Photo Credit: forwardstl (Creative Commons)

Friday, forecasters expect the Labor Department to report the economy added 155,000 jobs in December—substantially less than is needed to pull unemployment down to acceptable levels.

The tax and spending package passed by the Senate and House provides little prospects of improvement, as the U.S. economy continues to suffer from insufficient demand and will continue growing at a subpar 2 percent a year.

Factors contributing to weak demand and slow jobs creation are the huge trade deficits with China and other Asian exporters and on oil. However, on the supply side, increased business regulations, rising health care costs and mandates imposed by Obama Care, and now higher taxes on small businesses discourage investments that raise productivity and competitiveness and create jobs.

Higher social security payroll taxes were already rolled into growth projections for the New Year. The budget deal raises about $40 to 50 billion annually from higher rates on family incomes above $450,000 but also extends other spending programs that were set to expire—for example, long-term unemployment benefits; therefore, the new net impact on aggregate demand is not large.

On the supply side, higher taxes on small businesses will reduce returns on investment—this will slow capital spending and new hiring in 2013 and even more next year.

Read more at CNBC. By Peter Morici.

Photo Credit: forwardstl (Creative Commons)



Don't Miss Out. Subscribe By Email Or Facebook

Email

Facebook