Tuesday, August 16, 2011

Jobless Recovery...or Just a Jobless Non-Recovery?

Recent headlines have pondered the apparent paradox of economic recovery without corresponding increases in jobs – called the “jobless recovery” by some.  I believe I have resolved the apparent conundrum using a detailed analytical technique.  Don’t blame your politicians because few of them are familiar with this methodology, and no liberal has ever heard of it.  I like to call this special technique…common sense.

The nation’s Gross Domestic Product (GDP) is an oft cited indicator of economic well being.  United States’ GDP, in real dollars, fell in 2008…then fell more in 2009…then supposedly increased in 2010.  Woo Hoo!  Recovery!  Right?  If it was a sign of recovery, then where are all the jobs?

Liberals have the answer: big, bad corporate America shipped them overseas!  Not to mention all those evil companies that found ways to do the same, or more, work with fewer employees.  Who knew we would all be giving up our minimum wage jobs to be replaced by an electronic kiosk?  Of course, if the electronic equivalent of a primate can do your job maybe it was time to get some new skills anyway.  I hate to say it, but liberals are wrong again (I think we should call Guinness and see if it’s a new world record).

In reality, we don’t have jobs because we also don’t have a recovery.  The calculation for GDP includes government spending except for all transfer payments (thinks like social security, welfare, unemployment, etc.).  Based upon the Bureau of Economic Analysis’ (BEA) numbers, nominal GDP increased more than what is attributable to non-transfer payment government spending increases in 2008, 2009, and 2010.  However, if transfer payments to citizens are included in government spending, then government spending increases actually outpaced GDP increases.  These numbers are tabulated, below.

Gov't Spending
Nominal GDP
GDP change from 2006
Gov't Spending Change from 2006

Government transfer payments are normally excluded from GDP because these monies are accounted for in other measures of GDP.  In other words, the government gives someone money, that person spends it on alcohol and cigarettes, then the BEA measures it when it computes the production of alcohol and cigarettes.  If it counted it as government expenditures towards GDP it would effectively be counted twice.

If you’re a liberal, you’re thinking that I’ve just proven social welfare works to stimulate the economy.  “See!  When the government spends everyone wins!”  However, if you’ll put down your granola and “medicinal herbs” I can explain why this isn’t a good thing.  The fact that government spending accounts for the apparent increase in GDP explains why there are no jobs: there is no recovery.  In fact, there is further economic decline.  It might be tempting to suggest the government’s spending improved the economy, but these transfer payment increases are mostly attributable to unemployment benefits or “stimulus” monies; all of which are temporary and limited either by mandate or by national debt crisis, or both.  Bona fide economic recovery by the private sector would be based upon long-term prospects and real economic benefit (such as real demand). 

Real government stimulus would build new infrastructure that generates new economic activity.  It would be evidenced by continued economic output after the government’s spending was completed.  However, there has been no such stimulus coming from the U.S. government; therefore, there will be no government-funded economic recovery.  It is questionable if there ever has been (don’t get me started on FDR and the Great Depression).  The bottom line is that we will not see job recovery until the private sector has reason to believe it is safe and profitable to invest in U.S. jobs.  For the slower readers (if you voted for Obama you’re a slower reader…in case you were wondering), that means United States must become business friendly again: less regulation, or at least stop adding more regulations; more favorable tax structures; and a secure national currency.

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