At the Associated Press, as seen at its "Top Business News" page Friday afternoon, Christopher Rugaber opened his song of praise for yesterday's jobs report ("US EMPLOYERS HIRE AT ROBUST PACE, DEFYING GLOBAL TRENDS") as follows: "American employers added a robust 292,000 jobs in December, suggesting that the U.S. economy is so far defying global weakness and growing solidly. ..."
Rugaber's opening sentence has since been revised, but the damage was done — or, being cynical, the mission was accomplished. Thanks to Rugaber's original opening sentence being used at AP-subscribing outlets nationwide, most news readers, listeners and viewers will believe that decent job growth has been translating into "solid" overall economic growth. Too bad that hasn't been the case — and there are reasons to believe that it will continue to not be the case.
Let's first consider job growth in context.
As seen here, the total number of Americans on U.S. payrolls at the end of December was 143.242 million. At the end of December 2014, it was 140.592 million. That's a 1.88 percent increase. That beats a blank, but it's hardly "robust." Yesterday's 292,000 seasonally adjusted payroll jobs added, if repeated for a year, would be 3.5 million. That's an almost 2.5 percent increase, which would be pretty good — but not good enough, considering how many million Americans who would like to work are sitting on the sidelines.
A genuine example of long-term robust job growth occurred from 1983-1987. From a base of 89.786 million in December 1982, the economy added 14.895 million jobs. That's a 16.8 percent increase, or 3.15 percent compounded, for five years. By contrast, annual compound job growth during the past five calendar years has only been 1.84 percent.
Then there's the issue of why the current less than impressive job growth isn't leading to economic growth higher than the anemic level barely averaging 2 percent seen during the past five years, given that the job growth of the mid-1980s just cited led to average annual GDP growth of 4.6 percent.
The quick answer is that productivity is lagging. The reasons are not all clear, but excessive government regulation has to be in the mix. Examples: wasted efforts on "green jobs" which have hardly produced anything; Obamacare regulations which have caused individual doctors to spend hundreds of extra hours per year on "data entry and administrative work," adding no real value to healthcare services; and the thousands of pages added to Federal Register during the Obama administration, with the current total exceeding 80,000.
Excessive regulation has severely held back economic growth, and projected growth isn't looking any better. The Atlanta Fed and Moody's are projecting 0.8 percent and 1.4 percent, respectively as the annualized growth rate for this year's fourth quarter. Very few if any analysts think the ecconomy is going to grow by even 2.5 percent next year — and past predictions have almost always turned out to be overoptimistic during the Obama era.
So sorry, AP and Christopher Rugaber. Job growth does not automatically translate to economic growth, and you should stop pretending that it does. The current economy is ugly proof of that.
Cross-posted at BizzyBlog.com.