Not Much Hope for a Better Jobs Market

NEW YORK (TheStreet) -- Forecasters expect the Labor Department on Friday will report the economy added 175,000 jobs in July, down from 195,000 in June, and the unemployment rate will slip a notch to 7.5%.

The pace of jobs creation has been stronger in recent months; however, a noticeable shift toward replacing full-time workers with part-time employees masks a much tougher market for job seekers. Since January, 833,000 more Americans reported working part time, while 97,000 fewer have full-time positions.

That is not surprising -- a good deal of the new jobs are in the hospitality, retailing and other sectors where businesses may chop up full-time positions to avoid rising health-insurance costs for full-time employees mandated by ObamaCare.

More part-time workers pushes down wages for ordinary workers and is one particularly poignant illustration of a public-policy initiative intended to reduce income inequality that actually exacerbates it.

Under more normal circumstances, about 360,000 additional jobs would be needed each month to pull down headline unemployment to 6%, but to attain a truly healthy labor market, many more full-time jobs are needed.

Adding in discouraged adults and part timers who want full-time positions, the unemployment rate becomes 14.3%.

Slow growth is the ultimate factor behind income disparities.

In the second quarter, gross domestic product was up only 1.7%, and on average has grown a paltry 1% since President Obama's reelection.

Despite greater optimism expressed by consumers in sentiment surveys, real consumer spending, net of autos, has softened. $200 billion as higher taxes imposed at the beginning of the year have dwarfed sequester spending cuts and severely limited consumer spending on nonessentials.

Businesses remain pessimistic and investment remains subpar, dragging down growth. Obama's proposal to tighten up and raise corporate taxes for more jobs programs -- especially given the poor record of his targeted initiatives in alternative energy and vehicles -- only adds to investor skepticism.

Long term, the president's proposal to further tax overseas corporate earnings, when other principal nations do not, will motivate more companies to move corporate headquarters and jobs to Ireland and other low-tax jurisdictions. Eaton Corp. ( ETN), Sara Lee and many less well-known companies have already done so.

Major factors contributing to the slow pace of recovery include the huge trade deficits on oil and manufactured products from China, Japan and elsewhere in Asia -- these slow demand for U.S. goods and services. Absent U.S. policies to effectively confront Asian governments about their purposefully undervalued currencies, and to develop more oil offshore and in Alaska, the trade deficit will continue to tax growth.

An artificially cheap yen will eventually undermine the auto sector's recovery. It raises Japanese automakers' net on new cars by at least $2,000, which they can pour into incentives, more features and product development. The latter will have particularly insidious consequences for Detroit's ability to compete in the emerging hybrid and electric segments.

The recent surge in natural-gas production, and accompanying lower prices, improves the competitiveness of energy-using industries like petrochemicals, fertilizers, plastics, and primary metals -- as well as their consuming industries like industrial machinery and building materials. However, the Department of Energy efforts to boost exports of liquefied gas will reduce the trade deficit and boost growth much less, and create fewer jobs, than keeping the gas in the United States for use by energy-intensive industries.

Dodd-Frank regulations make mortgages, refinancing, and home-improvement loans much more difficult to obtain. The recovery in housing construction, though welcomed, remains lackluster as compared to past recoveries.

The high cost and slow pace of regulatory reviews are a constant complaint among businesses and damp investment spending -- and Washington shows no signs of listening. Government needs to subject policies to protect the environment and other regulatory goals to the same efficacy standards the market applies to commercial technologies -- regulatory assessments and enforcement are needed, but those must be delivered cost effectively and quickly to add genuine value.

Without better trade, energy, tax, health care, and other regulatory policies, stronger growth and the creation of enough good jobs are simply not going to happen.

At the time of publication the author had no position in any of the stocks mentioned.

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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