Can Mr Obama Really Create Jobs- Part I

The Obama government is clear in its focus of creating jobs in the current economic scenario. The intentions are definitely good but the results so far don’t look so positive. Let us look at the facts. Last week the labour department announced a second month of 10% plus unemployment. Coinciding with this the White House called a meeting of prominent executives, labour leaders and academicians to discuss as to how the Federal Government can increase job growth. The president commented that his government is looking for fresh perspective and every good demonstrable idea is welcome.

Definitely sounds promising but can the government really create jobs at such short notice. Economists feel that creating new jobs in short notice isn’t exactly the government’s cup of tea. In the long term however the government can definitely impact the health of the labour market. The tool kit that the government has namely the Trade policy, corporate tax rates and the structure of health care do have a real impact on economic growth but in the short run this tool kit is ineffective in creating jobs.

It doesn’t take to be a rocket scientist to understand that currently there aren’t enough jobs because the companies are not hiring and the companies are not hiring because there is not much demand for their products and services. In fact go through economic history and you would find that unemployment at the beginning of an economic recovery is perfectly normal.

For me to write all this is pretty easy but those 15 million people who are out of work this will sound nonsense. This is the situation which the government is facing and they are under immense pressure to act.  Below are four ideas which the government is considering to stimulate job growth. We are analysing these practically to understand how much we can expect from these.

Target an Industry to Stimulate Demand

The government first experimented with this method by introducing the highly successful cash for clunkers program. Just to brief the cash for clunkers program paid people $4,500 to turn in their old cars and buy new ones.  So far the program turned out to be one of the most successful federal efforts at stimulating the economy.

To meet the increased demand car companies like the General Motors increased production – adding shifts and running plants overtime. The result increased profit and employment in this industry. With increased employment more money was put in the hands of workforce who spent the same on other goods and thus helped to revive other sectors of the economy.

After the success of cash for clunker program the policymakers are now thinking about Cash for Caulkers program that would give homeowners an incentive to refurnish and redo their houses. The idea is to revive and provide boost to the construction industry which is in deep trouble after the real estate bust. Also the program is expected to help the government’s green agenda.