Forecasting is the meticulous brother of optimism. The Administration is still determined to create or retain 3.5 million jobs by the fourth quarter of 2010 through its $787 billion in stimulus spending, according to a report from The Council of Economic Advisers. It does not seem important to the group that the goal is nearly impossible mathematically.
The Council’s new report on the future of jobs and job creation in America begins with the simple assumption that because citizens are saving more, that GDP will not be driven as much by consumer spending in the future as it has in the recent past. The Council is stating the obvious, but it is the foundation for its philosophy on how the economy will be rebuilt. America will become a much greater producer of exports and business fixed investments will rise. There is no evidence that these things will come to pass, but they are probably critical to a growing and sustainable economy.
Exports and the growth of exports have always been based on two factors. The first of these is the quality of the product and the other is its cost. America has been known as a good manufacturer of finished products for decades. It has also been known as one of the highest-priced producers in the world. Export growth is not likely to come through the sales of manufactured goods except in industries where the US has particular strength such as aircraft and weapons building. Once the list of items goes beyond those areas, the opportunities thin out.
America is already an impressive exporter of products and services based on intellectual property. The US continues to be the largest provider of premier entertainment and software, and one of the most advanced designers of hardware devices like the Apple iPod. Most of the work done on those hardware products is handled overseas where components are bought and assembled making the opportunities for improving the balance of trade though consumer electronics limited. The one portion of American exports that is likely to continue to grow comes from burgeoning innovation in the software, biotech, and internet industries. Those, in and of themselves, are not going to create an export renaissance.
With the backdrop of the Administration’s assumptions on job creation over the next several years, it is spellbinding to look at where the government believes the sources of the jobs will be. The largest pool by far is dentists and medical personnel who are not doctors. The Council expects this part of the economy to add well over 2.2 million jobs in the next eight years. Nursing home employees, private hospital workers, and physicians will make up another million new positions. The oddity of this is that medical jobs have nearly nothing to do with creating an export economy, and, they are, to a very large extent temporary, based on the age of the population. Once the current, aging generation of Americans begins to die in great numbers, the nursing home business will lose its luster. The other large increase in unemployment, according to the Council, will be in construction. That may happen if the stimulus money being spent on infrastructure carries over to private enterprise spending, which is unpredictable, and whether there is any real recovery in housing and commercial construction, which, at this point in time, seems unlikely.
Predicting job creation, if the Administration wants to be candid, is like guessing how many people will contract the swine flu next year or which two baseball teams will make it to the World Series. The economic advisers to the president all know that even predicting a figure as broad as GDP growth is nearly impossible now, and was probably, if they are willing to admit it, just as impossible in the past. The Daily Racing Form, America’s Turf Authority Since 1894, almost certainly has a better track record of prediction than the Wall Street Journal’s monthly polls of prominent economists.
Creating and defending economic forecasts as always been a business that is unlikely to be rewarded by accurate results, but someone has to tell Americans that there is a clear path to better employment, even if the path is based on a fantasy
Douglas A. McIntyre
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