Despite the claims of the Barack Obama administration, the stimulus package has
created or saved few jobs. This is best seen in the absolute absence of growth
in state and local government employment.
From December 2007 to February 2009, or the first 14 months of the recession,
state and local government employment increased by 128,000. From February
through May 2009, which closely approximates President Obama's first 100 days
of stimulus spending, state and local employment decreased by 2,000. I simply
can't find progress in those numbers. Private construction employment, of all
kinds, continued to fall.
The employment situation is improving in the sense that the rate
of loss in the private sector, overall, is slowing. But that is the natural
process of the economy correcting and bracing for a recovering. Gross domestic
product (GDP) will bottom out sometime this summer but unemployment will
continue to rise into 2010.
The economy will simply not grow fast enough to absorb all the new entrants
into the labor force - jobs creation will not equal the natural increase in the
number of workers
The stimulus package will help raise growth in 2010 and 2011 and add 2.5
million to 3 million jobs. Those will hardly offset the 7 or 8 million that
will be lost once the carnage is over, and those created jobs will be
temporary, only lasting an average of two years each.
The stimulus package was poorly conceived. Not enough is devoted to hard
projects, and little of the spending will stimulate permanent growth. The Obama
administration would do well to stop the wild claims of having created or saved
150,000 jobs in the first 100 days and promising another 600,000 over the next
100 days.
This is not a campaign any more. At some point, the promise must turn into
prosperity. Campaign slogans, polemics and political spending that rewards
supporters won't resurrect growth or prosperity.
Meanwhile, the Commerce Department report on Wednesday reports April
international trade in goods and services. The US trade deficit on goods and
services is expected to rise to $28.7 billion from $27.6 billion in March. My
forecast is $29.9 billion.
Trade with China and oil imports comprise more than 90% of the deficit. The
deficit with China is expected to increase as consumer spending recovers, but
the oil import bill is expected to rise on higher prices.
At 2.5% of GDP, the trade deficit subtracts more from the demand for US goods
and services than Obama's stimulus package adds. Moreover, the lift from the
Obama stimulus is temporary, whereas the drag from the trade deficit is
permanent.
In 2009, the trade deficit is slicing $400 billion to $600 billion off GDP,
and, longer term, it reduces potential annual GDP growth to 3% from 4%.
Manufacturers are particularly hard hit by this subsidized competition. Through
recession and recovery, the manufacturing sector has lost 5.3 million jobs
since 2000. Following the pattern of past economic expansions, the
manufacturing sector should have regained about 2.7 million of those jobs,
especially given the very strong productivity growth accomplished in durable
goods and throughout manufacturing during the expansion.
Lost growth is cumulative. Thanks to the record trade deficits accumulated over
the last 10 years, the US economy is about $1.5 trillion smaller. This comes to
about $10,000 per worker.
Peter Morici is a professor at the Smith School of Business at the
University of Maryland, and former chief economist at the United States
International Trade Commission.
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