The job market hit a major roadblock last month, as hiring slowed to a crawl and the unemployment rate unexpectedly rose.
The economy gained just 18,000 jobs in the month, the government reported Friday, sharply missing most expectations and coming in even weaker than the paltry 25,000 jobs added in May.
It marked the weakest month since September, when the economy was still losing jobs.
Unemployment is up to 9.2%.
Everyone is trying to blame everyone on this. I think they’re all half-right. It’s clear that the stimulus — now $4 trillion and growing — hasn’t had anywhere near the promised effects. However, the extension of the Bush tax cuts and unemployment benefits, as well as the demand-side cut in payroll taxes has not had a positive effect either. We have the lowest level of taxation in over half a century and the economy continues to stall.
I’ve noted before how I think we need to go about creating jobs. More stimulus spending is simply going to send us down the road Japan followed and mindless tax cuts are only going to worsen our biggest problem — the deficit. We have to stop playing games. As I said in the previous post:
Close the deficit, even if it means broadening the tax base.
Overhaul the tax code.
Sign the pending free trade agreements.
Create a process to identify and remove the most damaging regulatory provisions.
Suspend Obamacare or allow HSA’s to qualify.
Suspend Davis-Bacon provisions.
Reduce the employer contribution on payroll taxes.
There are signs of progress on the first one. But it critical that the Republicans and Democrats agree to a grand bargain. Given the job numbers, it would be insanity to crash the debt ceiling and hope that nothing bad happens.
Update: Looking deeper, the problem is that while the public sector is shedding jobs, the private sector, while growing is not growing fast enough to pick up the slack. In some ways, this is not a bad thing. The public sector was bloated and, like the housing sector, needs to shed its fat before things get moving. But in other ways it demonstrates precisely the problem: we’ve made it more difficult for the private sector to hire people. Think of the regulations and obstacles we’ve put in place as an anchor on hiring and imagine the linked graph without that anchor.