Mar

That Obama Recovery

WASHINGTON (MarketWatch) — Private-sector firms in the U.S. eliminated 20,000 jobs in February, the 25th decline in a row, according to the ADP employment report released Wednesday.

It was the fewest jobs lost since 22,000 jobs were added in January 2008.

In January 2010, a revised 60,000 jobs were lost, compared with the 22,000 originally reported, ADP said.

Month after month after month after month I’ve been blogging the unemployment numbers. Today not only do we learn that the economy is shedding more jobs, but that the “only 20,000″ laid off last month was actually 60,000. A rounding error at the BLS?

Unemployment as of Feb 5 was officially 9.7%. Will it move back above 10% now?

And this trend of layoffs will continue if the president and Congress don’t start enacting pro growth policies, like cutting spending, reducing taxes across the board, and raising interest rates. In short, extricating themselves from the workings of markets. With 25 consecutive declines in payroll numbers, businesses are jittery. Nobody except government officials believe in a “jobless recovery.”

Wednesday morning philosophy:

A “market” is what we call a group of individual humans who interact with the purpose of satisfying their desires through exchange. The order arising from each individual seeking to maximize his “utility” was called by Adam Smith the “invisible hand,” and by F.A. Hayek the “extended order.” Markets are self-regulatory by nature: that is to say, the people who engender what we refer to as a “market” are constantly shifting their tactics to attain higher levels of satisfaction. When there is a meeting of minds between individuals or parties, a price is set, and the market is said to have “cleared.” When government interferes with this clearing, it has positively acted against the well-being of the citizenry.

All actions in a market are necessarily subject to the law of unintended consequences because man’s faculty of reason is imperfect. If men were angels, i.e., endowed with perfect intellect, the “market” would exist in the Biblical “fullness of time.” Under these conditions, the consequences of every decision made would be immediately discernible, and the global market, unfettered from the feeble minds of men, would exist in perfect homeostasis. Economists refer to this imaginary scenario (or something akin to it…, likely without the biblical reference) as the evenly rotating economy.

If it is true that one individual or one party (e.g., a business) can influence markets in ways that are impossible to completely predict, it is all the more true for gigantic entities such as governments. Not only does the size of the typical Western government dwarf the size of even the largest corporations, but they are also not subject to the legal and ethical restrictions that markets place on their actors. For example, what company can pay its debt to itself? Can imprison its debtors? Can seize property at gunpoint? What company controls the judicial system? Reflecting on the nature of government should make one very wary of its power, and the inevitable and dangerous consequences that overreaching by legal fiat entail.

So 25 months of declining payroll numbers? It’s no great mystery. The United States government’s unprecedented interventions that followed the collapse of our real estate and banking sectors have spawned a new generation of problems that we, with our weak intellect, are only beginning to recognize. Their first warning signs are right now slowly taking shape on the approaching horizon.

It was not until 1931 that the consequences of 1929′s and 1930′s interventions became evident for all; the country then realized it had an additional set of major economic complications to sort out, without ever fully coming to grips with the prior set. The American who in 1930 sat contemplating the ancient riddle now suddenly found it translated into incomprehensible Swahili.

Our intellect may not be perfect, but it’s functional. And this unique trait of man will soon bear down upon the second great economic collapse in a few short years.

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