Stephen Foley: The real work there is still to do on US jobs

Click to follow
The Independent Online

US Outlook: When the US last emerged from recession, after the dot.com bust, the Bush administration presided over what became known as the "jobless recovery". If they get it right, a new generation of leaders might just spark a jobs-led recovery.

This week's White House "jobs summit" was a photo opportunity, but there is already the hum of ideas in the air about how government can support job creation. This is in contrast to the early 2000s, when the government cut taxes, sat back and waited for the jobs to materialise.

One eye-catching initiative has already been dubbed "cash for caulkers", in a twist on the $3bn cash for clunkers that handed government subsidies to car owners who traded up to a greener model. Its designer, venture capitalist John Doerr, says cash for caulkers could divert $23bn over two years to help millions of Americans weatherise their homes, cut energy bills, reduce greenhouse emissions and get unemployed construction workers back on the job.

Democrats and left-leaning economists, meanwhile, have a wish-list of other projects, including aid to the states to prevent forced lay-offs of teachers and emergency service personnel. The focus should be on those ideas that create and save jobs in the very short term, plugging the gap before the recovery really takes hold.

Key to this will be finding new money without provoking the deficit hawks. Happily, the $700bn Wall Street bailout fund has not been fully spent. The Obama administration must decide what to do with the remaining $216bn before it expires at the end of the year. Republicans want it to go to pay down the deficit rather than become a "slush fund", but they ought to be resisted.

One risk to the world's recovery is that the US acts too quickly to end its emergency aid to the economy. It is a resumption of growth, and the resulting cascade of tax revenues from corporate profits, that most quickly reduces deficits. Redirecting crumbs from the Tarp table to debt repayment would be largely symbolic – and it would be the wrong symbol.

Confidence is still fragile. Better to signal the government stands firmly behind a recovery and ready to do what it takes to bring down the scandalously high jobless rate. US firms hired 52,000 more people as "temporary help" in November; with a bit more confidence, these could turn into permanent jobs. US consumers hit the shops in greater numbers after Thanksgiving this year; with a bit more confidence, they might turn their attention from the discount aisles to full-price items.

Yesterday's US jobs figures were better than expected, but that does not mean they were good. One in 10 Americans is still out of work. And that means, for the country's politicians, there is work to do.

Comments