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Yesterday (Wednesday July 13), Federal Reserve Chair Ben Bernanke was once again before Congress, testifying on the economy. Buried way down in the Reuters coverage of the hearing was this little nugget:
After recovering from the steepest recession in generations beginning in the summer of 2009, the U.S. economy has lost momentum in recent months. Gross domestic product expanded just 1.9 percent in the first three months of the year, and the second quarter does not look to have been much better.
Bernanke held to the view that recent weakness was due in part to temporary factors like energy costs and the effects on global industry from Japan’s earthquake and tsunami.
But he acknowledged the labor market remains weaker than the Fed would like.
The labor market also remains weaker than the 14M unemployed and the 25M – 30M un and underemployed would like as well. While part of the stated Fed mission is “pursuit of maximum employment,” the actions of the Fed over these last few years seem to have been more along the lines of “we’ll pretend to do something and maybe the miracle will occur.” As far as Bernanke’s “…view that recent weakness was due in part to temporary factors…,” as I’ve stated before, there are always “temporary factors” that are going to have an effect on life. It is part of life and should be part of his work to be anticipating and dealing with those “temporary factors” as they occur rather than using them as an excuse. Read the rest of this entry →
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Well, instead of being “surprised” by the June (lack of) Jobs Report, it seems the economists were “stunned” by the numbers (via Bloomberg):
Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said he was “stunned” by today’s U.S. employment report.
He wasn’t the only one.
Not a single economist among 85 surveyed by Bloomberg News correctly forecast the 18,000 increase in payrolls in June reported by the Labor Department. Estimates ranged from a low of 60,000 to a high of 175,000. The median was 105,000 — almost six times the actual number.
…snip…
It’s not unusual for payroll figures to fall outside of the range of economists’ forecasts. The same thing happened last month, as well as in October, November and December of last year.
That last paragraph should become a mantra for economists looking for excuses, but it most likely will not. As I’ve mentioned in earlier posts, there are always extraneous reasons for things happening within the economy. Like bad weather. And there will always be extraneous impacts that should be accounted for in any economic forecasting.
There have been a number of other articles/opinion pieces from yesterday and today that I have found interesting. While Bloomberg reported here that Warren Buffett is betting ‘very heavily’ against a “double-dip” recession (and that kinda scares me a little as I’ve predicted that there will be an official double-dip), the Wall Street Journal seems to be considering a double-dip quite possible.
Washington Beltway Villagers are still in the austerity mode with all the talk of the debt ceiling increase needing drastic cuts to accompany the increase. At least officially, although CNN points out that the GOP is once again claiming tax cuts as the route to employment Nirvana. But there are a few signs that the problems faced by millions just might be penetrating the consciousness of a few folks inside the Beltway. Today’s Washington Post had this opinion piece from Pete Peterson himself pointing out:
Immediate spending cuts and revenue increases could be counterproductive in the context of today’s grim employment outlook, but we need to reach a grand bargain fast to prove to the world that America is back in business.
Mr Austerity “how can we destroy save Social Security” himself recognizes that government does have a role and unfettered and unconstrained slashing is the worst thing that can be done.
Dave Leonhardt in the NY Times Economix points out the austerity trap by invoking Hoover, Roosevelt, and Japan:
In all kinds of ways — consumer demand, the federal deficit, even the weather — the medium-term future is highly uncertain. But this uncertainty, while the main problem, is not the only problem. We are also committing an unforced economic error. We’re cutting government at the same time that the private sector is cutting.
It is the classic mistake to make after a financial crisis. Hoover and even Roosevelt made a version of it in the 1930s. The Japanese made a version of it in the 1990s. Now we are making it.
Data on Friday showed hiring ground to a near halt last month, driving the jobless rate up to 9.2 percent and casting doubt on whether a sluggish U.S. recovery would soon pick up steam.
This all but ensures the Federal Reserve will keep interest rates at record lows well into 2012. But help probably won’t be as forthcoming from Congress and the White House, which are locked in battle over cutting a $1.4 trillion budget deficit.
The problem is one of timing: Economists and investors fear that with weak labor and housing markets causing consumers to tighten their own belts, the last thing the economy needs is an aggressive dose of austerity from the federal government.
Ezra Klein at the Washington Post had this blog post on long term effects of unemployment including:
It makes you permanently poorer: In 2009, Till von Wachter, Jae Song, and Joyce Manchester released a study on what happened to the long-term earnings of laid-off workers after the 1982 recession. Immediately, laid-off workers experienced annual earnings 30 percent lower than those of workers who hadn’t lost their jobs. But even 15 to 20 years on, these workers experienced 20 percent lower wages than people who had kept their jobs decades previous
…snip…
It makes you sicker: Being laid off has serious long-term health effects. William Gallo of Yale Medical School has found that people who are laid off near retirement are twice as likely to have a stroke or heart attack. Gallo, along with Jennie Brand and Becca Levy, have also found that being laid off or part of a branch closing increases one’s likelihood of depression.
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As we see the various articles today about President Obama and the “grand bargain” being offered to get Republican votes for raising the debt ceiling, we also see further indications of the total cluelessness of so many of the folks who live inside of the beltway village.
“The risk that retirees will outlive their assets is a growing challenge,” according to a study from the Government Accountability Office released today. Increased life expectancies and health-care costs coupled with declines in financial markets and home equity over the last few years have “intensified” workers’ concerns about how to manage their savings in retirement, the report said.
…snip…
“The risk that retirees will outlive their assets is a growing challenge,” according to a study from the Government Accountability Office released today. Increased life expectancies and health-care costs coupled with declines in financial markets and home equity over the last few years have “intensified” workers’ concerns about how to manage their savings in retirement, the report said.
Of course, the study does not and cannot explain how we are all supposed to be able to come up with the cash to buy an annuity nor does it explain how we’re are supposed to find insurance companies that will actually be around to pay off on the annuities, even if we could afford them.
A survey by First Command Financial Services found that almost half of respondents said they plan to work into their 70s. Those participating were ages 25 to 70, with annual household incomes of at least $50,000.
Seventy-six percent who haven’t retired yet said they are likely to consider working at least part time when they do retire. Many said they planned to work longer because they need the income. Some who said they have sufficient savings wanted to keep working so they could delay pulling from their retirement nest egg for an idle period that could last 30 years or more.
…snip…
Recent research by EBRI found that even if workers delay retirement into their 80s, there is still a chance they will not have enough money in retirement.
In 2003, EBRI created a retirement security projection model to assess people’s retirement income prospects. The 2011 version added a new feature, which allows households to see whether delaying retirement past 65 could help meet their income needs. The model found that 84 is the age at which 90 percent of low-income households would have a 50 percent probability of having enough retirement income.
Once again, we seem to be missing a key ingredient here – the actual jobs that would allow people to keep working, even if they wanted to work until 84 years old.
Last Friday’s (July 1) NY Times The New Old Age blog was a bit closer to reality being faced by many of us, with the results of a second GAO study:
There’s a long list of reasons that older people suffer malnutrition and weight loss, a geriatrician recently told a Senate subcommittee on health and aging: smell and taste diminishing with age, high rates of depression, medications that that suppress appetite or upset stomachs, disabilities that make it hard to shop and cook.
But at the same hearing, an official with Government Accountability Office pointed out another, perhaps more basic problem: poverty.
What a new G.A.O. report calls “food insecurity” remains stubbornly high among seniors with low incomes. In 2009, about 19 percent of households with a low-income person over age 60 faced this problem — meaning that the older adult was uncertain of having enough food or unable to acquire enough.
Unemployment is officially at 9.1% (roughly 14M people) and underemployment is nearly double that. Social Security has been one of if not the most effective government program of all time, yet all we hear out of Washington is how there must be “shared sacrifices” (from all but the very richest of us of course) so Social Security must be “on the table” for budget discussions, even though Social Security has not contributed one dime to the “problems” with the budget.
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In this post I wrote Tuesday, I predicted that the ADP Jobs report for June would come in at around 50K private sector jobs versus the economists prediction of 100K. Well the report is out (via Reuters) and I was way wrong while the economists were also under:
Payrolls processor ADP said on Thursday private sector employment increased 157,000 after a modest 36,000 gain in May, and beating economists’ expectations for a 68,000 rise.
The original report in May (as I quoted and linked to Reuters in this post) was actually at 38K jobs so 36K is a downward revision. For what it’s worth, I do like when I am wrong on these points, especially when I’m wrong and the numbers come in far better than I thought.
