Wednesday, November 18, 2009

Totally Upside Down On Job Creation

Yesterday, the report on Industrial Production in this country came in at a meager rise of one-tenth of one percent with manufacturing operations actually declining (Click to See Full Story: "Industrial output growth slows"). The only increase was seen in the demand for utilities; such as electricity and natural gas.

This is a worrisome number because it indirectly reflects that consumer spending and business expansion are almost non-existent. We can't recover from this recession without those two factors being in play. This poor showing for Industrial Production is consistent with the reality that Consumer Credit and Spending keeps falling; a fact that I keep reporting on. My latest commentary on Consumer spending issues was on November 7th when I wrote the blog posting: The Bad Econ Report That Nobody's Talking About.

Right now, there is at least one proposal in Congress to provide tax credits to those companies who hire additional people (Click to See Full Story: "US senator unveils tax credit for jobs"). This is pure stupidity. Companies hire people on the basis of increased business activity. Not the other way around. They aren't going to take on any new salary and the associated employee benefits load so they can save one-fifth of that expense by getting a small, 2-year tax credit. That fails first year accounting principals. But, this is so typical from people who don't understand business and who never ran a company or never created a job.

Our President will be having a Jobs Forum with, supposedly, small business leaders and large business CEO's. The goal will be to determine what can be done to create jobs. To me, this forum should have taken place months ago. But, instead, Obama met 22 times with his friend, the leader of the SEIU labor union, to set out his labor-oriented economic plans. Again, Obama's meeting with labor to figure out how to create jobs is just as back-asswards as Senator Feingold's plan of giving a tax credit for hiring new people. That's why unemployment is going through the roof.

A company like Microsoft wasn't created by a bunch of laborers who were just standing around and who needed or wanted jobs. That company grew out of an idea for a product and the "demand" that followed the implementation of that idea resulted in the hiring of thousands of employees. Simply speaking: No demand.. no jobs! My guess is that is what Obama will consistently hear in his little Jobs Forum. And, this isn't hardly some advanced principal of economics. It is inherent in the very cornerstone of economics: The Law of Supply and Demand. But, I'm guessing that Obama never covered that particular topic when he was busy studying constitutional law. Or, was it something that he covered when he was training ACORN personnel how to legally force Banks to give risky low-income earner loans?

No comments: