I don’t know what to think about the economy these days. I was feeling pretty good about it after Christmas. It felt like things were starting to turn around. The latest numbers from the Fed, covering December, showed all 12 Fed districts noted at least some level of expansion in economic activity. The economy was riding the wave of holiday sales increased consumption by consumers. The Fed’s numbers showed consumer spending “reflecting significant gains in holiday retail sales compared with last year’s season.” The jobs report also showed the economy was indeed expanding showing an increase of 200,000 jobs in December. At the same time, inflation continued to decrease as “prior increases in the costs of selected inputs have eased.” This was all good economic news and made me think that, finally, the economy might just be starting to turn around. Of course, the real estate – both residential and commercial – is still reeling. Prices are still hovering around the lowest point of the real estate crisis and may not have bottomed out yet, but overall, I was feeling pretty good about the economy overall. Especially the jobless numbers, which seemed to keep improving into January, bringing the unemployment rate down to 8.5 percent. But then, a report that came out Thursday showed the number of Americans applying for first-time-jobless benefits rose last week, reversing the recent declines. Darn it. Jobless claims jumped to 399,000 in the first week of January. That’s the highest in six weeks, up from an upwardly revised 375,000 the week before. It also drove the four-week average to 381,750 from 374,000. The report also showed 3.63 million continuing claims, up from 3.61 million. If you include the workers receiving benefits under emergency federal programs, around 7.3 million Americans were collecting unemployment benefits at the end of December. Economists are unsure exactly what’s going on with the labor market, but the most recent report shows it remains weak. This was truly unsettling to me because I had hoped things were going to continue on a positive path.I am no economist, but I just get this overwhelming sense of uncertainty in all sectors of the economy, but especially in the labor market. I just think people who operate businesses – small and large – are uneasy about what the future will hold. I think business owners wonder about the future with regard to health care and expanded government regulations. They worry about increased costs of virtually everything, including fuel and transportation. They worry about economic uncertainty in other parts of the world, like Europe. They worry about being able to borrow and even if they can borrow, they worry about having to service more debt right now. The net effect of all this is a kind of economic stagnation. Most business owners aren’t investing or expanding. They’re hunkering down and waiting to see where things are headed. That’s why I was so glad to see things – especially the labor market – headed in the right direction. And why it’s so disappointing to see it going the other way again. Of course, it’s only one report. Perhaps it was just an aberration and things will get back on track. But the report tends to underscore why employment is so important. With employment at 8.5 percent, we have 7.3 million Americans collecting benefits. If we could get that down to 5 percent, that would take 3.1 million people off the unemployment rolls. Not only does the government save billions in unemployment payments, those 3.1 million people are getting paychecks and paying taxes. They’re also buying more stuff for their families and driving up demand for products that somebody has to manufacture. That’s why politicians always like to talk about jobs. All politicians agree that jobs are very important. But they disagree about how to create them. I think that if you keep taxes low and don’t handcuff businesses with a bunch of dopey regulations, they’ll expand and hire people. I think government needs to create an atmosphere that encourages job creation. But right now, it feels like government is creating an atmosphere of uncertainty. Maybe that’s why the job numbers are bouncing around so much instead of steadily improving.
