by Jeff Reeves | August 3, 2011 9:32 am
As we digest the debt debacle, one important fact seems to be lost on most Americans — Congress has decided to overlook fixing unemployment in order to tackle spending. Unfortunately, that will only create more unemployment.
Why legislators allowed the conversation to change from job creation to debt busting is beyond me. Conspiracy theorists suggest it’s because the GOP has no interest in mending the economy, when a double-dip recession during primary season can energize Republican presidential campaigns. I’d like to believe that even the most stubborn legislators aren’t evil — just misinformed or incapable of viewing the big economic picture.
Whatever the motivations in Washington, the truth of the matter is that the biggest job destroyer in 2011 has been the government. This is not bluster or scare tactics, but an honest fact based on the respected analysis of outplacement firm Challenger, Gray & Christmas Inc.
Specifically, Challenger, Gray & Christmas has estimated that for the first six months of 2011, government layoffs were the primary source of job losses in the economy. And in the July numbers, a big reason government layoffs didn’t take the top spot is because the overall layoff numbers surged a stunning 60% to the highest level in 16 months. On the whole, government employees have been hardest hit by layoffs when compared to workers in all other sectors — banks, technology, retail, you name it.
And that bleeding out in public payrolls is due almost wholly to government spending cuts and the focus on smaller federal debts.
I’m not saying we should throw money around irresponsibly, but you have to ask yourself why we would allow so many workers to lose their jobs when the employment picture is so grim.
And the hard layoffs aren’t the only paychecks that have been cancelled. With Congress not expected to return until September after wasting months staring at the debt ceiling, nearly 4,000 nonessential Federal Aviation Administration employees are furloughed and hundreds (maybe thousands) of private contractors are without work. The FAA is losing $250 million a week in tax revenue while the standoff continues, so it has cancelled work on any construction projects at airports.
What a mess. And it’s only going to get worse.
The debt-reduction agreement adopted by Congress calls for defense-spending reductions of at least $350 billion over the next decade. That means companies like Boeing (NYSE:BA), Lockheed (NYSE:LMT), Raytheon (NYSE:RTN) and other contractors could be feeling the burn of layoffs as soon as Department of Defense checks get leaner.
And though federal regulations were clearly lax on the financial sector, the tightening of the noose via Dodd-Frank has helped lead to the specter of massive layoffs on Wall Street. Some 30,000 pink slips at HSBC are only the beginning.
I’m not saying we give banks a free ride just to keep folks on the payroll, or continue to spend billions on warplanes we rarely use. And I’m not suggesting Congress gets a blank check and we ignore our growing mountain of debt. I’m just saying maybe we should think more holistically about the state of our current economic mess.
Or at the very least, stop making the unemployment picture even worse by turning government workers out into the street. The private sector is already doing its best to get unemployment back above 10% all by itself.
Jeff Reeves is the editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.
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