by Stephen Stamos, professor of economics and international relations

The February payroll jobs report indicated a meager increase of 21,000 jobs. Consensus estimates were in around 150,000. How much can be written about this jobless recovery and the new household term — outsourcing? The media and the public ignore President Bush's broken promises of new monthly payroll jobs in the 200,000-300,000 range. Democratic presidential candidate John Kerry blames corporate outsourcing of U.S. jobs to foreign countries.

While outsourcing production and services is part of the problem and will be more difficult in coming years, it is not the primary problem. To fan the flames of protectionist sentiment represents misplaced anger and only complicates the realities of finding a way out of this morass.

In the past two quarters, this prolonged and hollow economic recovery has produced strong economic growth and a year of record corporate profits. Consequently, the financial markets are up. Inflation continues to be subdued and is not a problem with oil at $37/barrel.

Unit labor costs continue to decline. The massive fiscal policy stimulus from the Bush tax cut will deliver more punch this year as will the capital spending from generous depreciation allowances. The Federal Reserve has been able to maintain the Federal Funds Rate at 1 percent and will be able to do so for the remainder of the year. The budget deficit of over $500 billion has also contributed to the strong growth of the economy.

With the stimulus of the Bush administration fiscal and monetary policy driving strong economic growth, why are no jobs being created?

To absorb new labor force entrants, our U.S. labor force needs 150,000 new jobs per month. To reduce the unemployment rate, we need job growth beyond this level. The unemployment rate remains at 5.6 percent. According to a number of analysts, this number is much higher. If we add those who are discouraged, not formally a part of the labor force, those in school because there is no work, and the working poor, then unemployment approaches 7 to 8 percent, which hardly warrants re-election.

Productivity growth and the changing composition of the U.S. and global economy and labor force are primary factors behind the lack of job growth. Following the technology and productivity revolution of the late 1990s, U.S. firms found it possible to increase output without hiring new employees. Years of restructuring and cost cutting allowed firms to avoid hiring new employees. Rising health care and pension costs also have been negative incentives.

The manufacturing jobs that have been lost will not come back permanently. The first wave of outsourcing white-collar professional service jobs (information technology and computer software) is the beginning of this global labor market dynamic.

The absence of job growth and increase of job insecurity are the twin hallmarks of this distorted economic recovery. The Bush administration's response to this emerging crisis is to be patient and wait for the forces of the market to work their magic. A Kerry policy would increase protectionism and patch together incentives to reduce outsourcing trends. Neither policy will work.

The United States needs to make a national commitment to rebuild and expand the nation's infrastructure to lay the foundation for a new long wave (cycle) of economic growth.

Our dependence on petroleum and imported petroleum, 55 percent of our daily use, undermines our national security, forces us to war to protect our access to oil, swells the trade deficit, and degrades the natural environment.

We need to advance our health-care sector, enhance our educational system, particularly in the areas of math and science, and develop homeland security rationally, soundly, and with long-term sustainability. The global economy will need similar advances for its global security.

We have no choice but to re-examine our tax and spending policies. This will require a new understanding of the necessary partnership between the public and private sector, a better knowledge of our merging domestic and global economy, and adoption of new and necessary core values.

Stephen Stamos may be reached at