79. Agency: Jobs Report & Next Chapter of Work

Friday was the jobs report and my last day working at TPPF. I was honored to work there off and on for the last 9 years, and am excited about the next chapter of economic consulting with more agency.

Sep 03, 2022

Hello Friend,

I hope you’re doing well. I have a lot to say about the U.S. jobs report but first some important career news to share.

PERSONAL TAKE

After an incredible 9 years—even with the one-year hiatus at the White House, my last day at Texas Public Policy Foundation (TPPF) was yesterday. I’m thankful for this extraordinary opportunity. This second round at TPPF closed as I want to spend more time with my growing family and pursue consulting and other work in the public policy community, including some work at TPPF. I intend to remain in Texas and will continue to be at events, so hope to see some of you at upcoming events, like the SPN meetings in Atlanta, Georgia. If you have a contract or full-time work opportunity that might be a good fit, please contact me.

We accomplished much at TPPF over the last decade, saved taxpayers money, helped get people out of poverty, provided paths to an improved livelihood, and encouraged improvements that make these successes just the beginning of more human flourishing in the great state of Texas and beyond. There are many wonderful people who worked or work there who have benefited me and the movement. This year has been a struggle as I had hoped it was a year to “build” but it often felt “broken,” which gave me much time to ponder my future and the opportunities for the next chapter to fulfill God’s will in my life, which led me to the current situation. It hasn’t been easy or necessarily desired, but it is for the best and needed.

But as Frank Sinatra sang, “The best is yet to come!” I know this to be true because there are lessons about what works and what will work moving forward.

By limiting government to only preserving life, liberty, and property for the betterment of people, there will be many more opportunities for further human flourishing. Understanding government is the problem because of the reduction in liberty imposed on people from every action it takes, the limitation of government to its constitutional roles sets the stage for profitability by individuals and groups of individuals at businesses to innovate and expand so that we all benefit from voluntary exchange through the dignity gained through work and satisfaction enjoyed from the fruits of work.

This is counter to the idea that government can solve problems that it has mostly created when the politicians determining those “solutions” lack sufficient knowledge, values, and empathy in their desire to ultimately be re-elected. Those lacks by politicians are filled in the private sector through the best system we’ve known yet: capitalism. The opportunity to keep much of the rewards of what you build is something unheard of in most of human history and in most countries today. We need more of it now. The experiment of America had once provided private property rights and adequate rules of the game that help provide equal opportunity to achieve your hopes and dreams, unlike any other system.

The balance of the economic system in America, and in many ways in Texas, has tipped too far toward socialism for too long and we’re seeing the ugly results. The commanding heights of America are dominated by government spending and regulations whether it be healthcare, education, transportation, manufacturing, energy, and more. While America is the most productive in each of these sectors, these governmental impediments to our flourishing are hindering us from achieving the resulting abundance from capitalism in each of them, and thus in total whereby competitive advantages will be fostered through expanded free trade agreements and more market-based immigration.

Let’s turn the tide, unlock poverty and unleash prosperity, and believe in our unique dreams in a world that better provides the chance to fulfill God’s will in our lives. My faith and understanding of economics provide a firm foundation to help me in this endeavor, whereby economics is the study of human action and interaction within institutions to satisfy desires given a world of scarcity. I suggest we need a better understanding of economics before we fall into despair.

Ultimately, we accomplished much during my time at TPPF, and I will be forever grateful. A place that gave me from my humble beginnings to homeschooler to “rockstar” to first-generation college graduate to Red Raider to academic to policy entrepreneur that supported my God-given mission to let people prosper. Had we not helped remove obstacles imposed by the government, we would fall victim to the government largesse in many other states, and our successes would not have happened.

We can’t settle for anything less than the ultimate preservation of life, liberty, and property that comes from God, not the too often inept coordination of efforts made by rational politicians in government who adhere to the challenge of being re-elected. Removing government failure causing the problems is step one. Trying to solve those problems without achieving step one will only exacerbate the problem, which is too often the case in today’s policy community from the left and right.

The vision and desire for more economic freedom and individual liberty will support more success! Here’s to the next chapter and more opportunities to let people prosper.

