A few PhD economic bloggers I respect have forecasted a slow recovery but an improvement in employment numbers.  Based on my view from my small corner of the world I have remained skeptical.  Many small business people have remained reluctant to hire and invest due to massive increase in regulation (especially the health care bill), the huge deficit, fear of pending tax increases, credit tightening  and often irrational banking practices.

With tax increases only forestalled a few years,  income was pushed into 2010 and expenses pushed into future years when able. And the many businesses I see being closed or shut down are not likely to reopen (especially with tightening credit). New business creation is negligible and that is often the source of employment coming out of a recovery.

But Scott Grannis at Calafia Beach Pundit commented on the June employment numbers, claiming it is so shockingly low that it may be an aberration.

In June jobs report so bad it’s difficult to believe Grannis writes:

A weak employment report might be understandable given that the economy was still suffering from its “soft patch” in June, but bad news of this magnitude—and especially considering the huge variance between the household, establishment, and ADP surveys—must be considered suspect. Sometimes these surveys just go buggy. When they all line up in the same direction, then one can be reasonably confident that the data is somewhat sound. But when they vary by almost 600K, then it’s time to take a deep breath and avoid jumping to extreme conclusions.

For the past year or two, one consistent theme in the jobs data has been a steady—and perhaps even an accelerating—decline in the number of public sector jobs, and June was no exception. As the chart below shows, public sector jobs have declined by a little more than 500K on net since their peak in 2009 (abstracting from the temporary census jobs). This is welcome news, since bloated public sector spending and public sector payrolls (and their attendant and generous benefits) have been a drag on growth for some time.

HKO comments:

If this is the result of a decline in public sector jobs then maybe this is not such a bad thing.  The more unemployment becomes politicized the more difficult it is to get a clear picture.

268,00 new jobs were added last month.

62,000 of  those jobs, almost 1/4, were from McDonald’s.

McDonald’s was one of several large companies to receive a waiver from the new health insurance requirements.

Being careful not to draw too tight a correlation, this raises a question I have raised since the bill passed:  how much is this health care bill affecting unemployment?

We do not know how many jobs McDonald’s would have added anyway, but at least we know that exempting McDonald’s from the onerous health care bill certainly did not kill any jobs.  Only big companies have the political clout to even seek such exemptions. Small businesses which lack such clout, and bear the biggest brunt of this Kafkaesque bill, are also the sector that we depend on the most for job creation.

Dispensing privileged exemptions is the epitome of crony capitalism and the new charge of ‘gangster government’.  I first heard this charge from Michelle Bachman when the new GM was closing automobile dealers and politically connected dealers were appealing to politically connected friends to hold on to their businesses that were being taken by government decree.

I believe the impact on unemployment from the health care bills is grossly underestimated.  If exempting McDonald’s seems to improve employment then let’s just exempt everyone- repeal the damn bill.

For over a year economists I respect claimed this economy has hit bottom and is slowly recovering.  Yet long after the bottom is in we see unemployment anemic and even increasing.  While a recovery in employment does lag the economic recovery there are some differences in this cycle that should be recognized.

1. Higher minimum wages may not have affected employment during the boom but like any other higher price it will cause a decrease in consumption of jobs.  Only now is the real cost of the higher minimum wage  adding to the high unemployment.
2. Generous unemployment benefits discourage job seekers.  There is a longer term effect here as well: when someone has not worked for two years they become increasingly unemployable.  I have stated before that I never had an employee asked to be laid off…. until this recession.
3. We have accumulated onerous regulations for decades and this administration had added so many costly and uncertain costs that the small businesses have capitulated from exhaustion.  I have seen many small businesses shut down and very few start up. It is the death of fresh entrepreneurial activity that is causing such a slow recovery.  There is just too many barriers to entry such as tight credit, low collateral values, threats to wealth accumulation, and absurd regulations.  A high level of regulations is an advantage to large businesses who have the administrative structure in place to comply.  Unfortunately the job growth usually comes from the smaller businesses.
4. For a half century we have depended on the Fed to cover for the reckless fiscal policies of Congress.  This financial collapse has tapped out the ability of the fed to meet its dual mandate of stable money and low unemployment.   Instead of fulfilling a single mission well (sound money) it is proving ineffective at both missions.
5. While the tax cuts were extended, their future is still uncertain.  Businesses do not make long term investments without knowing the future return.  Today’s investments are tomorrow’s jobs.
6. The continuous jawboning about the wealthy does not attract investment to this country from within or abroad.  We have the most progressive tax structure and one of the highest corporate taxes in the G20, yet to this administration it is not enough.
7. The health care bill alone is killing more jobs that even the most pessimist estimates.  It is particularly harsh on small businesses where we usually see the biggest job growth at this time in the recovery cycle.

While economists can point to many recovery statistics that indicate that this recovery is following a similar path to previous recessions, it is foolish to ignore parameters that are making this one different.  Persistently high unemployment is largely a direct result of poor policy decisions. It can be corrected by reversing them.

In December of last year I posted at this blog The Second Wave of Unemployment.  An excerpt from that post:

Those of us who took a wait and see approach will generate another wave of layoffs. It will not be the thousands from a single large plant that makes national headlines.  It will be a dozen here and a few there as the small businesses across America face the reality.  Some will throw in the towel and just close; some will be forced to close or sell at bargain prices because of a lack of credit, others will finally get small enough to survive.

Either way private wealth  (and the taxes it generated) will be destroyed and unemployment will continue to climb.

Next week one of the largest and best run fab shops in our area is liquidating at auction.  The reason is that they just do not see any light at the end of the tunnel.  I still see auction notices in the mail regularly.

The fabrication and construction industry remains one of the hardest hit of this economy.  Part of this is the result of deflating a credit bubble, but much of it is the uncertainty from the onslaught of oppressive regulations and new laws.  And this is with record low interest rates and record high government spending.

Two of my favorite bloggers  on the economy, Carpe Diem and Calafia Beach Pundit have posted several economic insights about indicators that suggest that the economy has bottomed and is turning up: auto sales, rail road freight traffic, port traffic, temp posting, and other measurements suggest we should be turning the corner.  But from my little corner of the world- I am not seeing it.

By pushing more people into housing through incentives the Federal government may be aggravating the unemployment problem.

In good markets housing is illiquid. In a real estate depression a house is like a heavy anchor.  The inability to be mobile restricts job opportunities by forcing homeowners to remain in a single location. Renting allows mobility and the flexibility to respond to better job opportunities quickly.

With so many homeowners underwater there is a further incentive not to sell a house in order to avoid the recognition of the capital loss. Many would want to avoid the pain of coming up with cash at a closing.

The housing crash has destroyed home equity values even for those who can afford the homes they occupy, and it puts pressures even on them to avoid moving to better jobs in distant locations.