Economic Turmoil – Why?

When will this turmoil stop? When national leaders are elected, they appreciate that we appreciate stability, work, freedom, and control over our own decisions and destiny.

Economists are great at predicting the past, not so the future. We just got a terrible jobs report, worst all year – yet unemployment remains mysteriously low. Economists thought jobs would be higher. Likewise, we have exploding inflation, energy to everything. Then we also have Omicron. What does it all mean? Where is the turmoil coming from, where does it lead, and when does it end?

Here are some thoughts. Economists, like the rest of us, like predictability. Except for speculators, who like volatility, most of us – consumers, families, retirees, businesses, investors, financiers, and producers prefer predictability. But we do not have it. Why not?

Unpacking, here are the answers.

First, where is the turmoil coming from? Latest jobs report showed just 200,000 jobs created, far removed from economists’ higher predictions. Why did that happen?

The biggest reason is the uncertainty created by the US government. Ironically, the government is supposed to stabilize and reassure, not spur doubt. Yet, the government is creating doubt.

At a time when businesses large and small need running room to recover from the original COVID hit, the federal government has put a federal vaccination mandate in place – across all states and sectors.

The mandate flies in the face of constitutional law – which multiple courts are ruling and triggered unnecessary pullback on investment, hiring, and recovery. Instead of confidence, it spurred resentment, resignations, premature retirements, difficulties in recruiting, and retarded growth.

Add to this hyping of the Omicron variant on COVID. That scared people. The government could have tamped down fears, as clinic data suggest this variant is milder, but they did not do that.

They did the reverse. They put mass travel and commercial restrictions in place, depressing international trade, disrupted stumbling supply chains, caused markets to shiver, fall. That seems unnecessary.

Why else were the jobs report dismal? Because federal spending is out of control, Biden and Congress are stuck on full throttle, at a time when few have extra money, inflation and energy shortages threaten individual solvency, and what is being legislated – and spent on – is often unnecessary.

So, businesses – with 60 to 80 percent small, state by state – are not in a position to risk hiring, especially when consumers are doubtful and pinched, investments costs rising, fear for the future widening.

Second, where does this lead? The answer to this one is harder. If the “Build Back Better” overspending bill, which concentrates more power in the federal government, fails – there is slower spending. If a yearlong continuing resolution – or level appropriations pass – that offers a breather.

But if the Democrat-led Congress and White House stay on a spending spree, inflation will keep rising, triggering increased interest rates, which again slows growth – even if it trims inflation in coming years.

If any major world shock – to energy, national security, global stability, health, or some other major input to economic growth – is hit, there is little margin for recovery, which means a chance of recession.

All this is happening against the backdrop of a nearly$30-trillion-dollar national debt, rising fears – fanned by national leaders and media – over a new COVID variant, and a coming political year.

So, with a return to basic economic sanity, a sense that revenues and spending must balance, understanding that higher taxes do not work in a struggling economy, where job growth is tenuous, labor market shrinking, and federal mandates growing, there would be hope.

Average Americans do understand basic economics since they must make ends meet, work, plan, and so appreciate stability and predictability, as much as any sensible national economic thinker. But if Democrats keep spending and a handful of Republicans go along, the impact will be more uncertain.

Finally, when does it end? If you read big fat economic textbooks or Harvard Business School case studies, they might point you to business cycles, historical trends and make a prediction. But fat books often get it wrong.

When will this turmoil stop? When national leaders are elected, they appreciate that we appreciate stability, work, freedom, and control over our own decisions and destiny. That could be sooner or later, but with the flood of Democrats retiring, economic tremors afoot, 2022 looks increasingly the answer.