Sick And Tired

Bear with me. This post takes a while to get to the point, but there is one.

obama was bumbling around my neck of the woods yesterday, trying to divert attention from the Benghazi hearings and at the same time fool people into thinking he's doing something to improve the economy.

Obama touts economic recovery in visit to Austin area

President Barack Obama came to Texas on Thursday to tout the economic recovery...

Traveling to the heart of a state that bounced back quicker than many after the deep recession, Obama said the government has a role in fostering policies to encourage innovation, improve education and help assure middle-class jobs and opportunity.

Obama was greeted by a half-page ad in the Austin newspaper from Gov. Rick Perry that tweaked the president, saying the lesson he should take from Texas is that economic success is the product of low taxes, light regulation and protecting businesses from lawsuits.

Gov. Goodhair has a point. barry is claiming that recent stock market gains and rising economic indicators justify whatever it is he's doing to improve the economy (Can anyone name three things obama has done that have stimulated the economy? Anyone? Bueller...?)

But underlying those optimistic and IMO misleading reports is the ugly fact that the U.S. job market is a train wreck.

For all the positivity about the April jobs report—lowest unemployment rate in four years!—the U.S. job market remains dismal. One statistic makes the point: Just 58.6 percent of American civilians aged 16 and up had jobs in April, according to the Bureau of Labor Statistics. That’s a lower employment-to-population ratio than during the worst of the 2007-09 recession. Even though the jobless rate has fallen, millions of people aren’t counted as unemployed because they’ve stopped looking for work, or never started.

The breakdown of the labor market can be blamed on either supply or demand. Those who argue that the supply of labor is the main problem say that many Americans simply aren’t qualified for the jobs available. On May 7, the BLS reported that there were more than 3.8 million job openings in the U.S. at the end of March—at a time when more than 11 million people were looking for work.

The “supply” case hinges on the notion that the working world is getting more complicated and demanding. “Complexity has opened a great divide between those who have mastered its requirements and those who haven’t,” Brink Lindsey, a senior fellow at the Cato Institute and the Kauffman Foundation, argues in a new book, Human Capitalism. The economists’ term of art for this is “skill-based technical change.”

One fact supporting the "American's aren't qualified" argument is that our institutions of higher education are doing a poor job of preparing graduates for life after college - students are taught to memorize and repeat, not to think. In my experience, there's quite a bit of truth in that accusation, as indicated by the graph below.

The other side of the coin is that the skills mismatch is a short-term and fixable problem. The real issue is that the economy is too feeble to create new jobs.

Getting the U.S. economy producing at full potential would add about $950 billion to annual gross domestic product and go a long way toward putting people back to work. For the Fed, accelerating economic growth through monetary policy is Job One. Alas, for Congress, which controls taxing and spending, faster growth appears to be Job Two, behind trying to shrink the federal budget deficit. Hence the January tax increases and the March sequester, both of which weigh on growth.

Both the supply and the demand arguments have merit. Other factors are in play as well. Automation has decreased manufacturing and other related jobs, while many white-collar jobs have moved offshore where they can be done cheaper.

But it's not an either/or problem. It's a complex and interrelated problem that requires multiple approaches to resolve

Five years since the start of the unemployment crisis, the problem with the U.S. labor market isn’t weak supply or weak demand. It’s both. At the same time, plenty of good and innovative ideas for how to put more Americans back to work are out there. Fixing aging infrastructure is a job generator that’s a no-brainer at today’s low interest rates. Youth jobs programs need more funding, not less. Jeff Madrick, a senior fellow at the Roosevelt Institute, calls for a revival of “Fordism”—Henry Ford’s sensible idea of paying workers enough to afford what’s for sale. All that’s needed is the will to act. Tackling Unemployment, a new book by Ruth Ellen Wasem on the Employment Act of 1946, describes how postwar Americans made up their minds that they would not let the economy slip into another Depression. “There was a sense of ‘let’s do it,’ a can-do spirit,” Wasem says in an interview. A little of that American swagger would go a long way right now.

I'm doing my part. Next week is my last week at work before I retire and open up a slot for some ambitious young junior professor.

Except I've learned that my duties will be filled by part-time adjunct professors, who already teach a few assorted classes. Thus one full-time position is being eliminated, shrinking the number of available jobs. One of the reasons given is that this alternative is cheaper. Part-time adjunct professors do not get benefits, such as healthcare.

obamacare strikes again...

And that's the point of this post. Until we stop creating what economists call disincentives and start creating a positive environment for job creators, this stagnant economy will persist.