On Thursday, November 7, the Associated Press published an article speculating how the October federal government slowdown might affect the monthly jobs report set to be released the next day.
The AP predicted an anemic 122,000 jobs were created in October. Why? The lack of government operations during the first half of the month would hinder job creation. Christopher Matthews of Time magazine thought the impact would be worse, quoting a report that only 80,000 new jobs may have been created.
The next day, the federal Bureau of Labor Statistics instead reported a robust 204,000 jobs were created during October. Obviously, this far outpaced the many negative estimates suggested by the AP and other sources.
The unemployment rate did tick up by one-tenth of a percentage point, possibly due to an unusually large drop in the number of people actively seeking work (some of whom may be discouraged by all of the gloom-and-doom coverage of the effect of the government slowdown on employment prospects), but the actual jump in job creation — 204,000 in October, versus 163,000 in September — reflects an undeniable point.
The center of the economic universe is not in Washington, DC.
This fact cuts against the prevailing ideology of our politicians, activist government propped up by Keynesian economics, that takes on faith the idea that recessions can be stopped and the economy can be stimulated simply by increasing government spending. When such spending and stimulation don’t work as expected (as with the president’s first stimulus bill), those who believe Washington is the center of our economic universe just want to spend more.
Keynesian economics assumes so-called stimulative spending is good since it supplements natural economic demand with a government’s artificial one. This allegedly supports production and supply that would otherwise not be needed, thus avoiding increases in unemployment.
The problem is that government cannot create value or wealth. It just redistributes it, either through borrowing or taxation.
These redistributive schemes are prone to cronyism and regulatory capture. The liberal rule of thumb – that $1 of stimulus spending brings about $1.50 of economic activity — doesn’t stand up to the reality that Obama era stimulus spending has failed to increase economic performance by the expected trillions of dollars.
The recent government shutdown is a perfect case in point. Due to philosophical economic disagreements between leaders in the House and the Senate and Obama White House, portions of the government shut down for 16 days in October. And this government inactivity has coincided with more — not fewer — jobs.
President Obama himself warned against any curtailment of government operations — claiming economic recovery would be hurt if the government were to shut down. The president’s warning seems a bit hollow now that the Dow Jones Industrial Average closed well above 15,750 points on the day the promising jobs report was released (a positive the left nonetheless still wants to tie to the president’s economic agenda).
In the end, the jump in monthly jobs creation should be seen as another piece of evidence that Washington is not and should not be the focal point of our economy.
America is saddled with over $17 trillion of debt already, and more than $90 trillion in unfunded liabilities already. It’s time we got over the myth of an activist government at the center of our economic universe.