Our enormous public investment has produced a misleading sense of economic progress.
By Michael Beygelman
If you scan news headlines, you’ll read that politicians are talking about a recovery, about jobs, about healthcare—about a lot of things. I’ll concede that some “philosophical” battles are being won in Washington and on Main Street, but I’ll be among the first to point out that we can’t simply wish ourselves into a recovery, nor can we slick-talk or negotiate ourselves into a better employment picture.
The October 2009 jobless rate hit 10.2 percent, the first time it has reached double digits since 1983, and I predict that rate will go higher. President Obama uses data like this to demonstrate why we haven’t yet scratched the surface on what needs to be done in order to create new businesses, or to create new jobs, or to stimulate consumer spending. But what is really being done about structurally fixing the problem? President Obama has often said that he will not rest until all Americans who want to work are able to find work. That means either: a) we get lazy, and fewer people want to work, and/or b) President Obama will be working well beyond his presidency.
Grasp the scope of this problem: 1 out of every 10 people in the U.S. is without a job. We also have to remember that we are spending an unimaginable amount of money to provide stimulus. For example, if we took the $785 billion and paid it to every U.S. citizen 18 years and older, that would come to approximately $3,900 each.
Alchemical Stimulus
Recently, the focus has been on the positively whopping 3.5 percent GDP growth number, which made the stock market soar. Even if this number were not misleading, one report certainly doesn’t make a trend. And, besides, the number is misleading. For example, the money spent on the stimulus was $173 billion during the time period coinciding with the 3.5 percent growth in GDP—but the GDP growth amounted to about $112 billion. In simple terms, the GDP gained about $0.65 for every $1 spent on stimulus.
Housing tax credits represented another contributor. Even the National Association of Realtors suggests that a portion of the increase in home sales this year was due to the tax credit. The commensurate portion of these tax credits cost U.S. citizens about $30 billion, yet they only generated about $11.6 billion in tax revenue. This leads me to ask the all-important question: If we’re spending mountains of money right now, and the unemployment rate keeps rising, and we have no real tangible GDP growth to speak of, then what will happen when we have spent all of the $785 billion, and the government can no longer dole out $1 to create $0.50 worth of prosperity?
On a brighter note, we can look at the sectors that are hiring people right now to get a sense of where the employment market is going. Some sectors of the economy seem as if they are either improving right now or operating from a belief that a recovery for their businesses is right around the corner. A slight pickup in demand for non-exempt employment has occurred, and it appears that firms in banking, financial services, or tangential businesses have increased hiring. Also, we’re starting to hear rumblings of talent demand planning and forecasting, which signals that firms interested in this kind of activity anticipate hiring people in the near future.
Given these niche insights, would it not make sense for the U.S. government to look at what is either working now or can work near term and make more strategically focused investments in those areas? It seems as though the shotgun approach to the government’s investment strategy is either not working or will take too long to work before we run out of money to invest.
We as a nation took bold risks to improve our employment and economic situation by entrusting our government to invest an unprecedented amount of money, yet what we’ve seen as results to date in terms of the employment situation is far from a recovery. We simply cannot wish ourselves into a recovery. Our business leaders need to make tough decisions that will focus their businesses on growth. Yes, cost cutting is an effective way to reduce operating losses or generate quick returns, but this is a fake recovery methodology that is not sustainable, and the most recent unemployment number demonstrates this fact beyond a shadow of a doubt. True change in direction—the beginnings of a recovery—will be noticed when companies start consistently growing their sales on an unadjusted basis.
Michael Beygelman is SVP, business development, with Adecco Group North America. He can be reached at michael.beygelman@adeccona.com.
Real Recovery ROI