Now 157K jobs sounds like something to cheer about and I guess in a way it is but we shouldn’t get all giddy with excitement quite yet. After all, the economy needs to add 100K to 150K jobs each month just to absorb new folks coming into the work force each month so 157K jobs does not dent the long term un and underemployment numbers by much. Tomorrow’s numbers from the BLS for June will include public sector as well as private sector and it is likely the public sector jobs lost will push the 157K number down significantly. And I’ll say right now that July will be worse. How can I say that? Many states start their fiscal years on July 1 and the budget axes will be showing the results as Politico discusses here: Read the rest of this entry →
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In the year plus that I have been writing about the economy and life as one of the long term un and underemployed, I’ve mentioned a few times how difficult it is to catalog all of the stupidity, cupidity, and overall cluelessness of the Beltway Village Idiots Politicians, Pundits, and Courtiers (here, here, here, and here for example). A few weeks ago, I predicted that we will have a “double-dip” recession, even though reality for many millions is we have been in a depression and there has been no recovery that would be necessary for there to be a “double-dip” in the first place. Nevertheless, over the weekend, there were a few articles premised on how the deficit/debt is the worst thing going on right now in the economy. This one from CNN yesterday (July 4) starts things off:
CNNMoney surveyed 27 economists and asked them to choose from a list of possible threats facing the economy. What scares them most? A sovereign debt default by a European country such as Greece. More than half of those surveyed ranked it as one of their top two concerns, with 10 choosing it as their number one worry.
…snip…
Relatively few of the economists surveyed were worried about the other risks they had to choose from — a slowdown among emerging economies such as China, or budget cutting by federal, state and local governments.
“Austerity is a short-term risk, but will help long-term,” said David Wyss, former chief economist at Standard & Poor’s, now visiting fellow at Brown University. “The odds of too big a budget cut seems small.”
My bold and there we have it. What’s a little austerity to those who have no fear of the consequences of that austerity. Given the propensity of economists polled by news organizations to be wildly and incredibly wrong in their predictions while then expressing their continual “surprise” at being wrong, I think we can safely say that the budget cuts that are coming will be both too big and soon followed by economists chanting “Hoocoudanode?” when the negative impact becomes obvious even to the most obtuse of the Beltway Villagers.
“It sounds as if the package is going to be all spending cuts with a few symbolic revenue increases,” said Isabel Sawhill, an economist who studies fiscal issues at the Brookings Institution and worked in the Clinton administration.
…snip…
Sawhill said the cuts are likely to be focused on non-security discretionary spending, a small section of the budget that includes funding for food inspectors, the FBI and education grants, among many other programs and services people associate with government.
Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.
According to the study, between the second quarter of 2009, when the recovery began, and the fourth quarter of 2010, national income rose by $528 billion, with $464 billion of that growth going to pretax corporate profits, while just $7 billion went to aggregate wages and salaries, after accounting for inflation.
The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades, the study found.
Nice to have some empirical evidence to back up the anecdotal evidence so many of us have experienced first hand.
As a companion of a sorts, the Washington Post and Bloomberg each have this Bloomberg article up from Sunday, although with differing headlines. While Bloomberg’s headline is, “Payrolls in U.S. Probably Rose at Pace That Failed to Reduce Jobless Rate” the Washington Post headline is just a tad bit misleading to say the least (as the cheerleader paper of record I guess it is to be expected though), “Employment Probably Increased in June: U.S. Economy Preview.” From the article itself:
Employers in the U.S. probably expanded payrolls at a pace that failed to reduce the unemployment rate in June as companies sought to contain costs amid slower growth, economists said a report may show this week.
Payrolls climbed by 100,000 workers after a 54,000 increase in May that was the smallest in eight months, according to the median forecast of economists surveyed by Bloomberg News ahead of Labor Department data due July 8. The jobless rate held at 9.1 percent. Another report may show growth in services cooled.
…snip…
The Labor Department employment report will also show private payrolls, which exclude government agencies, increased by 125,000 after rising 83,000 in May, according to the survey median.
Now this article is phrased as definitive but it actually is speculative as the BLS Jobs Report for June for the entire economy will be issued Friday (July 8) while the ADP report on private sector jobs will be released tomorrow (July 6). My guess is that the private sector jobs (the ADP number) will be in the 50K range while the overall economy will be 20K to 25K max. The layoffs in the states with their new budgets will be starting to come in and the weekly Initial Unemployment Claims Report is still running well over 425K per week. I hope I am wrong in my predictions. I don’t think I will be off very much. Unlike the economists who keep getting polled against all evidence of their errors.
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It was the 1970s, and the chief executive of a leading U.S. dairy company, Kenneth J. Douglas, lived the good life. He earned the equivalent of about $1 million today. He and his family moved from a three-bedroom home to a four-bedroom home, about a half-mile away, in River Forest, Ill., an upscale Chicago suburb. He joined a country club. The company gave him a Cadillac. The money was good enough, in fact, that he sometimes turned down raises. He said making too much was bad for morale.
