I know what you're thinking: Why is Knakal addressingunemployment yet again? Simply, it is because last week'sannouncement that the official rate has climbed to more thandouble digits further illustrates that the administration isincorrectly focused on things other than job growth.As I havealways stated, our commercial real estate markets need employmentmore than anything else to enhance our fundamentals and turn ouroutlook around. As unemployment increases, our fundamentals degradeand as our fundamentals degrade, our values drop. Until the trendin unemployment reverses, it will be nearly impossible to seetangible health return to any segment of commercial real estate.Our rising unemployment rate begs the question: How did jobcreation get put on the back burner?In October 2008 in Toledo,Ohio, a major economic speech was delivered by then candidateBarack Obama. Let's take a close look at what he said:"Right now,we face an immediate economic emergency, and that requiresurgent action. We can't wait to help workers and families....whodon't know if their jobs......will be there tomorrow. ... We needto pass an economic rescue plan for the middle-class, and we needto do it not five years from now, not next year, we need to do itright now. It's a plan that begins with one word thats oneverybody's mind, and its easy to spell: J-O-B-S."That soundspretty good and is pretty powerful. That sounds like focus. Mr.Obama gave the impression that job creation would be his toppriority and that his action would be swift.Gandhi once said that,"Action expresses priorities". If this is true, job creation has,clearly, not been one of the president's priorities. Recently, theadministration has begun talking about job creation but thisprovides little comfort as this recession began two years ago.Theresults of the off-year elections in Virginia and New Jersey havedemonstrated that Americans are increasingly believing thatthe administration should not be prioritizing health-care, climatechange, and financial regulation while hundreds of thousands ofpeople continue to lose jobs each month. Nearly 90% of those votingin these gubernatorial races said they were worried about thedirection of the economy and the majority of those who held thatview voted for the Republican candidate. Are we looking at another1994 (a year in which we saw a dynamic shift in political power) in2010? If jobs do not become the priority, we just may be.Could itbe any more obvious that the objective on Pennsylvania Avenue is topush an entire agenda through before power is potentially lost inthe midterm elections? This could be a tragic policy flaw whichcould lead to relinquished majorities in the fall of 2010.This lackof focus on jobs has resulted in an official unemployment rate of10.2% (the highest since 1983) and an underemployment rate of17.5%. The latter takes into consideration those who are out ofwork and have stopped looking for work and those who are employedpart-time who are seeking full-time employment.Clearly, jobcreation has dropped from a top priority to just one of many, andPresident Obama has been remanded to pandering for patience andoffering excuses. On one hand he argues that there is some goodnews in the awful numbers as things are indeed getting worse but ata slower pace. On the other, he constantly reminds us that heinherited this mess. How long can he continue to do this? Fair ornot, finger-pointing is not effective policy.The administration nowclaims that the stimulus has "created or saved" one millionjobs. Does anyone really believe that? (Maybe ifCongress spends another $787 billion, it can get the jobless rateup to 12%). The data upon which this claim is based is ofextraordinarily low quality and are not reliable indicators of jobcreation or the even vaguer notion of job retention. There are twomajor problems with the data. The first is a strongreporting bias. Those providing data are those who have receivedstimulus funds. If they are creating or saving jobs, they arelikely to get more free money, hence, a strong incentive toinflate reality.The second is that the government is using what isreferred to as "gains-only" reporting. When the governmentreports this figure, it wants us to believe that the new hires camefrom the pool of the unemployed and that they are netadditions to the stock of employed workers. The data donot speak to the number of workers who left their current jobsto fill government sponsored jobs. Because these data do nottell us where the workers come from and what happens tothe positions they left, the numbers cannot answer the ultimatequestion: How many net jobs were created? The government isreporting the gross positive figures, not the relevant netfigures.On a monthly basis, the Department of Labor reportsactivity from the Job Openings and Labor Turnover Survey (Jolts).The Jolts data show that, in August of 2009, about 4 millionworkers were hired. Unlike the administration's newjobs-created-or-saved data, the Jolts data also lets us know thatabout 4.3 million workers lost their jobs. How difficult is it tofigure out what the relevant numbers are?It is difficult to imaginea more complete repudiation of Keynesian stimulus than the recentevidence in our job market. Only 11% of the stimulus money isactually stimulative (spent on infrastructure) with significantpercentages being spent on pork projects and non-stimulativetransfer payments such as Medicaid and jobless benefits. The neteffect is that net job creation has been negative. The muchballyhooed Keynesian multiplier that every dollar of governmentspending yields 1.5 times that in economic growth has, once again,been exposed as false. Few people remember that Keynes developedhis theory when government spending only represented about 2% ofGDP, a far cry from where it is today.The policy lessonhere is for both political parties (if you are afrequent reader of StreetWise, you know that I try to critique bothparties equally and, I believe, fairly). In 2008, PresidentBush caved-in and initiated the first "stimulus", a $160 billionprogram that was ill-conceived and not very stimulative. Mr. Bushlost policy bearings during his last year and forgot that in orderfor a tax cut to be stimulating it must be immediate, permanent andat the margin of the next dollar. Instead, for the past two years,the U.S. and most of the rest of the world have been pouringtrillions into a Keynesian black hole. Let's not forget that thisspending must be paid for at some point. Tax increases areinevitable and this expectation continues to stifle consumerspending.If the administration is serious about wanting to createjobs (a by-product of which would be to help our commercial realestate markets) the best policy action would be to ask themselvesand Congress, Why?.....Why create so much investmentuncertainty and additional barriers to businesses hiring newemployees?Why raise the costs of doing business by making iteasier to unionize workers via "card check"?Why raise energy costsfor businesses with a cap-and-trade ("cap-and-tax") bill?Whyadd to an already inflated budget deficit and future tax burdenwith a 12% increase (proposed in the draft budget) in domesticspending in 2010?Why force through Congress, on a partisan vote, ahealth-care bill that imposes a 5.4% income tax "surcharge" onanyone making more than $500,000? The Joint Tax Committee reportsthat about one-third of this $460.5 billion tax increase will bepaid by small business job creators who file their taxes under theindividual income tax code.Perhaps someone should read Mr. Obama atranscript of his Toledo speech. Then maybe he will be remindedthat he cannot wait for next year, he needs to act now and, verysimply, it's all about J-O-B-S.Mr. Knakal is the Chairman andFounding Partner of Massey Knakal Realty Services in New York Cityand has brokered the sale of over 1,000 properties in hiscareer.

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