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Friday, forecasters expect the U.S. Labor Department to report the 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 percentage 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%. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Friday, forecasters expect the U.S. Labor Department to report the economy added only 120,000 jobs in November, after scoring a nonplus 80,000 gain in October. The three-month moving average stands at 120,000 jobs, a pace inadequate to much lower unemployment.

The unemployment rate is expected to stay at 9.0%, mainly because so many displaced professionals report themselves as “self-employed,” when working only a few hours a week from home.

Even before escalating troubles in Europe and China are considered, the economic outlook is mediocre, with gross domestic product growth expected at about 2%–hardly enough jobs to absorb adult population growth. With Italy likely to default in a manner similar to Greece, and new questions raised about China’s accounting practices, fraudulent stock and bank reports, and inflation and growth statistics, all risks are to the downside.

Without more assertive efforts to address America’s structural problems–huge trade deficits with China and on oil, and ineffective and expensive regulations in banking and health care, America is headed for a protracted period of high youth unemployment and permanent displacement of many older workers. These conditions are not destiny–solutions are at hand but leadership and a genuine willingness to compromise, absent excessive partisanship, are required to progress. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Analysts expect the Commerce Department to report on Wednesday the deficit on international trade in goods and services was $47.7 billion in March, up from $45.8 billion in February.

This trade deficit subtracts from demand for U.S.-made goods and services, just as a large federal budget deficit adds to it. Consequently, a rising deficit slows economic recovery and jobs creation and limits how much Congress and the President may cut the deficit without sinking the economic recovery.

Rising oil prices and imports from China are driving the trade deficit up, and these are major barriers to creating enough jobs to pull unemployment down to acceptable levels over the next several years.

Jobs Creation

The economy added 244,000 jobs in April; however, 360,000 jobs must be added per month to bring unemployment down to 6% over the next 36 months. With federal and state governments trimming civil servants, private-sector jobs growth must exceed 360,000 per month to accomplish this goal.

Americans have returned to the malls and new car showrooms but too many dollars go abroad to purchase Middle East oil and Chinese consumer goods that do not return to buy U.S. exports. This leaves too many Americans jobless and wages stagnant, and state and municipal governments with chronic budget woes.

Simply, policies regarding energy and trade with China are not creating conditions for the 5% GDP growth that is needed and easily could be achieved to bring unemployment down to acceptable levels.

In April, the private-sector added 268,000 jobs per month, but many were in government-subsidized health care and social services. Netting those out, core private-sector jobs have increased only 229,000 in April. That comes to 73 non-government-subsidized jobs per county for more than 5,000 job seekers per county.

Early in a recovery, temporary jobs appear first, but 22 months into the expansion, permanent, non-government-subsidized jobs creation should be much stronger.

Economic Growth

Since the recovery began in mid 2009, GDP growth has averaged 2.8%, disappointing administration economists who have consistently assumed 4% growth in budget projections and forecasts for the job-creating effects of stimulus spending.

Consumer spending, business technology and auto sales have added strongly to demand and growth, and exports have done quite well. However, soaring oil prices and the continued push of subsidized Chinese manufactures in U.S. markets have offset those positive trends.

Administration imposed regulatory limits on conventional oil and gas development are premised on false assumptions about the immediate potential of electric cars and alternative energy sources, such as solar panels and windmills. In combination, administration energy policies are pushing up the cost of driving and making the United States even more dependent on imported oil and indebted to China and other overseas creditors to pay for it.

To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing undervalues the yuan by 40%. It accomplishes this by printing yuan and selling those for dollars and other currencies in foreign-exchange markets.

Presidents Bush and Obama have sought to alter Chinese policies through negotiations, but Beijing offers only token gestures and cultivates political support among U.S. multinationals producing in China and large banks seeking additional business in China.

The United States should impose a tax on dollar-yuan conversions in an amount equal to China’s currency market intervention divided by its exports–about 35%. That would neutralize China’s currency subsidies that steal U.S. factories and jobs. It is not protectionism; rather, in the face of virulent Chinese currency manipulation and mercantilism, it’s self defense.

These are the views of Thomas Lam, group chief economist at OSK Group/DMG & Partners:

Following a bunch of apparently softer-than-expected releases earlier, the April labor market report on Friday took on more prominence. The increase of 244,000 April non-farm payrolls combined with upward revisions of 46,000 in the prior two months was respectable. The fairly widespread gain in private (goods-producing up 44,000 and service-producing up by 224,000) employment of 268,000 was inspiring. But the continued contraction in government jobs of 24,000 (mainly in state and local governments–down 22,000) was not a surprise.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Economists expect the Labor Department will report the economy added 185,000 jobs in April, after adding 192,000 in February and 216,000 in March. While stronger than in prior months, jobs growth remains too weak, and the economy is in danger of slipping into a second recession. Longer term, the nation faces fundamental structural problems that neither political party seems willing to address in a comprehensive and systemic fashion.

In the first quarter, bad weather slowed construction activity, rising gas and health-care prices tapped off consumer dollars and weakened demand in other sectors, and defense and state and local government spending slowed. GDP growth was a paltry 1.8%–much less than economists forecasted in January and well below the minimum sustainable rate.

Growth less than 2% to 2.5% is not sustainable, because many businesses can meet such modest growth in demand by improving productivity and laying off workers to maintain margins in the face of rising energy and other commodity prices. Layoffs slice household income, and a negative cycle of reduced spending begins.

Indeed, the four-week moving average for new unemployment claims moved up to 408,000 for the week of April 23 from 390,000 the week of April 2. A rate below 350,000 is consistent with a strong economy and above 400,000 is perilously close to recession levels.

