Analytical Reasoning - Free Market Style

Economists, journalists, market gurus, consultants, and researchers of all types are using one hand and then the other in trying to explain the U.S. job situation. The first point to be made is that the situation is complex, and keeping the faith is not enough (Billy Joel's fine song notwithstanding).

Data Point # 1: U.S. Lags in Job Growth - WSJ.com: "One year into the global recovery, the U.S. is lagging far behind other major economies in restoring jobs lost in the recession.

A Wall Street Journal analysis of employment trends in 11 countries suggests that manageable debt burdens and healthy banking systems—areas in which the U.S. doesn't excel—are proving to be crucial factors in creating jobs.
Brazil and Chile, neither of which suffered banking crises, have seen the strongest job growth since the beginning of the recession, according to data from the Organization for Economic Cooperation and Development and the International Labor Organization. In April, total employment in the two Latin American countries was up 4.5% and 6.8% from December 2007, respectively...Proximity to the booming economies of Asia has helped job creation in some cases. Australia has managed to boost total employment by 3.7% through May, thanks in part to trade in commodities such as iron ore with Asian countries that never went into recession.
Australia's banks also emerged from the financial crisis largely unscathed.
By contrast, total employment in the U.S. in June was down 4.8% from December 2007. Businesses have been reluctant to hire amid difficulties getting loans from financially wounded banks and uncertainty about how long it will take consumers—a key driver of the U.S. economy—to pare down their large debt loads..." (bold font added by blogger for emphasis).

***When did the WSJ suddenly wake up and realize that the U.S. does not have excel in manageable debt burdens and healthy banking systems? Did a healthy U.S. banking system suddenly become unhealthy? How did the disciples of Adam Smith suddenly end up with unmanageable debt burdens? What happened during the times of the great free market mavens George Bush, Greenspan and Helicopter Ben?***

Data Point # 2:BofA Says It Incorrectly Hid Debt - WSJ.com: "Bank of America Corp. admitted to making six transactions that incorrectly hid from view billions of dollars of debt, following a bid to cut the size of a unit's balance sheet and meet internal financial targets.

The disclosure, made in a letter to the Securities and Exchange Commission, comes as the agency prepares to unveil the results of an inquiry into banks' accounting for borrowing deals known as repurchase agreements, or 'repos.' ...
The bank's disclosure also suggests the trades may be an example of end-of-quarter 'window dressing' on Wall Street, in which banks temporarily shed debt just before reporting their finances to the public. The practice, which The Wall Street Journal has uncovered in a series of articles, suggests the banks are carrying more risk most of the time than their investors or customers can easily see, and then juggling it during quarter-end reporting of financials."

***So, the banking system is not getting healthy, but continuing to abuse the public trust and money***

Data Point # 3: Why Andy Grove Is Wrong About Job Growth - BusinessWeek: "Third, the majority of new jobs created in the U.S. aren't created by companies like Intel, but by startups. The Kauffman Foundation's analysis of Census Bureau statistics shows that net job growth in the U.S. economy occurs only through startup firms. From 1977 to 2005, existing companies were net job destroyers, losing 1 million net jobs per year. In contrast, new outfits in their first year added an average of 3 million jobs annually."

***Wadhwa claims that startups drive job growth and multinationals like Intel are net job destroyers.***

Data Point # 4:Immigration Can Fuel U.S. Innovation—and Job Growth - BusinessWeek: "...Take a recent study by the McKinsey Global Institute on U.S. multinational corporations. In Growth and competitiveness in the United States: The role of its multinational companies, the consulting firm notes that big business comprises less than 1 percent all U.S. companies, yet the 2,270 multinational corporations in its database accounted for 31 percent of the growth in inflation-adjusted gross domestic product from 1990 to 2007. Even more important, U.S. multinational corporations have contributed 41 percent of gains in labor productivity since 1990—and 53 percent of the productivity increases during expansions...."

