An American Policy of Decline by Design - TheStreet.com

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) -- Friday forecasters expect the Labor Department to report the economy added only 67,000 jobs in August -- my estimate is 63,000. Either would be much less than the 130,000 the economy must create each month to stay even with adult population growth. Overall, GDP and employment are growing more slowly than the population, and the private sector is much smaller than before the Great Recession -- even with big boosts in federal spending on private health care services and federal mandates for similar outlays by the states. Employment grew in the second and third quarters despite very slow GDP growth, because labor productivity fell the first half of 2011. Consequently, real wages, per capita income and living standards are dropping -- all exacerbated by hungry state and local tax collectors who refuse to tighten belts as quickly as households and businesses. A downsizing private sector, falling productivity per capita GDP and a shrinking share of the adult population employed or even seeking employment are ominous signs of economic decline. >> Get your economy news on the go with TheStreet's iPad app. Recent economic data -- retail sales, consumer spending, surveys of business sentiment, and housing/auto market activity -- indicate an economy in neutral, and one that could slip into permanent stagnation or recession. Near term, employment in health care, retail, and manufacturing should post modest gains, and construction may exhibit some bounce, because it fell to such low levels during the recent recession. State and locals governments will continue to shed jobs, because state of payments for Medicaid services are rising too rapidly and a downsized private sector generates too few tax receipts -- together those shrink resources available for other public services.

The Big Picture

The economy must add 13.9 million jobs over the next three years -- 386,000 each month -- to bring unemployment down to 6%. Considering layoffs at state and local governments and likely federal spending cuts, private sector jobs must increase at least 400,000 a month to accomplish that goal. Growth in the range of 4% to 5% is needed to get unemployment down to 6% over the next several years. Recent GDP data put first half growth at less than 1%.

30 Aug, 2011


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