114,000 New Jobs Is Not Nearly Enough

NEW YORK (TheStreet) -- The economy added 114,000 in September, down from 142,000 in August and not nearly enough to keep pace with population growth.

The unemployment rate decreased to 7.8% because the number of self-employed jumped dramatically. With the economy growing so slowly many of these are likely workers laid off during the economic collapse who have established home-based businesses.

In the weakest recovery since the Great Depression, nearly the entire reduction in unemployment from its 10% peak in October 2009 has been accomplished through a significant drop in the percentage of adults participating in the labor force -- either working or looking for work. Were the adult participation the same today, the unemployment rate would be 9.8%.

The most effective jobs program appears to be to convince working-aged adults they don't need a job.

Growth slowed to 1.3% in the second quarter, as consumers pulled back and the trade deficit on oil and with China continued to drag on demand. The outlook for the second half of the year is not much better. Car sales are stronger than a year ago, but are not likely to move up much further, and housing prices have risen in recent months but often on weak volumes.

The September jobs report indicates growth remains slow in the third quarter -- likely in the range of 2% or less.

Job gains were unevenly spread. Manufacturing and temporary help services lost 16,000 and 2,000 jobs, respectively, adding to concerns that the recovery is sputtering and a recession is eminent.

Gainers included retail trade, education and health care, leisure and hospitality, transportation and warehousing, financial services, and information and communications.

Construction gained 5,000 jobs, and federal, state and local governments added 10,000 jobs.

Gains in manufacturing production have not instigated additional improvements in employment largely, because so much of the growth is focused in high-value activity. Assembly work, outside the auto patch, remains handicapped by the exchange rate situation with the Chinese yuan.

Recent moves by China to further close its markets to stimulate its own flagging manufacturing indicate matters will get worse without a substantive response from Washington.

Also, concerns about health insurance costs, once Obamacare is fully implemented, are discouraging employers. Mandated services raise costs and regardless of their merits, make adding employees more expensive at a time of great stress for most businesses.

The financial crisis in Europe and mounting problems in China's economy worry U.S. businesses about a second major recession and discourage new hiring. The U.S. economy continues to expand at a torturously slow pace, and is quite vulnerable to shock waves from crises in Europe and Asia.

Factoring in those discouraged adults and others working part time for lack of full time opportunities, the unemployment rate is 14.7%.

Prospects for substantially lowering the headline unemployment rate are slim, because so many folks who left the labor force would likely return if economic conditions improved.

The economy would have to add about 12.8 million jobs over the next three years -- about 357,000 each month -- to bring unemployment down to 6%. Growth in the range of 4% to 5% is necessary to accomplish that.

It is simply not true, as President Obama claimed in his Democratic nomination acceptance speech, that the economy faces challenges more daunting than any time since the Great Depression. Ronald Reagan inherited a similarly troubled economy, with unemployment peaking at 10.8% in November 1982.

President Reagan put in place a very different set of stimulus measures -- emphasizing private sector leadership -- and when he faced the voters in 1984 the jobless rate had fallen to 7.3%. During his recovery, GDP growth was averaging a brisk 6.3% in contrast to President Obama's 2.2%.

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

Oil and trade with China account for nearly the entire $600 billion trade deficit. Dollars sent abroad 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.

Prompt efforts to produce more domestic oil, redress the trade imbalance with China, relax burdensome business regulations, and curb health care mandates and costs, would create 5 million to 10 million new jobs, and lower unemployment to about 5%.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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.

More from Opinion

Throwback Thursday: Intel Edition

Throwback Thursday: Intel Edition

Intel's Next CEO Should Try Harder to Protect Its Flanks Against AMD and Others

Intel's Next CEO Should Try Harder to Protect Its Flanks Against AMD and Others

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

Wednesday Wrap-Up: GE and Facebook

Wednesday Wrap-Up: GE and Facebook

PayPal Strikes Again, Facebook, and AT&T -- 3 Tech Stories You Must Know

PayPal Strikes Again, Facebook, and AT&T -- 3 Tech Stories You Must Know