Housing, Jobless Benefits and Unemployment

While there are varying views as to what tomorrow's unemployment report will reveal, it's generally assumed that the number will be too high. But what's not spoken of enough is how the very federal government seen as so eager to put people back to work is blocking the kind of recovery that would make more hiring possible.

To put it very simply, hiring is a cost born by investors and employers. And the problem with the latter in mind is that continued governmental efforts to drive non-market outcomes are reducing the amount of available capital for hires, all the while raising the cost of luring workers from the sidelines.

Somewhat ironically, efforts to prop up the housing market with an eye on jobs are actually making job creation more difficult. To understand why, it has to be remembered that there are no jobs without capital. Simple as that.

So when we consider capital flows at present, the Federal Reserve has made plain that it will continue to use its balance sheet to drive down interest rates on mortgages through purchases of the securities backing them. Translated, the Fed is excusing and encouraging the very non-market lending practices that weakened the economy to begin with.

For those who doubt this, they need only ask themselves when in history vibrant housing markets have improved corporate efficiency, let alone opened new markets overseas. All economic activity involves tradeoffs, and while establishment economists continue to wail about looming job losses in areas such as construction if Washington allows the housing market to truly correct, they continually ignore the jobs not created in productive, knowledge-based fields due to government intervention. For the federal government to stimulate one sector is for that same government to depress elsewhere.

Worse for the job-interested individual, not only are the Fed's actions encouraging even more capital flows into the ground, they're making those on the cusp of the cleansing process of foreclosure less mobile when it comes to job opportunities irrespective of locale. Indeed, it's fair to assume that where housing markets are weakest so is job creation, but thanks to the falsely compassionate efforts of our central bank, it's more likely that those who would be best served if freed of a location-locking mortgage will take advantage of same in ways that will reduce their employment chances.

Heavy capital flows into the earth are a cause of economic weakness, not the facilitator of real growth, but if one were to listen to media-savvy Keynesian economists like Mark Zandi, the opposite is the case. As the New York Times recently reported, the oft-quoted Zandi believes that if the government does what it ought to do, as in get out of the way, that we'll "go back into recession" and "it will be very difficult to get out."

Implicit in Zandi's questionable reasoning is that the individuals who comprise any economy would be made better off if more in the way of faulty lending and borrowing were subsidized. If we ignore the contradictory nature of such a viewpoint, what Zandi doesn't bother to acknowledge is the basic economic law which tells us that due to human wants being unlimited, there will always be entrepreneurs seeking capital in order to fulfill those wants.

How keeping capital locked into dead assets helps this natural, economy-enhancing truism is seemingly something that has never occurred to Zandi, but it should be said that entrepreneurs can't innovate and create jobs without capital. That being the case, it's tautological to note that Zandi's alleged economy-saving solution is in truth the economy's entrepreneur and job strangling ball-and-chain.

Moving to unemployment insurance, the latest proposal in Congress would extend benefits to 99 weeks. On its face this works against job creation owing to a human reality that we as individuals know all too well. Simply put, cash handouts - whether they come from parents, friends or governments - delay our day of reckoning at which point we reduce our wage/job quality demands in order to work.

Not discounting for one second the very real pain presently felt by the unemployed, every individual in any economy has a price at which they're employable, and unemployment benefits serve to increase the price of tempting us toward work that, while perhaps not initially appealing, makes us more valuable over the long-term for it being work. Hard as it may be to swallow, workers are capital too and unemployment benefits serve to keep this capital sidelined longer than would otherwise be the case.

Worse, and often unseen, is what might reveal itself absent the above-mentioned safety net. If no such cushion existed, it's easy to suggest that as individuals we would save more while working with the stormy days we're now suffering in mind. And while it's true that these savings would similarly raise the price of hiring us as jobless benefits do, it's also true that these same savings would serve as seed capital for our future employers, thus making downturns less objectionable.

The unfortunate mistake of nearly all government programs is that they treat us as a collective group, rather than as individuals. What's harmful there is that as individuals all, we've all to varying degrees experienced periods of economic hardship that far from "depressing" us in perpetuity, have made us more wise as to how to succeed.

More to the point, as individuals we all know that what establishment economists term "economic depressions" are a misnomer given our singular ability to heal from layoffs and mistakes, large and small. And looking at today's painful downturn from an individual's perspective, all we need now to right our own situations is a greater flow of capital toward job-creating concepts; the only deterrent being the federal government's false compassion which is making these flows needlessly difficult.