Without stronger growth in the second quarter, the economy will cycle down into recession–it can’t likely continue to drag along at about 2%.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Friday, the U.S. Labor Department reported consumer prices were up 0.5% in March, driven by 3.5% and 0.8% jumps in energy and food prices.

This is the fourth straight month of large gains in consumer prices. While food and energy prices may be volatile, international conditions indicate commodity prices will continue surging, and the Fed’s emphasis on core inflation is absolutely misplaced.

With inflation running at 6% a year, it will be tough for the Federal Reserve to deny inflation and continue quantitative easing and low interest rates generally. Similarly, with unemployment likely to remain above 8% for the balance of the year, the Fed will find it tough to raise interest rates too much.

The U.S. economy is headed for stagflation thanks to failed banking and international economic policies that lie largely beyond the Fed’s control.

Continue reading…

(These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission.)

Federal finances are in shambles, and Americans should be amused if not disgusted by the explanations and solutions both political parties offer.

President Obama’s budget plan issued in February projects a $1.6 trillion deficit for 2011 and a cumulative shortfall of $11 trillion through 2021.

Things may get worse, as additional revenue and cost savings from health care reforms don’t materialize and the 4% growth assumed by the president’s budget for the next four years proves Pollyanna.

Time and again, Obama and House Democratic leader Nancy Pelosi have demagogued the problem, blaming two wars and tax cuts instigated by President Bush and the Great Recession.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The Labor Department reported Friday that the economy added 216,000 jobs in March. After adding 194,000 jobs in February, this indicates the economy is finally gaining momentum. First-quarter growth will likely be a bit higher than 3%.

Unemployment ticked a notch lower to 8.8% on the strength of jobs growth. Unlike past months, this improvement could not be attributed to adults leaving the labor force.

These gains are in sharp contrast to weaker gains the previous 13 months, and largely resulted from stronger, potentially self-sustaining private-sector jobs growth.

As measured by gross domestic product, the economic recovery began in July 2009; however, the economy did not begin adding jobs until January 2010, and gained only 76,000 jobs a month through January 2011. Too many of those job gains were created by stimulus spending, temporary business services, and health care and social services, which are heavily subsidized by federal and state governments. Job gains in the core private sector–private employment less temporary business services, and health care social services and temporary business services–averaged only 47,000 a month.

Core private-sector jobs are so important, because those have the potential to set off a virtuous cycle of hiring, consumer spending and more hiring. In March and February, this barometer of private sector vitality gained 183,000 and 157,000 new positions, respectively. Similarly strong core private-sector gains will be needed to continue adding 200,000 or more new jobs each month going forward.

The jobs drought may finally be over but important challenges remain.

Gains in the range of 200,000 a month are not enough to push unemployment down to acceptable levels. Continued dependence on foreign oil, the growing trade deficit with China, and health care and tax policies that penalize the location of businesses in the United States are responsible for slower jobs creation than has been accomplished during past recoveries and that could still be achieved.

The economy must add 13 million private-sector jobs over the next three years–360,000 each month–to bring unemployment down to 6%. Core private-sector jobs must increase at least 300,000 a month to accomplish that goal.

The economy is expanding at a 3% annual rate and this is barely enough to hold unemployment steady, because the working age population increases 1% a year, and productivity advances about 2%. Growth in the range of 4% to 5% is needed and possible to get unemployment down to 6% over the next several years.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Economists expect the Labor Department will report on Friday that the economy added 200,000 jobs in March. After adding 192,000 jobs in February, this would indicate the economy is finally gaining some flying speed; but if the jobs figure falls significantly short of 200,000, the economic recovery is in a lot of trouble.

Since July 2009, gross domestic product has been growing at a bit less than 3%–just enough to keep pace with productivity growth at 2% and population growth at about 1%.

After adding fewer than 100,000 jobs per month in the 13 months ending in January, the private sector is finally starting to create jobs in significant numbers that are not temporary or in the government-subsidized health care and social services sector.

If the March jobs figure comes in at less that 165,000, that would indicate higher oil prices and political conditions in North Africa and the Middle East, renewed weakness in the housing market, uncertainty about the federal deficit and sovereign debt crises in Europe, as well as supply-chain disruptions from the Japanese crisis are slowing growth to 2.5%, perhaps less.

Growth in the range of 2.5% is hardly sustainable–any hiccup would then cause a negative cycle of renewed layoffs, consumer pessimism, falling retail sales, more layoffs, and ultimately, recession. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Friday, economists expect the Labor Department will report the economy added 200,000 jobs in March. After adding 192,000 jobs in February, this would indicate the economy is finally accomplishing momentum.

The February gain was in sharp contrast to weaker gains the previous 13 months, and largely resulted from stronger, potentially self-sustaining private sector jobs growth.

As measured by GDP, the economic recovery began in July 2009, but the economy didn’t begin adding jobs until January 2010.

Through January 2011, the economy only gained 77,000 jobs a month, mostly thanks to stimulus spending, temporary business services, and health care and social services, which are heavily subsidized by federal and state governments. Job gains in the core private sector — private employment less temporary business services, and health care social services and temporary business services — averaged only 45,000 a month.

Core private sector jobs are so important because those have the potential to set off a virtuous cycle of hiring, consumer spending and more hiring. In February, this barometer of private sector vitality gained 170,000 new positions. A similarly strong core private sector gain will be needed to add 200,000 new jobs overall in March. If that is accomplished, we may finally be getting someplace. Continue reading…