The Bureau of Labor Statistics reports that the American economy added 271,000 jobs in October. While this number is an improvement on September, it reinforces the reality that the American economy remains on life support. The unemployment rate, number of long term unemployed, and labor force participation rate are all essentially unchanged. The recovery from the great recession has been anemic and one month of good jobs numbers isn’t going to change that trend.
The size of the hole we are in can be seen by comparing where we are now in terms of jobs from where we would have been had the post-recession recovery followed the trajectory of past recoveries. We are now 6 million jobs behind where we should be, according to Congress’ Joint Economic Committee. The economy would need to add 516,000 jobs a month to match the pace of the average recovery at this stage.
So what is different this time? Why aren’t we adding 516,000 jobs a month?
One answer that has gotten too little attention is that the rate of regulation over the economy has increased over the past decade, including since the great recession began. Regulation has its costs—CEI’s Wayne Crews estimates the total annual burden of regulation on the economy at about $1.9 trillion. That number could support a lot of jobs.
Examples of how regulation impedes job creation include:
- The Obama administration’s impending Clean Power Plan, which is estimated to reduce employment by 300,000 jobs a year.
- Minimum wage hikes in Seattle and San Francisco, which have cost over 1,000 and 2,500 food service jobs in each city respectively.
- Dodd-Frank banking regulations that are crushing small community banks all over the nation.
Meanwhile, as I highlighted last month, the Department of Labor and National Labor Relations Board are pursuing a policy of further restrictions on employment conditions:
- The Department of Labor’s interpretation of the Fair Labor Standards Act, which essentially says that most independent contractors have to be classified as employees, and therefore subject to a host of cost-increasing regulations.
- The Department of Labor’s proposed overtime rule, which will significantly increase costs on businesses that promote from within if they wish to encourage aspirational staff to work longer hours. (The likely outcome is that hours will be cut instead.)
- The National Labor Relations Board’s decision on “joint employer” classification and its impending rulings on franchises and contingent workers. These decisions threaten business models that sustain 8.5 million jobs across the U.S.
When the nation went into recession in the early 1980s, high taxes were the largest supply-side problem to creation of new jobs. President Reagan worked with Congress to cut taxes significantly, and the result was the Reagan boom. Clearly, overly burdensome regulation is the largest supply-side problem today. A responsible President who cares about employment prospects would be working with Congress to cut regulations significantly, not imposing more of them.