Jobs for Main Street Act

Posted by Ray on January 3, 2010 under Main | Be the First to Comment

Those who deny that there was a stimulus II, which was actually a stimulus III or IV depending how you count C4C and the home buyers tax credit, should be intrigued by the title of one of the last acts to narrowly pass the House, the “Jobs for Main Street Act.” This act spends an additional $174B on jobs for American’s, which sounds great, until you read the jobs it wants to create. This act which is merely another spray and pray spending bill geared to help the base that swept the current administration into power. However, the $174B isn’t all new spending as $75B is coming from TARP and only $100B is coming from new spending.

Let’s examine where this money is going and then decided if it is going to help the employment situation. According to the bill and its Democrat supporters a portion of the bill is going to support key areas of ‘infrastructure’ and create jobs in the following areas: tens of thousands of new construction jobs, 5,500 more police officers, 25,000 additional AmeriCorps members, 250,000 summer jobs for disadvantaged youth, 14,000 part-time jobs for parks and forestry workers.

A couple of points of interest, first, weren’t the first $787B supposed to support infrastructure projects? Wouldn’t this prove that the first stimulus in the infrastructure area was a waste or at least mismanaged? Second, I am not really sure how AmeriCorps and summer jobs for youth are infrastructure jobs, but it does do one thing, solve the unemployment problem for youth which is in the high 20% area. Unfortunately it does nothing to solve the real unemployment problem in the private sector or for those who actually pay taxes to support such spending bills, but hey, who cares as long as kids have jobs.

I love the fact that we are going to hire more part-time workers though, that is fantastic as the BLS can remove another 14,000 people from the employment pool. Maybe the government should just hire 100,000 part-time employees every month, that will cure the problem of unemployment the old fashioned way, they will lie their way out of it. On the real Brightside, construction jobs and more police officers are a good thing, honestly. Perhaps they should spend more money in that area, as long as they don’t dump the cost on municipalities later on and provide federal grants forever for their expense.

There is no question that the Federal government needs to do all it can to spur job creation, but my issue is that they simply do not know what they are doing and this is all for show. Not to mention that for all the bragging about the original stimulus working and “saving or creating 600K to 1M jobs” this is just proof that we experienced one big waste of money. For proof of this all I need to say is ‘monorail,’ yes a monorail from Southern California to Las Vegas was part of the original stimulus package, this is straight out of the Simpson’s, but unlike the Simpson’s this is no laughing matter.

The other major issue is the fact that clearly Congress is not buying the BLS’s employment figures either. If they did they would not have passed the unemployment benefit extension or this latest pork barrel spending bill. Evidence of the understatement of employment is plentiful from the ADP, ISM and weekly claims reports to the BLS’s own admission that they will have to adjust the unemployment figures for 1009 by about 800K in February of 2010. Even Zero Hedge, who I disagree with on many issues, just did an excellent post on how the Treasuries own numbers show that there is the potential that the government is underreporting the unemployment figure by as much as 32%, based on the gross amount of benefits paid versus the actual reported number of unemployed.

Of course, this discrepancy could be from the increase in benefits that Obama and Congress gave to the unemployed with the stimulus bill. It could also be because of the fact that the extension of benefits brought many people back on the unemployment rolls on the Federal level, but not on the state level keeping the official level down, I love how the EUC benefits work now. We simply just do not know how the gross number works because Treasury does not tell us and they operate in a very opaque way, I hope this changes, but I am sure it won’t. I do believe unemployment is being underreported, by how much I have no idea, but there is certainly plenty of room for speculation. Regardless, a headline stating ‘the government underreports unemployment by 32%” is sure to grab readers, whether it is true or not, well, that’s a different story.

What we do know is that unemployment is a huge problem and there is simply no way of believing the problem is getting better when credit for business remains tight. Hiring is simply not happening based on the data available, but the firings do appear to be slowing. What I do not like is that even during the holiday season we are still getting initial claims well over 400K, that is not a good sign. As I have stated earlier, employers try not to let people go over the holidays because they do not want to be a Scrooge. The worst part is that now the holidays are over and the after Christmas sales are going to be coming to an end, remember all those part-time workers? I bet you they are going to be gone very soon and the inventory build is also almost complete. In other words, employment may actually get a bit worse again.

On the bright side, we are going to get a great GDP report soon, until it gets revised down to nothing like 3Q09 did. I am also sure we will get another fabulous employment report on Friday as well, whether it is believable or not will be another story. If the BLS takes out another 100K people out of the workforce maybe we will get unemployment below 10%, but do any of you really believe 100K people a month are really leaving the workforce? There is only one reason to reduce the workforce, mathematically, like that, to lower the unemployment number. It is like the birth/death model the BLS uses, do you really believe that 130-200K people a month were starting their own businesses during the peak of the credit crisis when there was no credit available, to anyone other than Uncle Sam? Well, that is what the BLS said happened and that should be reason enough to not trust government numbers.

The other tell that things are not getting better is the fact that the government is spending another $174B in a jobs bill. This goes against very argument that the V shaped economists and pundits have been telling us is in the works. Not only does this fly in their face, but also in the face of Obama and Joe Biden as well as they told us that the stimulus was a stunning success and we are on the road to recovery. Yet, all we keep hearing about is more jobs bills and extended unemployment benefits, the real kicker is 1 out of every 10 of Americans is on food stamps, go figure.

I want things to get better, everyone wants things to get better, but the issue is no one is being straight with the people and why should they be? Unlike the 1930’s the truth can be hidden. There are no soup lines because we have food stamps. There are less homeless because we have public housing. We have unemployment insurance and a host of other social safety nets to mask what is really happening. All we really see are figures on paper and the occasional rally on Washington, not what is really happening and the media questions nothing. Regardless, we have another jobs bill to help wallpaper over our major problems and propel the myth that the ‘road to recovery’ is just fine. Maybe it is, but I just do not see it.