Tags: Chao | unemployment | avalanche | regulations

Former Labor Chief Chao: ‘Avalanche of Regulations’ Hurts Labor Market

By    |   Wednesday, 10 Oct 2012 01:52 PM

Regulations slapped on the financial sector and elsewhere are scaring businesses away from hiring new workers and are keeping unemployment rates elevated, said former Labor Secretary Elaine Chao.

The U.S. unemployment rate fell to 7.8 percent in September from 8.1 percent in August, as employers added a net 114,000 jobs, while households reported that total employment rose by 873,000 in September.

But the improvement was largely due to increased demand for part-time workers and not due to fundamental improvements taking place in the labor market.

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Blame the Dodd-Frank financial reform law, the president’s healthcare overhaul legislation and other regulations hampering recovery, especially by scaring small businesses away from hiring due to the regulatory and tax uncertainty they bring.

“Small businesses are important — two-thirds of the net new jobs are being created by small businesses. So that is why the government’s policies have got to cultivate and encourage the establishment of small businesses,” Chao told Newsmax TV in an exclusive interview.

“Small businesses will suffer tremendously, much more than big companies, if the government is very heavy-handed with tax policies and if the government is very heavy-handed with regulations that it issues from the executive branch,” said Chao, labor secretary under President George W. Bush.

“The avalanche of regulations coming out of the executive branch has a very serious and real dampening effect on job creation.”

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

While new policies might have businesses putting off expanding to deal with compliance issues, some also come with tax hikes.

The Affordable Care Act, for example, calls for tax hikes on investment income.

President Barack Obama has also proposed letting tax breaks already in effect expire for wealthier Americans.

Meanwhile, September’s drop in the overall unemployment rate came from more Americans finding part-time positions, as some economists have suggested political campaigns have been hiring younger Americans looking for work as Election Day approaches.

Even with an unemployment rate below 8 percent, however, the labor market is still far away from seeing lasting improvement.

The unemployment report is the product of an array of analyses, including two surveys, one of employers and one of households.

The employers survey reveals how many new jobs were created, thus it grabs more headlines, though still, the current number doesn’t depict an economy gaining serious steam.

“The employment survey revealed that last month in September the economy produced about 114,000 net new jobs. That is still far below the 250,000 net new jobs which our economy needs to produce just to keep even with population growth,” Chao said.

The household survey, which revealed that 873,000 people found work albeit most of which was part time, still represents a small snapshot into the health of the economy.

In other words, marked improvement needs to take place in all areas of the labor market before the economy resembles its pre-recession self, and not just an uptick in younger Americans finding part-time jobs.

“Many young people graduate in June, they take the summer off and they start to look for jobs in September," she said. "Many of these jobs are temporary or part-time jobs, and that is very troubling because what it means is these young people from the ages of 22 to 34 or 36 are entering part-time jobs, and that is because they cannot find full-time jobs, and it speaks again to the lethargy of our economy and the sluggishness of our economy,” she said.

The household survey might guide the unemployment rate, but it stems from a small sample.

“It’s only 60,000 households in a population of 300 million. It will fluctuate a great deal,” Chao said.

“I think it’s premature to conclude anything about the economy — we need to have more than a one-month snapshot as to what is happening in our economy to determine if the economy is really coming back.”

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown


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Regulations slapped on the financial sector and elsewhere are scaring businesses away from hiring new workers and are keeping unemployment rates elevated, said former Labor Secretary Elaine Chao.
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Wednesday, 10 Oct 2012 01:52 PM
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