By Dave Oberting

The real unemployment rate in certain parts of the District is over 30%. This may sound fantastic to some, but it’s a realistic estimate. Hands down, the most important issue in November’s mayoral election is jobs – especially jobs in the predominantly African-American parts of the city. For that matter, the second and third most important issues are jobs and jobs — especially good, middle-class, middle-income jobs that we don’t’ seem to be creating much at all anymore.

News flash: you are not qualified to be the Mayor of Washington, DC if you cannot articulate how and why a job gets created. You are also not qualified to be the mayor of DC if you cannot, or will not, lay out a concrete set of policies that you will implement to enable faster private sector job growth.

This may sound strange, but a job normally only gets created as a last resort. When the demand for your company’s product or service exceeds your ability to deliver that product or service with existing resources, that business owner is forced to make one of the following decisions: a) turn away business; b) improve the productivity of existing staff — through a more efficient process or the implementation of technology; or c) hire a new worker.

Job creation Just Ahead

A typical business owner is loathe to turn away business, but they will only hire a new worker when they’ve maxed out productivity gains. Job creation only occurs when demand cannot be met by gains in productivity. It’s not good enough to have an economy where demand narrowly exceeds supply. It has to be growing fast enough to outrun gains in productivity for serious job growth to take place. Since 2013 in the District of Columbia, it has not.

If job creation is driven by increased demand, shouldn’t the District government be spending the majority of its time and efforts encouraging and facilitating growth in what the economists call aggregate demand? A would-be mayor must have a plan for doing exactly that. The next time you see a mayoral candidate on the street, ask them how they intend to stimulate aggregate demand. The answer will tell you a lot.

In times of economic trouble, the Keynesian school of economics calls for the government to stimulate demand by pumping borrowed money into the economy through deficit spending. Economists have argued about whether deficit spending stimulates demand/job growth ad nauseam, but in the District, the argument is moot. We are required by law to spend no more than we bring in each year.

Then what is left for a municipal government to do? Simple. Restore the confidence of the electorate. Yes, we said confidence. Give both businesses and consumers a sense of reassurance that it’s safe to invest and spend.

The District’s economy contracted in 2013 for a couple of reasons. The definition of a contraction is that that economic output declines from one period to the next. The District’s economy produced $520 million less in 2013 than it did in 2012. We attribute this partially to the government shutdown, but it seems the average District consumer was not convinced that tomorrow will be better than today. It also seems the average business was not convinced that demand for its goods and services tomorrow will exceed the demand for them today.

This caused both to pull back in 2013 — consumers on spending and businesses on investment. We call that a shortfall in aggregate confidence. The real danger is these processes feed on one another and can spiral in the wrong direction.

For the District’s economy to right itself, both businesses and consumers must have confidence in the new mayor’s stewardship of the economy. A would-be mayor has no chance of restoring that confidence if they cannot articulate a credible plan for accelerating economic growth and the faster job growth that comes with it.

Consumers and businesses want a mayor with the knowledge and experience that’s necessary to manage a $106 billion economy. Businesses want to be assured that the new mayor will protect them from the imposition of additional burdens and mandates, and consumers just want to know that things are getting better.

Should we trust that one of the major mayoral candidates has what it takes? Not until they can lay out a platform credible enough to inspire the magic word – C-O-N-F-I-D-E-N-C-E.

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Dave Oberting is the Executive Director of Economic Growth DC, a non-profit political and economic advocacy organization focused on the District. Follow them on Twitter @GrowthDC.

  • dwb1

    Pet peeve: jobs are not “created.” A job is just a task. It takes an employer willing to pay to have the task done, and someone willing to do it for that price. There are lots of jobs not being done (count the number of vacant properties in Baltimore, my favorite example), because its too expensive or not worthwhile. If you could raise property values, or make it less expensive to renovate or destroy properties, more vacant properties would be redeveloped (which would mean: jobs). Grass needs to be cut, meals cooked, papers written, science experiments performed, and so on. I am sure there are zillions of tasks not being done in D.C.

    I do not agree that someone will hire someone as “a last resort.” They will hire someone when the task becomes valuable enough to pay someone to do. If it’s a business, because they can sell the product. When people make more money they eat out more and hire maids, landscapers, and contractors to redo their house (If I buy materials and re-do my kitchen, it does not count in GSP; If I hire someone, it does).

    I am not a fan of the “confidence” argument. It more effect (employers see growth) than cause.

    “Creating jobs” really means: Either make it less expensive to perform tasks not being done (e.g. government regulation, permitting, taxes, or labor costs); Or, make it more valuable to do those tasks so that people find it worthwhile to overcome the costs. The latter is hard. Usually politicians promise to “spend money,” to stimulate demand, but usually that means they are paying to have something done that is not worthwhile to do at market prices. Unless you are spending money on something that results in a cheaper cost of doing business later on, its merely a one-off tactic.

    “Inspiring confidence” really means in my mind: A concrete plan to reduce the costs of hiring people.