It’s hard to make sense of all the headlines, reports and analysis on the subject of US September employment figures. The private sector is creating a few jobs, but not as many as are being shed by the public sector. The numbers being created are not even enough to keep pace with the growing numbers of people of working age coming into the marketplace, caused by population growth, let alone start helping the 7 million back to work, who lost their jobs in the 2008 recession.
The picture is far more bleak than the headlines suggest.
The figures are, of course, reported in the financial media, who always want to keep a positive spin to keep asset values nice and high, where politicians also want them. If a realistic report about the real employment picture was allowed out, the President, facing his mid-terms next month would not be happy.
The current optimism in the markets is courageous given the huge problem that’s growing in the employment field. The bulls imagine that another large quantitative easing will boost the economy, and are keeping faith with the growth story based on the continuing idea of the Fed acting as Deus Ex Machina. But as is apparent from the first quantitative easing, the money doesn’t make any jobs. It simply gets sucked into investment markets, temporarily driving up share markets and commodity markets, which will eventually crash again once the money feed dries up. Nothing changes at street level, where the problems are.
If anything, QE adds to the employment problem by driving up the prices of vital commodities such as energy. If commodity prices were able to fall, and if the minimum wage were reduced, this would do far more to get employers hiring once more than throwing yet more trillions of dollars into asset markets.
It’s a bit like a doctor treating the symptoms and not the underlying causes. If workers rights were removed, and minimum wage was reduced to a sensible level, employers might dare to hire once more. Most have been burned with claims from lawyers backing up incompetent or dishonest staff who they’ve had to fire in the past, and have seen their costs rise with the minimum wage rising from $5 to $7 in 2007, driving up the level of all wages. The employment market needs employment market measures, not more financial ones such as the much-hyped QE2.
If prices could come back down, of labor, of commodities, and the legal risks of employing people removed, then employers might start the process of investing once more. By delaying the inevitable, and throwing yet more cash into the pool, there will arguably be even fewer jobs after more QE than before. It’s change that’s needed, not more and more money, which merely inflates asset prices, which otherwise could fall back to more realistic levels.
The real world is waiting for those who imagine financial fixes can override political errors, to give up their games.
These are the measures which will get Americans (and others) back to work –
1. Cut the minimum wage.
2. Stop inflating asset prices with excess cash.
3. Allow commodity and real estate markets to fall and find their floor.
4. Get rid of the masses of so-called workers rights which merely act as a disincentive to employ, and raise costs.
That means, to get more jobs, cancel all thoughts of quantitative easing, and deal with the real problem, the relationship between employers and employees. Allow the market to adjust, which it will do if it’s given a chance. It may be painful but a lot less painful than the even bigger financial crisis that is being created every time the Fed turns on the taps, enabling the current power-holders to maintain the status quo just a little bit longer.