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The economy grew at a 1.3 percent annual pace in the second quarter after expanding just 0.4 percent in the first three months of the year. First-quarter growth was revised from the previously reported 1.9 percent increase.
While the recovery stepped-up in the second quarter, economists had expected a stronger 1.9 percent reading.
Fourth-quarter [2010] growth was revised to a 2.3 percent rate from 3.1 percent.
Now, I have been using the phrase “officially a double-dip” because for the millions of people among the long term un and underemployed, we’ve never left the Great Recession/Lesser Depression. It has been all one long scene of watching our unemployment run out, our savings and retirement plans get cashed in and spent while trying to survive and keep a roof over our heads. And this is not just limited to those folks covered by the official un and underemployment lists but includes the new college graduates from the last few years trying to find employment in their fields. It also includes the folks who gave up and filed for Social Security if they were eligible, just to have some money coming in. It includes all the folks who are now considered “independent contractors” or “self-employed.” 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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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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