Breaking news (I’m not surprised!): May Jobs report is a disappointment!

Posted on June 4, 2010 by

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President Obama and his Vice President are happy to report “job growth” for 5 months in a row!  Nonfarm payrolls up 431,000 in May but this number doesn’t paint the whole picture. Although unemployment is down by 0.2% from 9.9% to 9.7%, job Growth did not meet most economists expectations, but I can’t say that I am surprised.  Of those 431,000 new jobs, only 41,000 are productive private sector jobs (failed to meet expectations).  The government added 390,000 jobs.

It seems to me that despite federal budget deficits in the trillions of dollars, the size of government is still increasing and crowding out private sector investment.  As long as the public sector keeps growing and financing its growth with present and future/expected tax receipts, private sector growth will remain sluggish.  Individuals and firms are forward looking, investment decisions depend not only on current but also future time periods.  Government debt implies that tax rates will have to increase eventually, and America will continue to lose its competitiveness.  These expectations can help explain why despite 3 quarters of economic recovery, the private sector remains reluctant to hire.

Don’t let America turn into a “Big Government” style european nation. The end result is what we’ve seen in Greece, but with US debt levels that exceed the GDP of the top performing European countries, no economy or institution will be large enough to bail us out!  A debt crisis in the US will only mean austerity, and a much lower standard of living for the next generations (your children and your grandchildren!)

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