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The Good News Is the Bad News Isn't Over

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The Washington Examiner comes through with that rarest of finds -- an unsigned editorial from the left-side stack that adds something to the news:

First, the drop to 9.7 percent unemployment does not reflect the creation of new jobs that normally accompanies an economic recovery. The number of new jobs is actually declining. Total nonfarm payroll employment, for example, dipped by an additional 20,000 positions after a December decline of 150,000 positions. The unemployment rate the day Obama took office last year stood at 7.6 percent and 134.6 million people had jobs. When he signed the economic stimulus, Obama promised the bill would bolster the economy sufficiently to keep unemployment below 8.0 percent. But the unemployment rate has exceeded 8.0 percent since last fall, and total employment stands at only 129.5 million. The stimulus has been a bust.

Second, anybody who thinks the job situation is going to improve dramatically in coming months is not paying attention to what's going on behind the unemployment rate. The Hudson Institute's Diana Furchtgott-Roth notes that "This is a better employment report than last month's report, yet the economy is still not creating jobs. The percent of the unemployed who are out of work for 27 weeks or more exceeded 41%, an all-time high. This is unacceptable and shows that Congress and the President need to focus on job creation, rather than on expanding government, because the tax increases and borrowing used to expand government reduce overall job creation and create uncertainty."

Come shopping for FOR LEASE signs.

While reactions like this are important for demystifying government claims about macroeconomics, there is something disingenuous in slagging the executive and legislative branches for poor job creation when you know (as the editorialist surely does) that there is nothing the government can do to create jobs. This is not to say cutting taxes and spending would be unhelpful -- or that the Obama Adminstration doesn't deserve opprobrium for wasting four-fifths of a trillion dollars. But you're setting yourself up for a fall if you claim public policy alone will get people borrowing again in the near term.

To speak honestly about the economy you need to acknowledge that what the political world views as a bug -- the radical dehydration of credit on both the supply and demand sides -- is a feature, a necessary and long-overdue process that is probably closer to the beginning than to the end.

Through that lens, the economic picture looks quite a bit better. The home "ownership" rate, while still historically high at more than 67 percent, has dropped back [pdf] to its 2000 level. Consumer credit continues to decrease rapidly. The process of getting supposedly prime borrowers out of their oversized loans is well under way. Everywhere except in DC, where we see trillion-dollar deficits to the horizon, Americans are being compelled to live within their means.

If you've been to a shopping mall lately, you know there ain't nobody a-shoppin', and for the reasons listed above it is unlikely that green shoots like these from the Institute for Supply Management will thrive in a drought of consumer demand. But it's never pretty to dry out after a decades-long binge. I'm glad nobody believes the Democrats have created any jobs. I'd be happier if both ruling parties acknowledged that job creation is not part of their purview and is not within their power.