BuzzCharts spent much of 2003, 2004, and 2005 rebutting the media mantra that the U.S. was experiencing a “jobless recovery.” While unemployment rates bobbed between the upper end of 4 percent and the lower end of 6 percent, the press sang dirges about the “worst job market since Herbert Hoover.” So why is it that nobody seems to mention a “jobless recovery” anymore, especially with the unemployment rate marching toward 10 percent?
The data now confirm that we really are in a jobless recovery. Unemployment just hit 9.5 percent, with few signs of a momentum reversal. And we just passed a historic milestone: Our jobless rate has eclipsed that of France. And why not? American labor policy is rapidly mutating toward the Gallic model of wage floors, heavy unionization, and central planning, while French policy under Sarkozy is inching toward a supply-side formula for growth.
The interesting thing about this jobless recovery is that chainsaw personnel policy isn’t to blame. We’re not firing many people: Terminations have fallen to a fairly moderate level, and monthly layoffs have plunged in the last few months. Initial jobless claims also are falling. The problem is that we’re not hiring many people, either. It’s the Euro-model of non-dynamism — jobs can be neither created nor destroyed.
Meanwhile, we’re starting to hear calls for a second stimulus program. Let’s get the math right first. Under Obama, we just had the second stimulus program, since the first was launched under Bush last year. So we’re now discussing a third stimulus effort, with administration officials sounding the alarm: “The patient’s blood pressure is dropping. We need more leeches, stat!”
Truth is, we’re not mired despite the stimulus plan, but because of it. Entrepreneurs are not mindless beasts who simply expand operations when the government rings the fiscal dinner bell. They know today’s spending explosion will be financed by future tax increases. They know that every government check handed to a social worker, AmeriCorps “volunteer,” or United Auto Worker will be paid for, eventually, by the entrepreneurial and investor class — and they are planning accordingly.
They also know that their unemployment-compensation taxes will rise every time a stimulus plan extends unemployment benefits. Unemployment “comp” is run kind of like an insurance program: Each time one of your ex-employees gets a check, your rates go up. Who other than a community organizer, lobbyist, or solar-panel salesman would hire in an environment like this?
Health care figures in, too. If I’m going to be forced to offer an Obama-designed, gold-plated health-insurance plan to my employees (or face a penalty for each employee not so benefited), every person I hire is a potential long-term health-care liability. This already has begun with the changes to COBRA (a government health-care provision for laid-off employees) in Stimulus II. Wait until Obamacare arrives.
Want Euronomics? Get ready for perpetually high, Euro-style unemployment rates. Want low unemployment rates and robust American-style growth? Bring back the proven model of small government, spending restraint, and low tax rates.
– Jerry Bowyer is an economist, CNBC contributor, and author of the upcoming Free Market Capitalist’s Survival Guide.