Obama Chides Congress as He Urges Passage of Jobs Act

Barry Glassman, president of Glassman Wealth Services in McLean, Va., wrote in a comment to clients that they should consider a number of points in Obama’s speech, including how the President proposed to create jobs, whether his proposal would encourage companies to spend money and whether it was a long-term solution.

“If you were leading a major corporation, does the proposed solution either entice you to hire, or offer the confidence that you have some certainty with which to make long-term decisions?” Glassman wrote. “I hope that there are some great surprises announced Thursday, but unless what is said passes some or all of the above tests, we’ll find ourselves waiting until after the 2012 election to see any real action.”

Highlights of Obama’s American Jobs Act designed to help small businesses hire and grow include:

• Cutting the payroll tax in half for 98% of businesses. The President’s plan will cut in half the taxes paid by businesses on their first $5 million in payroll, targeting the benefit to the 98% of firms that have payroll below this threshold.
• A payroll tax “holiday” for added workers or increased wages. This would completely eliminate payroll taxes for firms that add new workers or give current workers a raise.
• Extending 100% expensing into 2012.
• Reforms and regulatory reductions to help entrepreneurs and small businesses access capital. “The Administration will work with the SEC to conduct a comprehensive review of securities regulations from the perspective of these small companies to reduce the regulatory burdens on small business capital formation in ways that are consistent with investor protection, including expanding “crowdfunding” opportunities and increasing mini-offerings,” according to the act.

Employment News Depresses American Consumers

To be sure, both Obama and the U.S. Congress have tremendous hurdles to jump before they can lay claim to having impressed America’s voters, consumers and job-creating businesses.

Federal Reserve Chairman Ben Bernanke in a speech before Obama’s on Thursday reviewed such seemingly intractable issues as the high level of unemployment, slow wage gains for people who remain employed, falling house prices and high debt burdens.

Despite these persistent problems, Bernanke fretted that many Americans who are in a position to spend money are simply not doing so because the nation’s mood, if not the economy itself, is in a depression that looks unlikely to lift soon. “Even taking into account the many financial pressures that they face, households seem exceptionally cautious,” Bernanke said.

A look at the nation’s jobs picture helps explain Americans’ lack of conviction.

On the same day as Obama’s speech, good news from the Labor Department showed that the number of unemployed people who filed for benefits fell slightly by 10,000 to 382,000, surprising analysts who had expected a drop of just 7,000. This kept the four-week moving average below 400,000, a level that suggests some economic expansion.  

But on the previous Friday, the Labor Department reported that no new payroll jobs were created in August, and the unemployment rate held flat at 9.1%. Analysts had expected a jobs gain of 65,000. The August numbers compare to July’s jobs gain of 117,000 and unemployment rate of 9.1%—a rate that has stayed virtually unchanged since April.

Further, consumer sentiment polls keep showing that Americans are experiencing low-level but persistent anxiety about their prospects. Two Gallup polls in as many weeks show that U.S. job creation is on a downward trajectory and that three in 10 American workers worry they could lose their job, double the level seen in 2008.

For more about the U.S. economy, read PIMCO’s Gross: Fed Action ‘Destroyed’ Credit Creation; Obama Needs to Be Bold at AdvisorOne.com.