Government news on employment is more about spin than actual substance, Lawrence Lindsey, former director of the National Economic Council and CEO of the Lindsey Group told CNBC on Wednesday.
“A sure sign of it was the number that the administration came out with this morning. They said 2 million jobs [were saved by the stimulus],” he said. “I think they said four months ago, they got 678,714 jobs, right, by actually looking where the money went. And then no one believed that because Congressional districts don’t exist that the jobs were in. So then they came with a 1.2 million-job number. If you actually had substance, if you actually had job growth, the political apparatus wouldn’t have to make up numbers like this.”
While some speculate high productivity stimulates the labor market, Lindsey said, the real creator of jobs is sales.
“If you get 2 percent more out of every worker, and you only sell 1 percent more, you’ve got to lay off people,” he said. “So what firms have been doing so far, is facing a tough environment, they’ve been cutting costs everywhere they know.”
The Fed estimates that credit contracted the most ever in history at almost $16 billion last month, he said. And at the same time, incomes and wages remain relatively stagnant, he said.
“You can’t earn the money; you can’t borrow the money; you really don’t have the money to spend,” said Lindsey.
While the economy has seen a rebound in inventory, the big question is whether that will lead to self-sustaining growth even after fiscal and monetary assistance is pulled, he said.
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“I think of it a lot like starting a lawn mower in March,” he said. “You pull that chord the first time and every now and then the engine turns over but often times it doesn’t. Unfortunately the labor market and wage growth have been very, very slow and it’s not clear yet that we’re going to have the engine actually turn over or whether we’re going to have more slogging ahead.”