Morici: Only 113,000 Jobs -- How Decadence Breeds Decay

NEW YORK (TheStreet) -- The economy created 113,000 jobs in January, up from a revised 75,000 in December. Colder-than-normal weather was a factor, but that simply does not explain two consecutive months of poor performance. These sad results are consistent with a broadly underperforming economy.

Construction, manufacturing and hospitality registered gains, while retail trade, financial services, and education and health services disappointed.

In 2013, GDP growth slipped to 1.9%, thanks to $200 billion January tax increase (including the expiration of the payroll tax holiday) and sequestration spending cuts, but this year should be somewhat better. President Obama is not likely to get from Congress the higher taxes he proposes, and jobs creation is likely to be in the range of 200,000 per month.

Economists expect the first quarter to be slow, as global currency and equity markets adjust to the Federal Reserve's phasing out of purchases of longer-term Treasury and mortgage-backed securities. The fundamentals under the U.S. and global expansion, however, are firming, even if those are not exciting.

Global growth will rebalance a bit from Asia to the Atlantic community as Europe begins shaking off sovereign debt problems. Conditions in Europe and the U.S. will broaden the foundations for global growth and reduce vulnerabilities to dodgy banking practices and economic nationalism in places like China, Japan and Latin America.

Currently, the U.S. economy is weighed down by a colder-than-normal winter, and the market inefficiencies and drag on household finances imposed by the rollout of Obamacare.

However, more robust household formation and balance sheets will give the residential construction and auto sectors a boost as warmer weather arrives. 2014 will be a good year for pickup trucks so ubiquitous on construction sites, and employment in industries supporting housing and motor vehicles.

In January, unemployment fell a notch to 6.6%, largely because 91,000 working-age adults chose not to seek employment. Alarming numbers of prime working age adults remain stuck in low-wage, part-time jobs with few benefits.

Factoring in adults on the sidelines who say they would seek employment if conditions were better and part-timers desiring full-time work, the jobless rate rises to 12.7%, and that likely understates the scope of the problem. Many working-age men have become despondent and displaced spouses in formerly two-earner families have become reconciled to permanent unemployment.

The economy needs to add about 360,000 jobs each month to push unemployment down to about 6% and provide employment for those frustrated adults. That would require GDP growth in the range of 4% to 5%.

Over the last four and a half years, the pace of GDP growth has been a paltry 2.4%, about the same as during the Bush expansion. Ronald Reagan inherited a much tougher unemployment situation than either of the two most recent occupants of the Oval Office, yet he managed 4.8% growth and created many more jobs.

Technology and globalization are most frequently blamed for the listless jobs market, but nothing is particularly novel about the current era. Disruptive technologies began when the arrow replaced the stone, and international commerce has been on the upswing since long before Marco Polo.

In all times, the quality of government policy, business culture and individual initiative decide which societies most effectively exploit new technologies and broader commercial opportunities, and accomplish prosperity and productive employment for the wider citizenry.

The defining difference between the recent two disappointing economic recoveries and the strong record of the 1980s has been the predisposition of presidents from both parties to champion politically expedient remedies: bailouts and entitlements that steal money from promising R&D, public infrastructure and private investment to bolster inefficient hospitals, abusive financial houses and decadent universities.

When the best incomes are to be earned gaming regulators, dodging prosecutors and fielding gladiators for Saturday spectacles, no wonder the economy doesn't grow, and one out of every six adult men is jobless and likely to stay that way. Decadence begets decay.

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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