The official August employment numbers will be released by the BLS tomorrow. But a few other notable sources have already provided data:
- ADP reports the the economy added 91,000 jobs, a decrease from July
- Goldman Sachs cut its estimate from 50,000 jobs added to 25,000
Meanwhile, the economic consensus is expecting something in the neighborhood of 100,000 jobs added to non-farm payrolls.
The economist Peter Morici, who's been hammering away at the jobs problem for over a year now, summed up an unpleasant situation rather nicely at CNBC:
The economy must add 130,000 jobs each month to accommodate a growing adult population seeking work.
The key factor stifling jobs creation is sluggish GDP growth, which only advanced 1.3 percent in the second quarter and 0.3 percent in the first. Businesses can’t hire and pay new workers without more customers.
Brian Watt and Madeleine Brand reported today on the final stop of the Congressional Black Caucus' jobs tour, which took place in Los Angeles. As they point out, the unemployment rate among African-Americans is around 16 percent, far higher than the national rate of 9.1 percent. In California, the rate for African-Americans is over 20 percent, while the overall rate is 12 percent.
If you think about this, we really have two problems rolled up into one: in California, we urgently need to reduce high general unemployment; but we also need to address the the problem of black unemployment, which is always higher than the general level. This is from the Economic Policy Institute -- in January of 2008, almost a year before the financial crisis hit:
In the best of times, many African American communities are forced to tolerate levels of unemployment unseen in most white communities. The 2001 recession pushed the white annual unemployment rate up from a low of 3.5% in 2000 to a high of 5.2% in 2003. During the same period, the black unemployment rate shot up from 7.6% to 10.8%. National recessions take African Americans from a bad situation to a worse one....In 2007, the black unemployment rate was 8.3%. This figure is still above the pre-recession low and more than twice the white unemployment rate. Goldman Sachs estimates that a new recession would increase the national unemployment rate to 6.4% by 2009. For African Americans, the unemployment rate would be expected to rise to 11.0%.
We won’t know until he actually gives the speech, but there’s been speculation that when President Obama lays out his jobs plan in September, he may resurrect the idea of establishing a national infrastructure bank.
What, you may ask, is an infrastructure bank? Well, it’s what it says it is: a public bank that invests in infrastructure, such as bridges, roads, rail lines, ports, and even energy projects and things like broadband capacity. Here’s how theWhite House presented the idea:
The Administration’s six year plan would invest $30 billion to found a National Infrastructure Bank (I-Bank). The I-Bank would leverage this Federal investment by providing loans and grants to support individual projects and broader activities of significance to our Nation’s economic competitiveness. For example, the Bank could support improvements in road and rail access to a West Coast port that benefit farmers in the Midwest, or a national effort to guarantee private loans made to help airlines purchase equipment in support of the next generation air traffic control system (NextGen). A cornerstone of the I-Bank’s approach will be a rigorous project comparison method that transparently measures which projects offer the biggest “bang for the buck” to taxpayers and our economy. This marks a substantial departure from the practice of funding projects based on more narrow considerations.
If $30 billion sounds relatively modest, that’s because it is. It’s seed money, which the I-Bank could them use to attract private capital. And there's private capital out there. For example, Goldman Sachs runs a $10 billion infrastructure fund.
Leverage ratios for the I-Bank's initial $30 billion could vary, but let’s say it’s something like 25:1. That’s $750 billion to spend on projects that would put potentially thousands of currently unemployed Americans to work building stuff that would yield a long-term return in capital. Take it to 50:1 and you’re looking at $1.5 trillion.
The I-Bank would function something like a national venture-capital firm -- albeit one that’s not necessarily interested in making huge returns off its investment, but rather by providing the basis for private sector investors to put their capital to work on infrastructure (and, not incidentally, create jobs). The tricky part would be in working out the relationship between the independent government committee that would oversee the fund -- and choose the projects that have the biggest bang for the buck -- and the private investors who might, you know, have their own ideas. Or have better ideas than politicans who want to steer money toward their constituents.
OK, now you know what it is. So how would it be very good for LA? Two reasons: first, because it would provide a means to accelerate development of Mayor Villaraigosa’s public transit goals; second, because it would enable private investors to get in on big freeway or port improvement projects. Now, you can see why there might be some wrangling over this. Mass-transit projects and freeway-improvement projects could benefit entirely different voting constituencies. This is where some -- but only some -- of the I-Bank debate has been concentrated.
In other respects, the I-Bank has caught the attention of supporters on both sides of the political spectrum, and in between. Hard-core free marketers don’t like it. But Reason Foundation’s Robert Poole -- whose experience with California and Los Angeles transportation is extensive -- sorta kinda does. Moderates and moderate conservatives, including Big Idea folks like Felix Rohatyn and Fareed Zakaria, love the plan, because it offers a tasty compromise: a public solution to both the unemployment problem and the crumbling-infrastructure problem that involves private money.
Robert Dove, a managing director at the Carlyle Group, a private equity firm, did a pretty convincing job of defining the way a national infrastructure bank would operate. Here's his Congressional testimony:
Congress should look at the infrastructure bank as a true bank that must make difficult credit decisions. The institution’s primary purpose is to lend to large projects with longterm maturities at a small margin over its borrowing cost. The bank would provide a project with a base of capital that could then attract, either at the same time or later, outside private investment that we need to support our nation’s infrastructure. The bank should cover its costs, but not operate as a profit-making venture. The purpose of the bank should be to utilize its expertise to attract additional investment from the private sector for public infrastructure priorities, rather than replacing existing funding from government institutions.
The point he makes at the end is important: the bank would bring money into the process that wouldn’t otherwise be there. It wouldn’t be a way to cut federal spending, but rather a means enable federal money to have a greater impact.
Photo: Wikimedia Commons