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Morici: Friday's Jobs Report to Indicate Whether Economy Improving

NEW YORK (TheStreet) -- President Obama has been touting an improving economy, even as he pleads for more "emergency" jobless benefits. The December jobs report will help indicate whether things are really getting better, or the president should fess up -- after five years, his economic policies are not doing enough to fire up growth and create jobs.

Recent data indicate the economy has neither been improving nor is there any new emergency. During the three months ending in November, the Labor Department estimates the economy added 193,000 jobs each month, whereas during the first three months of 2013, the monthly count was 207,000.

The economy did expand at a strong 4.1% pace in the third quarter, but some 40% of that growth was in stock-building. Retailers and others filling shelves and warehouses with goods customers did not buy, but scored that stock by GDP accountants as "inventory investment." Hence, most economists expect businesses to adjust purchases and for growth to slow to something in the range of 2.5% -- only marginally better than the pace set since the recovery began in 2009.

Industry surveys indicate retail sales did pick up in December, but retailers cleared out inventories by slashing prices. Hence, Chinese and Korean exporters made lots of money sending clothes and electronics to American holiday shoppers, but U.S. businesses did not profit much marking up those goods for sale to consumers. That generates little reason for optimism about future hiring.

On the plus side, housing remains strong, but much has been driven by investors from abroad seeking a politically secure parking place for wealth by purchasing real estate in Manhattan, the more elegant sections of other cities and warm weather properties in Florida and southern California. Importantly, young families, who compose the vast majority of first-time home buyers and domestic additions to demand and price push have remained on the sidelines.

Forecasters expect the Labor Department to report the economy created about 200,000 in December -- not much improvement or much decline from the record of recent months.

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The unemployment rate should stay at about 7%, largely because so many adults remain discouraged or stuck in part-time jobs. Factoring in those folks, the jobless rate becomes 13.2%. Getting unemployment down to 6%, while employing those folks at the margins of the labor market, would require about 365,000 jobs each month for three years.

What continued mediocre jobs growth shows is that Obama's redistributionist policies -- such as some of the highest taxes on businesses in the industrialized world and dysfunctional subsidies for middle class health insurance -- don't create growth or nearly enough jobs. The same goes for Statist policies -- such as business regulations more burdensome than necessary to accomplish reasonable safety and environmental objectives, endless lawsuits brought on banks, free trade agreements with government run Asian economies, and prohibitions on U.S. energy production.

More importantly, mediocre jobs growth indicates Obama's policies, by suppressing the demand for workers and wages, are adding to income inequality rather than addressing it constructively, in my opinion.

America can do better -- it can be a more prosperous and fairer society. However, the country needs for the president to radically change his policies, or wait for a radically different president.

Peter Morici is an economist and professor at the University of Maryland Robert H. Smith School of Business.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.

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