New jobs generated by private sector

By DAVID NICKLAUS

President Barack Obama held a jobs summit recently but made clear that he doesn’t think he can find money for a major jobs bill.

It’s a good thing for him, then, that the Dec. 4 employment report came in better than expected. The nation lost just 11,000 jobs in November, by far the smallest number since the recession began, and the unemployment rate fell slightly to 10.0 percent.

Normally, such numbers would be nothing to cheer about. But they’re better than the recent past, when hundreds of thousands of jobs disappeared every month.

“It suggests we are closer to turning the corner than we thought before,” says Ben Herzon, an economist at Macroeconomic Advisers in Clayton, Mo. He predicts that payrolls will start growing early next year and should be showing steady growth by the end of 2010.

At the jobs summit, Obama said businesses must take the lead in creating jobs, and said he’d like to give them incentives to do so. He added that government lacks the resources to create jobs itself, which seemed to rule out a major infrastructure initiative or a hiring program like the Works Progress Administration of the 1930s.

With the economy recovering, that’s a reasonable stance. Money from this year’s $787 billion stimulus bill is still being spent, and Herzon says it will continue to contribute to economic growth for another six months or so.

“We’re not facing the same risks we were facing a year ago when the economy was falling off a cliff,” Herzon said. “I would say the economy is turning, fiscal stimulus is working, and I would be inclined to just be patient.”

Patience is not a virtue, though, in Washington. With unemployment at 10 percent, every politician wants to tell voters that decisive action is being taken.

Decisive action

To some participants in the jobs summit, decisive action would mean spending tens, if not hundreds, of billions of dollars to build roads and fix sewers.

Obama expressed sympathy for the infrastructure arguments but also said such spending might produce jobs “two years down the road,” not right away.

He’s also worried about the budget deficit, which is already expected to be more than 8 percent of gross domestic product this year.

If the president does propose a jobs bill early next year, it’s likely to consist of modest tax incentives designed to spur private-sector hiring. One idea being discussed is a broad tax credit for any business that expands its payroll. That could get expensive, because it would reward employers that were planning to hire anyway.

The tax breaks could be aimed at small business and at people who want to weatherize their homes. The smaller and narrower the incentive, however, the fewer jobs it will generate.

“He’s going to look for ways that don’t cost too much and will persuade the private sector to do more,” says Gary Burtless, a senior fellow at the Brookings Institution in Washington. Next year will see the launch of one big government jobs program: the 2010 census. Beyond that, however, replacing the 7 million jobs lost in the recession will be almost entirely a private-sector task.

X David Nicklaus is a columnist for the St. Louis Post-Dispatch. Distributed by McClatchy-Tribune Information Services.