The latest jobs report shows that the President might be able to deliver growth to his credentials as defender of US security. The private sector created 268,000 jobs in April, the biggest jump since February 2006.
The number of long-term unemployed dropped by 283,000 nevertheless the unemployment rate rose to 9% and 25 million Americans remain out of work.
Looking at US GDP figures, the annual rate of economic growth fell from 3.1% in Q4 last year to a mere 1.8% in Q1 2011. Growth in the service sector is slowing, inflation is rising and the housing sector remains a drag.
Despite low interest rates, mortgages continue to decline. It will be a long while before house prices turn up and builders begin hiring workers to start a new round of home building.
On the positive side, the manufacturing sector which centres on the rust belt has added around 250,000 jobs since the low of December 2003. This revival has enabled companies such as GE, Caterpillar and NCR to expand in the US. The American motor industry is rising from the ashes.
Budget deficit
The major hurdle is the size of the budget deficit so there must be a political solution whereby:
- The Treasury will find ways to postpone the date on which the ceiling will be reached until early August;
- The ceiling will be raised in time to avoid default;
- Some spending will be cut;
- Deficit targets will be agreed with the aim of reducing to 3% of GDP by 2015;
- Agreement to specific spending cuts and tax increases needed to meet the deficit reduction targets will be postponed until after the 2012 elections;
It is wrong to write off America.
