no obligation for them to do so.  And so quite often, they don't.  Temp workers hirings would not count.

6)  Break the banks up -- Obama should have temporarily nationalized the banks for a period of 9-18 months, and in meantime push hard for re-establishment of the Glass-Steagall Act which placed a firewall between consumer and more risky banking and was repealed under Clinton.

Once nationalized, each of the Big 4- Bank of America, JP Morgan Chase, Wells Fargo and Citibank are broken up into 'baby' banks with more regionalized control, much like Standard Oil was broken into 20 or so smaller off-chutes.

Alas!..  So many other things the Obama Administration could have done to improve the economy, but he didn't choose to or wish to, and so the economy is still a mess.  I'ts not getting better any time soon, and the national & global economic forecast is considerably gloomier now than it was in January.

What did Wall St expect?!

Let's start with today's big news from AP:

"Stocks fell sharply Friday after the release of a dismal report on hiring and employment in the United States. The Dow Jones industrial average dropped more than 200 points, leaving it down for the year.

American employers added just 69,000 jobs in May, the fewest in a year, and the unemployment rate increased to 8.2 percent from 8.1 percent. Economists had forecast a gain of 158,000 jobs."

As of 2:45p, the Dow is -235.  And who knows, maybe magically by 4p, the Investors will manipulate it up into plus territory but we'll assume not..

Now the only two relevant questions worth asking is 'What did Wall St. expect?!' and following-up with "Where were these magical jobs supposed to come from?"

In trying to answer these questions, its important to understand that job creation comes from one of three areas-- government, corporations or private small-medium businesses.  That's it..

 So let's take a moment to analyze each sector:

1.  Government  

Wall Street i.e corporations love to complain about the size of government; its too bloated, too bureaucratic, too this.. too that.  In fact during the Great Depression of the 1930s, Republicans fought FDR bitterly at every step as he expanded government hiring so people could have jobs and means to support themselves instead of being jobless and ultimately homeless.

Wall St's belief was it government hiring took workers away from the private sector.  More specifically, how could corporations be able to pay workers $3 day if the government was offering work at $5?

The concept works like this-- A job is offered at $10/hr.  In a normal economy, it would be $15 but because the employer is getting thousands of resumes from desperate applicants, $10 it stays.  Now if the Government comes along and hires thousands of people at $16/hr, then that business will be forced to have to offer $16/hr and perhaps only get a dozen applications.

Aren't businesses wonderful?

So when state and local governments are firing people left and right-- teachers, firefighters, police, etc, in a desperate bid to meet budget (unlike the Federal Government, US states and municipalities are not allowed to carry budgetary debts into the next fiscal year) Wall St. ought to be happy piggies.

That's what they want right?

Here's another sad irony-- all those hundreds of thousands of brave men and women who serve in the Armed Forces and fight our endless wars overseas... Well, they don't do it for free.  Who pays them?  The Government, thus they are government employees.

So its a catch-22 for Wall St-- decrease government hiring so you have more and more people out of work and desperate for whatever pittance of a wage the private sector will give, but then you don't get to have those 'fun' wars anymore which allow corporations profits to grow even more than in peacetime.

Quite a dilemma...

2.  Corporations

So sizable job hiring is not coming from the public sector.  Guess that means corporations are ready to pick up the slack, yes?

""The weaker jobs report translates into anticipation of slower growth ahead and weaker corporate earnings, and that ratchets stock prices lower", said Todd Salamone, director of research for Schaeffer's Investment Research"

Ah.. so that means if corporate earnings aren't strong, they won't hire..  Then again when corporate earnings are strong and they can rely on temps to do the jobs full employees with benefits used to do, that isn't so good either.

And if Wall St wants improved job hiring as they claim, why do they celebrate every time a major corporation plans to fire tens of thousands of workers?

When times are bad economically, its called "downsizing".  When times are good, its called "restructuring".  Either way, what happens is something like this:  Company X decides it will layoff 25,000 workers.  This pleases shareholders greatly-- more profit-- and the company stock rises which attracts more investors.

~ Last week HP stated plans to lay off 27,000 workers in next 12-18months

Now Company X doesn't truly eliminate 25,000 people.. they will eliminate perhaps 75-80% but then re-hire the remaining 20-25% at lower wages or simply use temporary workers who get no benefits, job security or employee rights.  Short of sexually harassing a temp, you can pretty much do what you want to them and never have to worry about litigation.

So as the previous quote stated, Wall St isn't upset specifically that people aren't getting hired.   It just means more temps and more people dependent on credit cards to survive.  Its the thought of 'weaker corporate earnings' that's the real kick to the crotch.

3)  Small to Medium sized Businesses

So if the public sector is shedding jobs to meet budget and corporations only want to hire temps, we guess its this sector that's creating all the jobs right?

Well it is true that more people work in small to medium sized companies than corps or government jobs, but nonetheless, how is Mom & Pop stores really expected to survive in the broader US economy?

Rather than get tax breaks like the corporations, they get pounded with taxes.  And there is no such thing as a "too big to fail" for a company that has 250 employees.  If they are in a financial bind because people aren't buying their products or services, who do they go to for bailouts?

Overall, small to medium businesses are shedding jobs, not hiring.

It is also more and more difficult to create new businesses.  Banks won't lend and the Government does very little to provide grants and start-up assistance to budding entrepreneurs (yet have no problem loaning 18yr olds tens of thousands of dollars to go to college to major in Partying)

Every major corporation listed and publicly traded on Wall St. started as a small to medium sized business...  Every One.
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Before this post concludes, we want to help put the 69,000 new hires for the month of May into a clearer context because large numbers always have a way of being glossed over and manipulated.

If you divide 69,000 new employees in May by 50 US states, it equals 1,380 new employees per state on average.

Perhaps in a population like Alaska-- about 627k people, an increase of 1,380 jobs in a month isn't so terrible.  But Alaska is not the norm-- they rank 48th in US population.

How does 1,380 new jobs created in one month look in a state like Illinois with population of approx 12.9 million?   Or Florida with approximately 16 million people residing there?

Let's break the numbers down a little further...

Let's say the 69,000 new jobs for May was divided evenly over 50 states, and from there, the 1,380 jobs were divided evenly over counties. For this example, we'll stick with Florida, which has 67 counties.

So 1,380 divided by 67 = 20.59 (we'll round up to 21 people per county).

Dividing 16 million people into 67 counties, it averages 23,880

* On average 21 new jobs created per 23,800 people per county in FL..

So we end with the questions posed at the beginning: What did Wall St expect?  and Where were these magical jobs supposed to come from?