Jobs Are the Least of Our Worries

11/08/2011 9:37 am EST

Focus: MARKETS

John Mauldin

Chairman, Mauldin Economics

The national employment picture is scary enough, but it portends even worse news for the general economy, notes John Mauldin of Outside the Box.

With seven kids, jobs have been on my mind of late. It has not been easy for some of them.

It helps me to remember what it was like to be in my 20s in the 70s, and really struggle to pay the rent and put food on the table for a family. Savings? Hah!

And while I have been able to help the kids here and there, back then there was no one to help me. More than a few nights, I woke up with a knot in my stomach, wondering whether to pay rent or make payroll. College did not prepare me for the "joys" of being an entrepreneur.

Interest rates were 18%…if you could even find a bank in Texas to lend on hard receivables. Unemployment was north of 8% and sometimes 10%. The Japanese were beating our brains out.

It was the Carter malaise years. All my friends were struggling as well, so it seemed normal. Kind of like now.

And I know I have written this before, but it bears repeating. The correct answer then, as it is today, to the question, "Where will the jobs come from?" was "I don’t know, but they will." That is what free markets and entrepreneurs do: they create jobs where none existed, given the chance.

And that’s how it looks today. Last week’s ISM and jobs reports augur poorly for employment in the coming months. Jonathan Tepper of Variant Perception writes this week:

"Economists miss the start of recessions for two reasons:

  1. they focus on coincident-to-lagging data
  2. they use data series that are heavily revised, rendering them useless in real time.

"For example, most mainstream economists did not recognize the beginning of the last recession that began in December 2007 until mid-2008. Leading indicators had plunged, yet coincident and lagging data continued to be positive.

"However, once the data for non-farm payrolls and GDP were revised, the loss of employment and the loss of economic output were much greater than had originally been estimated. In all likelihood, we are seeing a similar dynamic play out today.

"All of our leading indicators have been pointing down since early spring. Now many unrevised short leading indicators are pointing towards weakness in employment, output, and asset prices. The GDP-weighted employment reading for ISM services and manufacturing is now clearly below 50. The last times this happened were before the 2001 recession and before the 2008 recession."

You can’t read any serious economic analysis of late that does not talk about jobs, whether in Europe or the US or Asia. And not a lot of it is pretty.

Politicians offer "plans" for jobs, most of which go to great lengths to illustrate the sympathy they have for people out of work, but without offering any real ideas on how to create meaningful, lasting jobs. Some are actually destructive of jobs, far from creating any (these are of the "I’m from the government and I’m here to help" variety).

How are jobs created? What policies should governments adopt to help create jobs? How do we get back to full employment in the US in a Muddle Through economy that needs at least 125,000 jobs a month just to keep up with population growth? (We learned that in October, new employment was just 80,000.)

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