The views expressed in this column are those of the author and not SVB Financial Group.
Author's note: The following article is reprinted from March 10, 2009. At that time, the job market was in freefall, losing an average of 650,000 per month from September 2008 through April 2009. This Friday, economists expect job creation of 508,000 to be announced. I hope, but am skeptical, that this is the beginning of a reversing that dismal streak.
B girl ain't lost the beat
Jumped over drama and I landed on my feet
Gotta keep goin'
No stoppin' me
And if you don't like it, then
La la la la la la la
Thus far, the government's attempts to jump over the drama of the current recession have had less than spectacular results. To be sure, the American drive is alive and well, but we've hit more than a bump in the road and now everyone is scrambling for answers.
Driving home last Friday, soaking in the day's events including the report of an additional 651 thousand jobs lost (net!) in February, I saw a potential answer to the problem on the door panel of a pickup truck: garbage can cleaning.
It's true; there are companies that you can hire to clean your garbage can in either your home or office. According to this particular company's website, the primary reasons to have your garbage can cleaned include unpleasant enduring odors, the presence of flies and other insects, increased risk of sickness or disease and - the real crowd pleaser - potential harm to the environment. After all, who wants their garbage sitting in a dirty can?
So, perhaps the solution to our joblessness is to enact legislation making it mandatory to have a bi-weekly cleaning of all garbage cans.
In my completely unscientific estimation, there are more than 1 billion garbage cans in the U.S. that must need a good scrubbing. That's got to be good for a million jobs or so. And let's remember that since we haven't been told by the government to clean these waste receptacles, they are surely spreading great harm to the environment.
And imagine the healthcare savings! How many deaths could have been avoided with a little government-mandated circular file scrubbing? Wait a minute, deaths actually SAVE money on healthcare. Ah, but perhaps that's a topic for another column.
Clearly, creating jobs alone is not a worthy goal. In fact, creating jobs should not be a goal at all. It is simply the outcome of a healthy economy.
Instead, we need to create productive jobs. Because the government is not a profit-oriented entity, it has no inherent need or desire to create productive jobs. Only private corporations who face the threat of going out of business have an ingrained bias toward creating productive jobs which lead to profitability.
These productive jobs are created to fill a need and that need arises from consumer demand. It's widely acknowledged that a vicious cycle exists today of job losses, leading to lower income for the masses, leading to less demand, leading to further job losses. But attempting to reverse this cycle at the "job loss" phase is foolhardy. The best place to halt the vicious cycle and reverse momentum to a virtuous cycle is at the demand level.
Increase consumer optimism and stabilize consumer wealth and Americans will spend. This will lead to corporate profits and job creation. The result: productive job creation.
In reality, job losses did not appear in large number until we were at least nine months into this recession. They are definitely a symptom and not the cause of our woes today.
The Conference Board's Consumer Confidence Index rose to 63.3 in May — the highest level since March 2008, up from a trough of 25.3 in February 2009. Much of the recent rise has been driven by a spike in the "expectations" component of the index implying consumers are feeling more confident about a stronger economy tomorrow.
The Bureau of Economic Analysis released its second estimate of first quarter's GDP measure, showing an increase of 3.0 percent vs. market expectations of 3.4 percent. This revision — a decline from the original estimate of 3.2 percent — was driven primarily by price measures.
The personal income and consumption expenditure report showed earnings growth outpacing spending in April, which caused the saving rate to rise from 3.5 percent to 3.6 percent. Nominal PCE growth in April was zero with spending weakest on nondurable goods.
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