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Obama and Romney Stop Arguing, Will Both Need to Deliver Jobs

Politics / Employment Oct 18, 2012 - 02:33 PM GMT

By: DeviantInvestor


George Leong writes: Watching the presidential debate on Tuesday, one thing was clear: both President Obama and Governor Mitt Romney were focusing on the jobs market. This was not a surprise.

Wall Street is not hiring, technology companies are firing, and the manufacturing sector is losing jobs to cheap overseas plants in China and Mexico, where wages are dirt cheap.

We are seeing more college graduates work at low-level jobs just to pay the bills, never mind their massive student loans. The reality is that given the dire situation in the jobs market, it will likely take years to resolve, and the mounting student loans will take decades to pay off.

Whether you sided with Obama or Romney, there is one common enemy, and that is the lack of strong and sustained jobs growth in America’s jobs market.

Obama is telling us about the surprise decline in the unemployment rate to 7.8% in September; while encouraging, the rate is well below that of the previous year.

Let’s take a closer look at the unemployment rate, based on data from the Bureau of Labor Statistics. The reading was the lowest since a 7.3% unemployment rate in December 2008, but the number remains well below the four percent level we saw during 2006 and 2007. The unemployment rate has improved from the recession high of 10.0% in October 2009, which was the highest level since the 10.8% in the December 1982 recession.

The trend of the unemployment rate, as you can see in the graph below, shows the improvement since August 2011, when over nine percent of Americans were officially unemployed in the jobs market. It took close to five years for the unemployment rate to fall below six percent in 1987 from the 10.8% in 1982. A breach below five percent was made in 1997.

The jobs market is even worse when you consider that the consensus among economists is that the country would need to add 500,000 jobs monthly to make a dent in the unemployment rate and get it moving towards full employment at approximately six percent.

The problem that I continue to see is that the number of officially unemployed in the jobs market stood at a stubborn 12.1 million in September; although it’s down from the recession high of 15.4 million in October 2009, it’s also well above pre-recession low of 6.7 million in March 2007. (Source: Bureau of Labor Statistics.) That’s still 8.7 million jobs that need to be recovered; but then there’s the unofficial 22.5 million unemployed, according to the U.S. Debt Clock.

Obama and Romney have different strategies for lowering the unemployment rate and growing the jobs market.

President Obama asked Congress to extend the Bush-era tax cuts to those making under $250,000 a year, which represents the majority of working Americans. The current plan is scheduled to end at the end of December, but I doubt anything will be done, due to the political gridlock in Washington.

Republican candidate Romney wants the cuts to apply to all income earners. While I’m not here to take a side, the tax cuts are critical, especially to the lower- to middle-class Americans. Without the extra cash, this key spending group will likely be hesitant to spend, which in turn would restrict the money flow into the retail sector and, ultimately, the economic recovery,

While the extension of tax cuts is hopeful, there continues to be a deeper-rooted structural issue that needs to be addressed in the jobs market, such as the movement of jobs to outside the country. Look at India and the Philippines, and you’ll see tens of thousands of lost American jobs. Move to the assembly lines in China, and you’ll realize the amount of lost jobs. The reality is that America’s jobs market is failing. Of course, you can always tell yourself how much better you have it compared to the massive unemployment in the eurozone, including a greater than 25% unemployment rate in Greece, Spain, and Italy.

But the government will be hard-pressed to fund significant capital for projects and the jobs market, given the nearly $16.0 trillion in U.S. national debt.

Unfortunately, the road to fix up the economy and jobs market will lie with the next President; in the meantime, we will continue to hear the bickering between the parties.


By George Leong

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

Copyright © 2012 Investment Contrarians- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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