HOT TAKE

Overview: The shutdown recession from February to April 2020 and subsequent government failures have caused substantial harm to Americans’ livelihoods, which include high inflation and a recession. One policy mistake was Congress adding more than $6.1 trillion in deficit spending since January 2020 to reach the new high of $30.9 trillion in national debt, or more than $245,000 owed per taxpayer.

Another mistake is the Federal Reserve monetizing much of the new debt, contributing to 40-year-high inflation rates. These bad policies have resulted in an inflated boom that is busting into what will likely be a long, deep recession with elevated inflation. The failed Keynesian policies of the Biden administration, Congress, and the Fed must be replaced with a free-market approach so that Americans have more opportunities to prosper.

Labor Market: The U.S. Bureau of Labor Statistics recently released another mixed U.S. jobs report for August 2022.

This shows 315,000 net nonfarm jobs added last month, with 308,000 added in the private sector. The official U3 unemployment rate increased slightly to a historically low 3.7%, but challenges remain. These challenges include about a 3% decline in average hourly earnings (inflation-adjusted) over the last year, a 0.2 percentage point lower prime-age (25–54 years old) employment-population ratio than in February 2020, and a 1-percentage-point lower labor-force participation rate at 62.4% with at least three million people out of the labor force.

Moreover, since the shutdown recession ended in April 2020, total nonfarm jobs have increased by 22.2 million. About 56% of these total jobs gained were during the Trump administration from April 2020 to January 2021 and 44% of them during the Biden administration thereafter. Private nonfarm jobs have increased by 21.6 million and are now up 629,000 from the past peak. Similarly, about 6 out of 10 private jobs gained were during the Trump administration.

Adding to the concern is a “zombie economy.” This includes “zombie labor” as many workers are sitting on the sidelines and others are “quiet quitting” while there is a reported nearly 5 million more unfilled jobs than unemployed people. And that demand for labor is likely inflated by many “zombie firms,” which run on debt but are likely to close as interest rates rise. Small businesses have slowly been adding jobs in recent months and their sentiment remains near half of a century low are worrying signs during a recession.

Economic Growth: The U.S. Bureau of Economic Analysis’ data below show a comparison of real total gross domestic product (GDP), measured in chained 2012 dollars, and real private GDP, which excludes government consumption expenditures and gross investment.

The shutdown recession contracted at historic annualized rates because of individual responses and government-imposed shutdowns related to the COVID-19 pandemic. Since then, economic activity has had booms and busts because of inappropriately imposed government restrictions in response to the pandemic, even as there is little to no evidence that these restrictions helped. However, they did severely hurt people’s ability to exchange and work. In 2021, the growth in nominal total GDP, measured in current dollars, was dominated by inflation, which distorts economic activity. The GDP implicit price deflator was 5.9% for Q4-over-Q4 2021, representing half of the 11.8% increase in nominal total GDP. This measure was up by 9.0% in Q2:2022—the highest since Q1:1981—for a 8.4% increase in nominal total GDP. There have now been two consecutive declines in real total (and private) GDP indicating a recession. This criterion has been used to date every recession since 1948. The Atlanta Fed’s early GDPNow projection on September 1, 2022, for real total GDP growth in Q3:2022 was 2.3%.

For historical comparison, the last expansion from June 2009 to February 2020 had average annualized growth of 2.3% in real total GDP and 2.8% in real private GDP. The earlier part of the expansion had slower real total GDP growth but had faster real private GDP growth. An explanation for this discrepancy is that deficit spending in the latter period grew faster, contributing to crowding out of the productive private sector. With excessive spending bloating the national debt thereafter, especially since the shutdown recession, the Fed has monetized much of the new debt instead of allowing many interest rates to rise to a market-determined rate. This resulted in higher inflation as there has been too much money chasing too few goods as their production has been overregulated and overtaxed. The consumer price index (CPI) is up by 8.5% over the last year—the highest rate since November 1981. After adjusting total earnings in the private sector for CPI inflation, real total earnings is down 0.4% in July 2022 since February 2020 or down 0.3% since January 2022 as inflation reduces people’s purchasing power.

Elevated inflation will continue until the Fed more sharply reduces its balance sheet to provide a positive real federal funds rate target.

