| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

Follow Finfacts on Twitter

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

Analysis/Comment Last Updated: Mar 8, 2012 - 7:27 AM


Dr. Peter Morici: Report to show fewer US jobs added in February; Burden of consumer debt, gas prices and trade deficit
By Professor Peter Morici
Mar 8, 2012 - 7:22 AM

Email this article
 Printer friendly page
President Barack Obama tours Daimler Trucks North America Mt. Holly Truck Manufacturing Plant in Mount Holly, North Carolina, March 7, 2012. On this part of the tour the President saw the Chassis Airing Station where multi-colored nylon air lines are installed for the brake system.

Dr. Peter Morici: On Friday, forecasters expect the Labor Department to report the US economy added 204,000 jobs in February, down from 243,000 in January. My estimate is 180,000.

Despite anecdotal reports of new hiring and consumer optimism, weaker jobs gains are likely for the next few months, because real consumer spending, the largest component of economic growth, was flat November, December and January. Auto sales are doing well but higher gasoline prices are crowding out most discretionary purchases.

Unemployment is expected to remain at 8.3% in February, as jobs creation barely outpaces population growth. Over the past three years, the%age of adults participating in the labor force—those employed, self employed, or unemployed but looking for work—declined significantly. If the adult participation rate was the same today as when Barak Obama became president, unemployment would be 11%.

Adding adults on the sidelines, those who say they would reenter the labor market if conditions improved and part-time workers who would prefer full-time positions, the unemployment rate becomes 15.2%. Factoring in college graduates in low skill positions, like counterwork at Starbucks, and unemployment is closer to 20%.

Too Little Economic Growth: Fourth quarter economic growth was 3.0%, but for all 2011 it averaged only 1.7%.

Stronger real consumer spending in September and October, plus a surge in inventory investment and multi-family home construction, pushed up fourth quarter growth. However, the increase in household spending outpaced disposable income, debt piled up, and consumer activity stalled the next three months. In addition, higher gasoline prices are absorbing too much of the modest advances in nominal household income.

Sluggish consumer spending indicates businesses will have trouble unloading unsold goods and slow inventory investments, and together those will lower first quarter growth. A bit stronger non-residential construction and auto sales will help, but overall GDP will grow at or below 2% in the first quarter—hardly enough to inspire businesses to add many more workers.

For the second quarter, things look brighter. Consumers will have assimilated higher gasoline prices and consolidated their credit positions by April, and further growth in household income should result in stronger real consumer outlays beyond the auto sector.

New Policies Needed: The economy must grow 3%—long term—to keep unemployment steady, because advances in technology permit labor productivity to increase 2% each year and population growth pushes up the labor force about 1%.

If conditions are mediocre and businesses cautious, productivity can slip—equipment and computers are kept beyond their economically useful lives. Then unemployment can be kept steady with 2.5% growth or even 2% but that poses risks.

The economy growing 2 or even 2.5% is like an airplane flying at low altitude. The plane can keep going, but the slightest unexpected obstacle and the plane ditches—such difficulties may soon emerge in Europe or China.

The economy must add 13.2m jobs over the next three years—367,000 each month—to bring unemployment down to 6%. GDP would have to increase at a 4 to 5% pace—that is possible after a long deep recession but for chronically weak demand for US made goods and services.

Oil and trade with China account for nearly the entire $550bn trade deficit, and dollars sent abroad to purchase oil and Chinese goods that do not return to purchase US exports are lost purchasing power. Consequently, the US economy is growing at 2% instead of the 4 to 5% pace that is possible after a long and deep recession.

Without prompt efforts to produce more domestic oil and redress the trade imbalance with China and the rest of Asia, the US economy cannot grow and create enough jobs.

Peter Morici,

Professor, Robert H. Smith School of Business, University of Maryland,

College Park, MD 20742-1815,

703 549 4338 Phone

703 618 4338 Cell Phone

pmorici@rhsmith.umd.edu

http://www.smith.umd.edu/lbpp/faculty/morici.html

http://www.smith.umd.edu/faculty/pmorici/cv_pmorici.htm

Check out our new subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

It's a simple fact that in the prevailing economic climate, the provision of high quality content cannot be sustained through advertising alone. 

Business executives who put a premium on time and value high quality information, should use our service.

Related Articles
Related Articles


© Copyright 2011 by Finfacts.com

Top of Page

Analysis/Comment
Latest Headlines
Disastrous 44-year War on Drugs and ignoring the evidence
HSBC & Tax Evasion: France/ Belgium issued criminal charges; UK/ Ireland nothing
Analysis: Germany world's top surplus economy; UK tops deficit ranks
Facts do not always change minds - can even entrench misinformed
Finfacts changes from 2015
Facts of 2014: Guinness not Irish; 110 people own 35% of Russia's wealth
In defence of dissent and Ireland's nattering nabobs of negativism
Dreams of European Growth: France and Italy facing pre-euro economic problems
Globalization's new normal needs permanent underclass - Part 1
MH17 and Gaza: who is responsible?
Israel vs Palestine: Colonization set for major expansion
Aviva Ireland's 'fund' runs dry and life cover to die for
We wish Martin Shanahan - new IDA Ireland chief - well but...
Ireland as an Organised Hypocrisy is in lots of company
Dr Peter Morici: Friday’s US jobs report won’t alter Fed plans to raise interest rates
Own Goal: Could FIFA have picked worse World Cup hosts?
Ireland: Spin and spending will not save bewildered Coalition
Irish Government parties set for 2-year vote buying spending spree
European Parliament: Vote No. 1 for Diarmuid O'Flynn in Ireland South
Dr Peter Morici: US April jobs report may show 215,000 added in April
Dr Peter Morici: Hardly time to call Obamacare a success
Celtic Tiger RIP: Change in conservative Ireland six years after crash
Dr Peter Morici: Five things to know about the Fed’s obsession with inflation
In age of acronym/ Google, Trinity to rebrand as 'Trinity College, the University of Dublin’
Hoeness case part of ‘painful’ change for Swiss bankers
Dr Peter Morici: The Cold War was only on vacation
Dr Peter Morici: US economy drags on Obama's approval ratings; Don’t look for changes in Washington
Dr Peter Morici: Bitcoin debacle shatters the myth of virtual money
Dr Peter Morici: US Tax Reform: Eliminate the income tax and IRS altogether
Wealth threatens the simple life in Gstaad, Switzerland
Irish journalists get cash payouts over 'homophobic' defamation claim
Irish academics get lavish pension top-ups as private pensions struggle
Dr Peter Morici: Inequality is President Obama’s highest priority, but solutions are naive
The Finfacts Troika: Better times ahead and a hangover to forget?
Dr Peter Morici: Volcker Rule arrives with the hidden jewel in Dodd-Frank financial reforms
Ireland's toothless fiscal watchdog threatens to bark
Analysis: Germany's current account surplus - - Part 2
The end of western affluence?
Bono's hypocrisy on Africa, corporate tax avoidance in Ireland
France like Ireland is run for the benefit of the old