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Issue of the week: Recovery, interrupted
The poor outlook on unemployment is raising doubts about the prospects of a healthy recovery in the economy.
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he still-sour jobs outlook is raising doubts about the economy’s resilience, said Peter Goodman in The New York Times. The U.S. lost 85,000 private-sector jobs in December, the Labor Department announced last week, “as hopes for a recovery ran headlong into the prospect that paychecks could remain painfully scarce into next year.” The unemployment rate remained at 10 percent, but only because the government removed from the labor force 661,000 unemployed workers who have given up looking for jobs. Add in those “discouraged workers” and part-time workers who’d rather be working full-time, and the unemployment rate jumps to 17.3 percent. The downbeat December report came with a sliver of a silver lining, however: Revised figures from November showed that the economy added 4,000 jobs that month. All the same, “the disappointing snapshot of the job market intensified pressure on the Obama administration to show results” from the $787 billion stimulus bill that Congress passed last year.

Good luck with that, said Louis Woodhill in RealClearMarkets.com. The flood of government spending isn’t creating jobs, it’s destroying them. That’s because “huge federal deficits are squeezing capital out of the private sector.” Instead of lending to businesses, banks are lending their money to the federal government, by purchasing Treasury bonds and “parking their reserves, which have increased by more than $1 trillion since the crisis hit,” in Fed accounts that pay above-market interest rates. Obama’s wrongheaded environmental policies are also killing jobs, said Diana Furchtgott-Roth, also in RealClearMarkets.com. Last week the president unveiled an initiative to boost production of alternative energy by awarding $2.3 billion in tax credits to makers of clean-energy technology. Those tax credits “would add to the economy’s inefficiency, diverting resources from productive to unproductive sectors.” If Obama wants to spark a hiring boom, he’ll let companies “explore America’s own oil and natural gas.” Instead, “he risks regulating jobs out of existence.”

It’s not too late to reverse course, said former Labor Secretary Elaine Chao in TheDailyBeast.com. With all their talk of new regulations, higher taxes, and health-care mandates, the president and his Democratic allies in Congress have sown uncertainty among business owners, who have responded by hunkering down. “Employers are not hiring because they fear that all these conditions” will rob them of the profits they need to afford more workers. What America’s unemployed really need is “a timeout on government actions that increase the burdens on the private sector and impede hiring.”

Government isn’t the problem, said Robert Barbera and Charles Weise in the Financial Times. Quite the opposite, in fact. Prompt, bold actions by U.S. policymakers have dramatically reduced the “panic” that drove many businesses to lay off workers willy-nilly and dump inventory at fire-sale prices during the worst of the financial crisis. “As order is restored to the real economy, inventories and payrolls should revert to normal levels, setting the foundation for a solid recovery.” Let’s hope Obama shows more patience than his critics.

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