Just as inflation is always and everywhere a monetary phenomenon, high deficits and taxes are always and everywhere a spending problem. As the federal debt far exceeds U.S. GDP, and President Biden has proposed an irresponsible FY23 budget, America needs a fiscal rule like the Foundation’s Responsible American Budget (RAB) with a maximum spending limit based on population growth plus inflation. If Congress had followed this approach from 2002 to 2021, the (updated) $17.7 trillion national debt increase would instead have been a $1.1 trillion decrease (i.e., surplus) for an $18.8 trillion swing to the positive that would have reduced the cost to Americans. The Republican Study Committee recently noted the strength of this type of fiscal rule in its FY 2023 “Blueprint to Save America.” And the Federal Reserve should follow a monetary rule.

Bottom Line: Americans are struggling from bad policies out of D.C., which have resulted in a recession with high inflation. Instead of passing massive spending bills, like the “Inflation Reduction Act” that will result in higher taxes, more inflation, and deeper recession, the path forward should include pro-growth policies. These policies ought to be similar to those that supported historic prosperity from 2017 to 2019 rather than the progressive policies of more spending, regulating, and taxing. The time is now for a limited government with sound fiscal and monetary policy that provides more opportunities for people to work and have more paths out of poverty.

Recommendations:

Set a pro-growth policy path with less spending, regulating, and taxing at all levels of government.
Reject new spending packages that America cannot afford nor needs; pass the RAB instead.
Enact return-to-work policies; impose strict fiscal and monetary rules—with the Fed having a much smaller balance sheet and a much higher federal funds rate target.

Thank you for reading Let People Prosper. This post is public so feel free to share it.

Empowerment Accounts may be the biggest recent poverty-relief reforms.
The Responsible Budget approach is essential in every state!
School choice now! See Washington Post article.
Economic freedom matters as people move to low-tax-and-spend states.
Handouts aren’t the answer to supporting long-term self-sufficiency.

TAKE ON ECONOMIES & POLICIES IN U.S.

Tech firms have been hit hard in the market this year.
Don’t miss this event (register here). I’ll be on the panel at 1 pm CT.
Good article in the WSJ by Senator Phil Gramm & John Early.
The student loan redistribution scheme is a political ploy to get votes.
The U.S. recession is light now but just wait.

BOOK TAKE

I recently read the book Agency: The Four Point Plan (F.R.E.E.) for ALL Children to Overcome the Victimhood Narrative and Discover Their Pathway to Power by Ian Rowe.

Check it out. Here’s the summary provided on the Amazon website:

Every child in America deserves to know that a path to a successful life exists and that they have the power to follow it. But many never set foot on that path because they grow up hearing the message that systemic forces control their destinies, or that they are at fault for everything that has gone wrong in their lives.

These children often come from difficult circumstances. Many are raised by young, single parents, live in disadvantaged neighborhoods, attend substandard schools, and lack the moral safeguards of religious and civic institutions. As a result, they can be dispirited into cycles of learned helplessness rather than inspired to pursue their own possibilities.

Yet this phenomenon is not universal. Some children thrive where others do not. Why? Are there personal behaviors and institutional supports that have proven to make a difference in helping young people chart a course for their futures? Agency answers with a loud and clear “yes!”
This book describes four pillars that can uplift every young person as they make the passage into adulthood: Family, Religion, Education, and Entrepreneurship. Together, these pillars embody the true meaning of freedom, wherein people are motivated to embrace the ennobling responsibilities of building healthy social structures and shaping the outcomes of their own lives.

For that reason, Ian Rowe calls the four pillars the FREE framework. With this framework in place, children are empowered to develop agency, which Rowe defines as the force of one’s free will, guided by moral discernment. Developing agency is the alternative to the debilitating ‘blame-the-system’ and ‘blame-the-victim’ narratives. It transcends our political differences and beckons all who dare to envision lives unshackled by present realities.

In addition to making the case for agency, Rowe shares his personal story of success coming from an immigrant family. He defends America as an ever-improving country worthy of our esteem. He corrects misguided calls for “anti-racism” and “equity,” and champions a game plan for creating new agents of agency, dedicated to promoting the aspirational spirit of America’s children, and showing them the path that will set them FREE.

Here are the last 5 books that I’ve read…check them out!