In his State of the Union address last week, President Obama made it clear where his priorities lie for the year ahead: jobs. To that end, President Obama has unveiled his budget for the next two years, and it contains plenty of money aimed at jobs creation. To help ease the deficit, the administration is also proposing spending cuts in a variety of programs.
Not everyone is convinced the fiscal 2010 budget will be effective. “I don’t think there is anything out there that is job creating and I don’t have much confidence that some of the spending cuts will happen,” Peter Boockvar, an equity strategist at Miller Tabak & Co., told BusinessWeek.
The White House, for its part, is forecasting a decline of the unemployment rate to 8.2% by 2011, down from 10% today. Much of the jobs spending comes in small-business investment, small-business tax cuts, and a heavy focus on green energy investing and stimulus. The administration has made no secret of the fact it wants America to lead the world in green energy technology.
By contrast, fossil fuel subsidies are scheduled to be phased out over a number of years.
Meanwhile, a number of economic professors are now highlighting the great difficulty in reducing the unemployment rate.
For instance – the American GDP grew at a 5.7% clip last quarter. However, in order to shave one percentage point off the rate of unemployment, the economy will need to grow 5% for an entire year.
Most projections have the American economy cooing off a bit in 2010, to a 2-3% growth rate. If the U.S. were growing at a 5% rate for a full year, economists would worry about overheating.
That’s why the Federal Reserve and outside economists agree it will likely be the middle of the decade before the unemployment rate drops to a healthier 5-6%.
While this is proving an awful time to be searching for work, it’s a great time to be offering jobs.
Indeed, many employers are now staffing themselves with more and more part-time workers – who demand less pay and little-to-no benefits.
“We wanted a professional staff, but we’re not in a position to take on someone with full-time pay,” Jodi Stevens, co-owner of Stevens Insurance Agency, recently told the Cincinnati Enquirer. “In this [job] market, it isn’t like we’re getting part-time experience for a part-time job.”
Indeed, with so many qualified individuals out of work, many businesses can easily get the expertise they need, at bargain-basement prices.
This is helpful for those businesses finding excellent, cheap labor, and that shows up in the GDP. But the drag from decreased spending by unemployed and underemployed workers likely more than makes up the difference, in the overall scheme.
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