***Chris Farrell cites the august McKinsey- that multinationals account for disproportionately high share of growth and productivity...but Wadhwa claims that these multinationals are job destroyers. If startups are creating massive numbers of jobs, that should drive or be driven by growth. Companies like Apple, Google, CAT, and others are delivering the growth, and small businesses and startups are struggling. The ones that make it to a certain level are trying to cash in by selling to the large firms.***

Data Point # 5:Immigration Can Fuel U.S. Innovation—and Job Growth - BusinessWeek: "The consultants highlight the role immigrants play in bolstering the competitiveness of American multinationals, especially helping the U.S. 'lead the world in the number of engineers, scientists, and business professionals who are ready to work in a multinational company.'..It's well-known that America's high-tech economy has prospered thanks largely to highly educated foreigners. But the degree that the nation's cutting-edge industries, from semiconductors to biotechnology, depend on immigrant scientists, engineers, and entrepreneurs to remain competitive is stunning. For example, a quarter of the engineering and technology companies started in the U.S. from 1995 to 2005 had at least one founder who was foreign-born, according to research by scholars Vivek Wadhwa, Annalee Saxenian, Ben Rissing, and Gary Gereffi. In Silicon Valley, America's epicenter of technological innovation, the percentage of immigrant-founded startups reached 52 percent of total new companies over the same period."

***The key question is the trend of employment at these startups. What is the survival rate and how many of the survivors sell to the multinationals?***

Data Point # 6: Small business cautious about hiring - chicagotribune.com: "...Intuit Inc., a Mountain View, Calif., provider of payroll services for small employers, says the nation's tiniest companies had fewer new hires last month than anytime since October.
The data are further evidence of a trend that has had many economists worried for months and intensifies concerns that smaller firms may not be robust enough to help lead the country out of its financial slump. The slowdown in hiring is particularly troublesome, experts say, because small businesses typically hire first during a recovery. A reluctance by little companies to add positions could mean that the big firms, which typically lag behind, will add jobs even more gradually..."

***Expecting start-ups and small businesses to deliver fast job growth does not appear to be realistic***

Data Point # 7:Businesses step up criticism of Obama's agenda - Yahoo! News: "...The U.S. Chamber of Commerce, a lobby that represents big businesses, is to lay out its concerns with Obama's policies at a 'jobs for America' summit Wednesday in Washington. Chamber CEO Tom Donohue is to issue an open letter to Obama and Congress that will urge 'immediate action to address the new regulatory stranglehold placed on America's job creators.'
Douglas Holtz-Eakin, an economist who was a top adviser to 2008 Republican presidential candidate John McCain, said Obama's agenda has 'nothing in it' for the business community...In comments that echoed those of some prominent chief executives and business groups, Holtz-Eakin called Obama's recently passed healthcare plan and proposed legislation to cap carbon emissions examples of regulatory overreach. He also said large budget deficits are spurring uncertainty and worries among businesses about the potential for higher taxes...

Ivan Seidenberg, chief executive of Verizon Communications, in a speech last month said there was a 'disconnect' between Washington and the business community that is harming job growth...The sweeping financial regulatory reform that is close to passage in Congress is another point of criticism for some groups representing business and finance..."

***data point # 2 clearly hits home the point that the finance industry continues to engage in shenanigans. However the Chamber of Commerce continues to pound Obama for trying to put some measly regulations to restrain the monster. In this effort the COC is ably supported by the WSJ ***

___________________________________________

It is wise for everyone, especially the COC and the WSJ, to take note of Dr. Grove's observation - "...Most Americans probably aren't aware that there was a time in this country when tanks and cavalry were massed on Pennsylvania Avenue to chase away the unemployed. It was 1932; thousands of jobless veterans were demonstrating outside the White House. Soldiers with fixed bayonets and live ammunition moved in on them, and herded them away from the White House. In America! Unemployment is corrosive. If what I'm suggesting sounds protectionist, so be it...."

P.S. the bold font that appears in this post is added by the blogger for emphasis- it does not appear in the quoted articles.