Forty years later, the trappings at the top of Dean Foods, as at most U.S. big companies, are more lavish. The current chief executive, Gregg L. Engles, averages 10 times as much in compensation as Douglas did, or about $10 million in a typical year. He owns a $6 million home in an elite suburb of Dallas and 64 acres near Vail, Colo., an area he frequently visits. He belongs to as many as four golf clubs at a time — two in Texas and two in Colorado. While Douglas’s office sat on the second floor of a milk distribution center, Engles’s stylish new headquarters occupies the top nine floors of a 41-story Dallas office tower. When Engles leaves town, he takes the company’s $10 million Challenger 604 jet, which is largely dedicated to his needs, both business and personal.
The evolution of executive grandeur — from very comfortable to jet-setting — reflects one of the primary reasons that the gap between those with the highest incomes and everyone else is widening.
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Talk about getting it from all sides. Economists want Americans to cut down on debt and boost spending all at once, even as home values tumble and gasoline prices soar.
It may all be a bit too much for the average U.S. household, particularly with an already sluggish labor market stuttering again.
From the second Reuters piece:
The big mystery in the United States today is why the job crisis is not at the center of the political and economic debate. After all, the numbers — and the human tragedies they reflect — could not be bleaker. Read the rest of this entry →
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Federal Reserve Chairman Ben Bernanke gave a speech yesterday (Tuesday, June 7) to the International Monetary Conference in Atlanta, GA. Only one speech. Yet looking around the Toobz at the various headlines at news sites on this speech, it must have been an all things to all people speech as I’ve found at least four different perspectives presented, some of them directly contradictory.
The most prevalent theme appears to be The Benbernank as cheerleader (links embedded in titles):
So taken all together, it seems that things are bad but getting better except where they aren’t; everything is going to be just fine; we need a stimulus except where we don’t; and except for that pesky jobs thing, it’s all good.
JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon asked Federal Reserve Chairman Ben S. Bernanke whether regulators have gone too far by reining in the U.S. banking system and are slowing economic growth. Read the rest of this entry →
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I had to laugh (albeit ruefully) when I saw this opening from Jon Walker at FDL Action this morning:
Almost any national health care debate in this country is almost entirely disconnected from real-world examples, which is tragic given that facts have a well-known liberal bias.
My bold. Why did I find this worth laughter? Because the bolded part is applicable to just about every policy issue written or talked about by the DeeCee Political crowds and their Beltway Village Idiots Courtiers in the TradMed. Pick the issue, any issue, and the discussion emanating from DeeCee sounds like it is coming straight out of an alternate universe.
Today, we have the Initial Unemployment Claims (via Bloomberg) report from last week, and guess what? The economists are once again “surprised.” From the Bloomberg article:
Jobless claims increased by 10,000 to 424,000 in the week ended May 21, Labor Department figures showed today in Washington. The median estimate of economists in a Bloomberg News survey called for a drop to 404,000. The economy grew less than forecast in the first quarter, a separate report showed.
…snip…
Estimates in the Bloomberg survey of 47 economists ranged from 390,000 to 420,000. The Labor Department revised the prior week’s figure up to 414,000 from the 409,000 initially reported. There were no special factors behind last week’s increase, a Labor Department official said as the figures were released.
IMNSVHO (In my not so very humble opinion) I think the economists are making it all up as they go along. I’m not sure any group of people can be so consistently wrong on so many levels. Read the rest of this entry →
Earth to the Villagers – decent paying jobs with good benefits would go a long way to resolving much of the “crisis” that has so many of you twisted in knots. And that is not to be defined as McDonald’s level jobs or other primarily minimum wage service jobs. I’m talking here about jobs that can allow a family to do more than survive and jobs where the wage earner can pay a rent or mortgage, purchase new clothing, maybe even buy a new car. If the jobs actually have benefits rather than being Perma-Temp, all the better.
Regional and state unemployment rates were generally little changed in March. Thirty-four states recorded unemployment rate decreases, seven states registered rate increases, and nine states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today. Forty-four states and the District of Columbia posted unemployment rate decreases from a year earlier, five states reported increases, and one state had no change. The national jobless rate was 8.8 percent in March, little changed from February but 0.9 percentage point lower than a year earlier.
Again I ask, what kind of jobs are these that are “lowering” the official unemployment rate? Since today is the big, nationwide McDonald’s Job Fair that was trumpeted a couple of weeks ago, will this push the Unemployment rate down another tenth of a point? If so, it probably won’t do much for the Underemployment (U6 in linked chart) numbers at all. Read the rest of this entry →
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