July 8th, 2009 | 
Author: The latest report issued by the Bureau of Labor Statistics (BLS) on July 2 showed that payrolls declined by 467,000 jobs more than the 345,000 lost in May, and that’s much higher than the 363,000 that economists had predicted.
Why it wasn’t predicted is unclear though, since a report that was issued April 29, by the Bureau of Economic Analysis (BEA) showed “an accelerating decline in real nonresidential fixed investment”, and a decrease of 37.3% in the first quarter of 2009, compared with a fall of 21.7% in the fourth quarter of 2008.
Since a large amount of private business investment (PBI) is used to offset depreciation and increasing productivity, it takes a 5% year-over-year increase in PBI to produce a 1% increase in the number of jobs.
The unemployment rate a year ago was 5.5% and because the potential labor force is growing, we need employment to increase by 1% annually in order to keep the unemployment rate from going up, and given that employment is a direct, linear function of private business investment (PBI), unemployment can be expected to rise to about 14% within a year, unless the downward slide of PBI is reversed.
After Bush’s $168 billion stimulus package in early 2008 seemingly had no impact at all, Obama rushed a $787 billion stimulus bill through Congress in January, but the major problem with Obama’s plan is that the government needs to sell $787 billion in government bonds, and many of the people that will buy them will be businessmen that otherwise might have used their money to expand their businesses, or keep people on their payrolls.
Up until now, $400 billion in non-tax-break stimulus money has been used, but much of it is getting spent on existing lawyers, consultants, white-collar lobbyists and litigators with little of it going to actual construction and job creation.
USA Today recently reported that only $2 million of stimulus money has so far been spent in Michigan which has the nation’s highest unemployment rate, and that works out to just 21 cents per Michigander.
Keith Hennessey, who is the former Assistant to the U.S. President for Economic Policy and Director of the U.S. National Economic Council says, “The President’s mistake was in largely deferring to Congress on the composition of the stimulus bill. Rather than allowing Congress to pump hundreds of billions of dollars through slow-spending and inefficient bureaucracies, the President should have insisted that Congress instead send all the funds directly to the American people and let them spend it quickly and efficiently. Given his policy preferences, he could have directed a large share of those funds to poor people who don’t pay income taxes”.
So what happens next?
Well, President Barack Obama said, “There’s nothing that we would have done differently”.
Democratic Sen. Claire McCaskill of Missouri says the idea of a second stimulus is a “non-starter”, whereas Democratic Sen. Sheldon Whitehouse of Rhode Island says it “should be on the table”.
Senate Majority Leader Harry Reid (D-Nev.) says there’s “no showing that a second stimulus is needed”, but House Majority Leader Steny Hoyer (D-Md.) says Congress needs to be “open to whether we need additional action”.
Senate Minority Leader Mitch McConnell (R-Ky.) said, “Down home, we used to say there’s no education in the second kick of a mule. Now, why in the world there would be any conclusion reached after looking at the results of the first stimulus that the way to deal with that is to pass yet another one, it’ is mind-boggling”.
The first Rasmussen Reports daily Presidential Tracking Poll to come out after the release of the unemployment figures showed that 32% of the nation’s voters now strongly approve of the way that Barack Obama is performing his role as President and thirty-seven percent (37%) strongly disapprove, giving Obama a presidential approval index rating of -5 which is his lowest to date.
The number of investors who say the economy is getting worse jumped from 43% before the jobs report to 51%, and consumer confidence fell to the lowest level in two months.
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