Jobs Report Reflects Bigger Problems: Opinion

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- The economy added only 120,000 jobs in March -- not even enough to keep up with normal population growth. The unemployment rate fell to 8.2%, but only because many unemployed adults became discouraged and quit looking for work.

Fourth-quarter economic growth was exceptionally strong as the global economy recovered from first-half disruptions such as the earthquake in Japan, but first quarter growth has been slower. Construction -- both commercial and single-unit residential -- has been hard hit, and now auto sales are slipping.

Manufacturing added 37,000 jobs, but that sector's strong recovery should be generating more gains. Elsewhere, jobs gains were weak and generally down from February.

Construction shed 7,000 jobs, and retailing lost 34,000 employees, as stalwarts like Sears ( SHLD), J.C. Penny ( JCP) and Best Buy ( BBY) face considerable challenges.

Gains in manufacturing production have not instigated stronger improvements in employment largely because so much of the growth is focused in high-value activity.

> > Bull or Bear? Vote in Our Poll

Outside the auto patch, assembly work remains handicapped by the exchange rate of the Chinese yuan. And concerns about the durability of the recovery and health care costs when Obamacare is fully implemented make employers very cautious about adding to payrolls.

Overall, the situation with the yuan is the single largest impediment to more robust growth in manufacturing and its broader multiplier effects for the rest of the economy. The Obama Administration indicated it has no intention of challenging China on this issue, but presumptive GOP standard bearer Mitt Romney promises a harder line.

Government employment fell by 1,000 as private-sector jobs added 121,000. Lower property values translate into lower assessments with considerable lag in most communities, and in 2012 and 2013, the housing recession will significantly impact local tax receipts and employment. Coupled with federal budget cutbacks, government employment should continue falling.

Excluding temporary businesses services and the heavily subsidized health care and social services industries, the private sector added only 98,000 jobs.

In the months ahead, gains in core private-sector employment must improve dramatically if the economy is to halt the decline in real wages and provide federal, state and local governments with adequate revenues.

The economic crisis in Europe and mounting problems in China's housing sector and banks are causing U.S. businesses to worry about a second major recession and are discouraging new hiring. The U.S. economy continues to expand but is quite vulnerable to shock waves from crises in European and Asia.

Factoring in those discouraged adults and others working part time for lack of full-time opportunities, the unemployment rate is about 14.5%. Adding college graduates in low-skill positions, such as baristas at Starbucks ( SBUX), and the unemployment rate is likely closer to 18%.

Prospects for lowering those dreadful statistics remain slim. The economy must add 13.0 million jobs over the next three years -- 362,000 each month -- to bring unemployment down to 6%.

Growth in the range of 4% to 5% is needed to get unemployment down to 6% over the next several years. In the fourth quarter of 2011, the economy grew at about 3.0%, but that is expected to slow to 2.5% in 2012.

Growth is weak and jobs are in jeopardy, because temporary tax cuts, stimulus spending, large federal deficits, expensive and ineffective business regulations, and costly health care mandates do not address structural problems holding back dynamic growth and jobs creation. These problems are the huge trade deficit and dysfunctional energy policies.

Oil and trade with China account for nearly the entire $600 billion trade deficit. This deficit is a tax on domestic demand that erases the benefits of tax cuts and stimulus spending.

Simply put, dollars sent abroad to purchase oil and consumer goods from China, that do not return to purchase U.S. exports, are lost purchasing power. Consequently, the U.S. economy is expanding at 2% a year instead of the 5% pace that is possible after emerging from a deep recession and with such high unemployment.

Industrial policies such as federal bailouts for General Motors ( GM) won't fix the jobs market. They just shift employment from more competitive enterprises. Payroll tax holidays are similar bandaids; they buy jobs today at the expense of cutbacks in 2013 and the years that follow.

Without prompt efforts to produce more domestic oil, redress the trade imbalance with China, relax burdensome business regulations, and curb health care mandates and costs, the U.S. economy cannot grow and create enough jobs.
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.

If you liked this article you might like

Economy Would Be Better Off With a Republican President

Economy Would Be Better Off With a Republican President

A Professor's Message for the Holidays: Time to Celebrate!

A Professor's Message for the Holidays: Time to Celebrate!

Paris Climate Conference Is a Bad Deal for America

Paris Climate Conference Is a Bad Deal for America

Weak U.S. Jobs Growth Is Only Part of a Bigger Problem

Weak U.S. Jobs Growth Is Only Part of a Bigger Problem

What Walmart's and IBM’s Troubles Really Tell Us About the U.S. Economy