The Employment Report

This morning's employment report was truly terrible. Okay, about 69,000 jobs were created in May, which is better than losing jobs, but at this point in a recovery we should be seeing 350,000 or more new jobs each month. The unemployment rate went from 8.1% up to 8.2% and there were no bright spots anywhere in the numbers. Simply put, these were disasterous results.

What makes all this worse is that other measures have been pointing towards further slowing of the economy. Consumer confidence is down. Consumer spending is below where it ought to be. The savings rate is down. The work week is shorter. Personal income is not sufficient to lead to growth. All the indicators point in a bad direction.

Europe and Asia are also going in the wrong direction. In Europe the crisis of the European Union is overwhelming everything else. Greece is a disaster, but if Spain joins Greece, the entire EU is likely to crumble. Just how many banks that disintigration will take down with it is anyone's guess. We do know that the number will not be small. European banks have been buying sovereign debt for a long time at the urging of their governments. If this debt suddenly gets devalued, the banks will lose a big chunk of their capital and well may fail.

In Asia, the Chinese continue to pump out numbers showing "growth", but not many folks believe these statistics anymore. China may already be in recession. Again, this is not good for the American economy. After all, if America stumbles, Europe falls and Asia is on the floor, who is going to lead the world economy back to growth? Will there be big growth coming from Egypt? Maybe Uruguay? The prospects are dim.

Even worse right now is the limitation that the United States has on its potential policies as a result of previous mistakes. It is highly doubtful that America will try the Keynesian solution of increased government spending. We are already way in debt and we just lived through the failed Obama stimulus of 2009. That effort failed because spending was directed at non-economic targets; state employee unions were helped the most, then the academic community and the lawyers and finally the big contributors to the Obama campaign. Only a minuscule portion of the stimulus actually was spent on economically valuable expenditures. We borrowed nearly a trillion dollars with no effect. Most Americans would not trust the government to try this again.

What is needed now is a plan to stop throwing funds down the government rat-hole. This has to be combined with acts to improve the business climate, plans to remove the spectre of further needless regulations, programs that will make permanent improvements to the tax structure and other measures to restore confidence to the American people.