Saturday, June 4, 2011

The Economy is about Jobs, Jobs and more Jobs

Well, the 2012 campaign is beginning just when the 2011 summer is about to start. Amazing, the presidential campaign seems to be coming earlier and earlier each cycle, similar to the summer weather. We just experienced a mid-August type of heat wave at the end of May. Of course, the big issue for this presidential campaign will be jobs and the economy. Unfortunately, the economic numbers released for this past month do not look good. Only 54,000 jobs were added in May. This is not the pace we need to get the unemployment rate down to pre-recession levels. In fact, it is not a good pace to get below 8%. The unemployment rate is now at 9.1%.

Who is the blame? The president, Congress, the state governments, or private businesses? Perhaps, it could be the weather, human incompetence and other global events. Many economist believe the weak growth in jobs and the sluggish economic numbers are due to weather related and global events, such as Japan's tsunami, tornadoes and flooding in the US south and mid-west and high oil and food prices.

In Japan, we are learning how much supply chain management has become a globally connected system. US companies get parts from all around the world and many car parts and electronic parts are from Japan. In fact, the Prius car sold by Toyota has seen an increase in the value of a used Prius because of the delays in new Prius car production due of the damage to Japanese factories that supply Prius cars and parts to the US. This disruption in supply chain management has also impacted electronic devices. In China, a major factory that builds products for Apple and HP caught on fire. Once again, this impacts parts and products getting to the US to be sold to the American consumer. If companies cannot produce product to sell to the American consumer, they do not need to employ additional workers, which impacts job growth.

Then there is the destruction in the South and mid-west with all of the tornadoes and flooding. This has impacted agriculture production and the movement and production of goods. The south has become a major area for manufacturing of goods for the US and many parts of the mid-west represent the US breadbasket. Clearly, this destruction in this region has impacted many families on a personal level, but it also has impacted the economy. This has also raised questions on whether the federal government should take responsibility to cover damages due to weather related events. Some Congressman have stated that funding to help the victims should be money that is actually available in the budget, which would mean taking money from other programs to pay for the reconstruction of these communities. This haggling over who should foot the bill could delay getting these communities up and back on their feet, which could also impact growth in our economy. If there is no funding to help rebuild these communities, many potential job opportunities in the construction sector sit idle until there is funding to pay for this work.

Then there is the issue of rising oil prices. One could argue that this is not weather related and due more to the events in the Middle East. That is probably true. Regardless, the rising cost of oil has impacted the prices at the pump and has cut into Americans' budgets. This means that money that they could use to purchase electronics, clothes and other goods is going to pay for filling their cars. Also, the cost of oil has impacted companies in manufacturing products due to rising energy costs. That cuts into their profit margins. That means there is less money and demand to higher more people, which again impacts job growth.

Another issue that has impacted the American wallet is the price of food. Because of the rising cost of oil and weather related event in the middle of the country and the South along with other weather related events impacting food production around the world, the price for groceries is going up. Once again, the discretionary spending of Americans are impacted. Therefore, a person has to chose between feeding his or her family or purchasing the latest Ipad. I would assume they would chose feeding the family over an electronic device. Although that might be a tough decision considering all the cool apps you can get on the Ipad.

The last thing is the government. The U.S. and state governments are concerned about deficit reduction are are cash strapped. As a result, they are forced to cut back on spending and to reduce staff. In the month of May the government shed 29,000 workers.

Based on the foregoing, it is not surprising that the US economy has slowed down and job growth has decreased. The question here is whether this is temporary or signs of another double dip recession. I am hoping the former rather than the later. One person that could help us is mother nature by cutting back on these devastating natural disasters. I am just hoping that she is a capitalist.

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