Weak hiring is a warning: America needs more production

The September employment report should get Washington’s attention. The economy added just 29,000 jobs, while unemployment rose to 4.2%. July and August payroll estimates were revised downward by a combined 60,000. www.bls.gov

One month does not establish a weak economy. But these numbers are a warning that the economic boom Americans want will require more than optimism.

President Trump has emphasized lower taxes, less regulation and greater domestic production. Those are the right priorities. Now Washington must ensure that businesses can turn those incentives into factories, homes, energy supplies and jobs.

The Hiring Warning

The August report initially showed 162,000 additional jobs. That figure has now been revised to 133,000. July’s revised estimate shows a loss of 10,000 jobs. www.bls.gov

Revisions are a normal part of economic reporting. They nevertheless remind us that an encouraging headline should never substitute for examining the broader trend.

September’s unemployment rate remains relatively low. That is good news. Yet a person who cannot find work receives little comfort from knowing that most other Americans remain employed.

The objective should be an economy in which employers compete for workers, young graduates can begin careers and families can improve their standard of living.

Achieving that requires businesses willing to expand. Employers hire when they expect additional workers to help produce goods and services that customers will buy. Government should make that decision easier.

Production Is the Answer

There are two sides to the economy: demand and supply. Washington frequently tries to solve economic problems by giving people more money to spend to increase demand.

But if production cannot increase supply, additional spending can increase prices rather than increase output..

The latest inflation figures illustrate the challenge. The personal consumption expenditures price index increased 3.4% over the year ending in August, still above the Federal Reserve’s 2% target. www.bea.gov

America needs policies that increase productive capacity while maintaining fiscal and monetary discipline.

Consider housing. Subsidizing buyers without increasing the number of homes can push prices higher. Allowing builders to construct more homes addresses the shortage directly and puts downward pressure on prices.

The same reasoning applies to electricity. New factories and data centers need reliable power. Delaying generation facilities and transmission lines can restrict investment, increase costs and raise prices to consumers.

Expanding supply takes time. That is precisely why unnecessary delays are so damaging.

Remove Barriers to Growth

Lower taxes improve the potential return on investment. But an attractive tax rate accomplishes little for a project that cannot obtain approval.

Federal, state and local governments should establish clear requirements and predictable deadlines for permits. Protecting public health and property rights is legitimate. Keeping projects in years of administrative uncertainty discourages investment.

Businesses also need consistent rules. A manufacturer considering a major expansion must estimate costs and revenues over many years. Uncertainty about taxes, regulations and trade policy can cause management to postpone their investment.

Trade negotiations should therefore seek durable agreements that open markets and allow businesses to plan.

Workers need opportunities to acquire the skills those investments require. Employers, community colleges and trade schools can cooperate on practical training tied to actual job openings.

These policies cannot guarantee strong hiring every month. They can improve the conditions under which private employers create lasting jobs.

Congress Must Act

The Federal Reserve faces a difficult situation. Inflation remains elevated, but hiring is weak. Raising interest rates may restrain demand while also making investment more expensive.

Monetary policy cannot issue a building permit, construct a power plant or remove unnecessary regulations. Those responsibilities belong elsewhere.

Congress must also control federal spending. Persistent deficits and a huge public debt add to borrowing needs and put upward pressure on interest rates, competing with private investment.

Spending restraint and economic growth should reinforce each other. Greater production expands the tax base, while disciplined spending reduces the government’s financing needs.

Neither is a substitute for the other.

September’s report should prompt action, not panic. Trump’s growth agenda needs implementation, and Congress must accept responsibility for spending restraint.

Americans do not need another promise of prosperity. They need an economy that produces more, offers more opportunity and allows their paychecks to buy more.

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