The jobs report of barely 88,000 jobs being created in the private sector in U.S. in February, as compared with expectations of a quarter million jobs, can only suggest several things : a) the effect of the Sequestration has been totally negative, instead of preserving cash it has slowed the economy down; and b) the price of Oil worldwide is too high.
High Oil price will always slow down economic momentum, as everybody directly or indirectly uses oil, be it for cars, scooters, operating machinery or combine harvesters. When Oil price is high, people stop using these can take to walking, travelling by public transport or using labour intensive methods. A high Oil price has retrograde impact on development, in short.
To summarise the sermon, after Oil price reached $147 a barrel, it took nearly two-and-a-half years for things to normalise to pre-crisis level.
Currently, with the Sequestration having kicked in in the U.S., within a month the slowdown has been quite clear. The West Texas Intermediate has gone down a couple of dollars per barrel, but is likely to fall further, simply that despite the warm good weather people cannot afford to use what they can't afford, especially as a whiff of austerity hits the U.S.
In Europe, there is a positive mood for things to return to normality, but again, the high Oil price puts paid to such hopes. The OECD and the IMF are probably fair in forecasting moderate growth.
As for the major developing nations, things are at a low ebb. In India, the human rights activist Mr. Arvind Kejriwal has been on hunger strike for 15days over the price hikes for gas and petrol. Most households in India buy canisters of gas for cooking, and the 'ordinary' people have to buy petrol for their scooters. There is such a disparity in income throughout the world, but the Oil price seems to be univeral. If the high Oil price has slowed down U.S. and Europe, what can you think is happening to India, or Kenya and other nations where the per capita income is far below that of the major economies but the Oil price seems to be the same? How can they afford it?
If a slowdown recurs because of the dynamics of the price mechanism, then OPEC will have only itself to blame. I remember of the wise words of the Saudi oil minister, Sheikh Ali Al-Naimi, that the Oil price at $95 was too high. There seems consensus that the oil producing nations and their economies and development can continue pretty well at an average price of $85 per barrel. So, in their own best interests, would it not behove the OPEC nations to lower the price to about that level? I pray that the people of influence are listening to my words.