Tags: Morici | Jobs | Economy | Slow

Morici to Moneynews: Jobs Report Proves Economy Stuck in Slow Motion

By    |   Friday, 02 November 2012 12:24 PM

The October jobs report may have beaten expectations, but a look at longer-term labor trends depicts an economy failing to create enough payrolls needed for more robust recovery, said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland.

The Bureau of Labor Statistics reported that the U.S. economy added 171,000 jobs in October, well above market forecasts for a gain of around 125,000.

The headline unemployment rate rose to 7.9 percent from 7.8 percent in September, as more jobless workers jumped back into the labor force and began looking for work.

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Unemployed workers who aren't actively seeking work are not counted as part of the labor force.

While the news was positive, don't break out the champagne and toast to better days ahead, as too many Americans remain out of work.

"It's a decent report if we were at full employment," Morici told Newsmax TV in an exclusive interview. "Unfortunately the economy has close to 8 percent unemployment and to bring that down to 6 percent over three years you would have to create about 350,000 jobs a month."

President Ronald Reagan saw unemployment rates rise to 10.9 percent early in his first term, but managed to lower the rate by pushing through policies that fueled economic growth.

That's not happening now.

"No matter what number you take for the last several months — up, down, in between, first, third or seventh revisions — they all show too few jobs being created given the kind of fix we are in and that the policies we are pursuing just don't work."

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

Policies that would fuel growth today include increasing oil and gas drilling at home and getting tough on China and its artificially weak exchange rate, which gives the country an unfair advantage in the global trade arena and cuts into U.S. competitiveness and growth.

In the meantime, the economy will continue plodding along in a stop-and-go fashion, with growth rates of around 2 percent, thanks to a lack of political will in Washington to get tough on China and to drill more for hydrocarbons at home.

Economic indicators will continue to paint a mixed and often conflicting picture, such as consumer confidence reports that come in better than expected one day and factory output figures that disappoint the next.

"The problem seems to be that we are stuck not in neutral but in slow," Morici said, noting that the economy is adding too many part-time jobs and not enough full-time positions filled by college graduates or older Americans who cannot afford retirement.

Job demand might increase in the coming months, as the Northeast rebuilds after Superstorm Sandy, while the country's gross domestic product (GDP) could see a spike in growth as well.

"We are poorer for Sandy. Our national wealth has been lowered by $20 billion in destroyed property. Yet because we try to rebuild, our income flow, our GDP, actually goes up," Morici said.

"Wealth is down, but income is up and that means more jobs but it is temporary."

Turning to earnings, expect more unpleasant surprises similar to third-quarter results, marked by companies missing revenue and profit estimates and others slashing forecasts.

A cooling global economy will cut into revenues, especially among big companies with heavy exposure to European and Asian markets.

"The only way they can boost profits is to cut employment, and then that sets the economy on a negative feedback cycle. I don't see profits improving until there is an overall improvement in the global macroeconomic picture," he said.

That means pushing through policies that prompt China to strengthen its currency, such as by slapping taxes on currency conversions when it comes to importing from China and for investing in China.

Don't expect much help out of Europe, however, at least if GOP presidential nominee Mitt Romney wins the election.

"Knowing the French as they are and knowing the Germans as they have been recently, I don't know that we could expect a lot of support from them if it was done by a President Mitt Romney. If President Obama did it, I think we'd get more support in Europe," Morici said.

"He promised to do something in 2008 when he campaigned just like Mitt Romney is promising now and has simply failed to act."

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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The October jobs report may have beaten expectations but a look at longer-term labor trends depicts an economy failing to create enough payrolls needed for more robust recovery, said Peter Morici.
Friday, 02 November 2012 12:24 PM
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