Jobs Report Shows Better Policies Needed

Although Friday's jobs report reflects a growing economy, the government must change its policies in order to foster sustainable, long-term job growth.
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The Labor Department announced the economy added 162,000 jobs in March, confirming my forecast for 150,000, which was more conservative than the consensus.

As expected, temporary census jobs contributed a significant but not overwhelming 48,000 to the jobs total.

The private sector gained 128,000 new positions. This reflects moderate GDP growth -- something in the range of 3% for the balance of 2010 -- and that's not enough to bring down unemployment, which remains at 9.7%.

As expected, manufacturing continued to show new verve, adding 17,000 jobs. After a long decline, America's factories have added some jobs each month for the last three months. They have a long way to go to recreate the more than five million factory jobs lost over the last decade.

In a big surprise, construction gained about 15,000 jobs. The residential sector stabilized, and gains in commercial construction likely reflected stimulus spending. The latter should not be viewed as permanent.

GDP growth must speed up to more than 4% to accomplish the jobs growth necessary to replace the more than eight million jobs lost during the Great Recession and bring unemployment down to 6% over the next three years.

The 5.6% GDP gain posted in the fourth quarter of 2009 reflected accounting adjustments -- mostly slower rates of drawdown in inventories. Sustainable growth -- demand by private consumers, businesses for expansion, and government -- only grew 2%.

The present mix of policies from Washington won't accomplish the 4% or 5% growth needed.

Strong growth requires policies to fix the huge trade deficits on oil and with China, and to address the crisis among America's community banks, which finance small and medium-sized businesses.

The president's recently announced policies to expand development of U.S. oil resources and build more fuel-efficient vehicles are not nearly aggressive enough, and bow to environmentalists in ways that are counterproductive to keeping the oceans clean, reducing emissions and creating jobs.

Regarding China, the president continues to procrastinate about confronting Beijing on its undervalued currency and mercantilist trade policies. The president needs to define broad macroeconomic and general trade policies -- such as a tax on dollar-yuan conversions and government procurement policies that offset Chinese protectionism.

Without stronger policies, GDP and employment growth will remain subpar and Americans will face a tough jobs market.

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.