Archive for December, 2009

The job market is pretty vacant. And we don’t care!

21 December 2009 reports today that its panel of mostly business economists says no more government stimulus spending is needed:

“Though unemployment will remain stubbornly high, and the economic recovery sluggish in 2010, the government doesn’t need to provide another round of stimulus spending to keep the economy afloat, they say.”

That’s a mighty big “though” there!  Just how stubbornly high do they expect unemployment to remain?

“The forecasters are not upbeat about the outlook for the job market next year. Though the latest employment data point to the end of a nasty cycle of job cuts, next year’s recovery is not expected to make much of a dent in the unemployment rate, which is hovering around 10 percent. The consensus is that the jobless rate drops by just two-tenths of a percent, to 9.8 percent, by the end of next year.”

That forecast is in line with other general predictions I’ve seen.  And each point in the unemployment rate represents about 1.5 million jobless persons.  So why not have a jobs program to relieve this stubborn problem?  (First, to be fair, let’s note that two of the eleven members of the panel do support another round of stimulus.  They are Jan Hatzius, chief economist of Goldman Sachs, and Ethan Harris, head of North American economics for Bank of America Merrill Lynch.  When Goldman Sachs and Bank of America are the good guys, maybe there’s something wrong with my profession?)

Edward Leamer of UCLA, whom I have heretofore associated with common-sense empiricism and clear writing, channels his inner Scrooge and mixes his metaphors in offering this beatings-will-continue-until-morale-improves prescription:

‘“The time to short-circuit the negative feedback from job losses is behind us,” said Ed Leamer[,] director of the UCLA Anderson Forecast. “Let the private sector heal the economy.”’

To paraphrase Homer Simpson and Proverbs 21:13:  “It’s not that we’re not listening to the cries of the unemployed, honey, it’s just that we don’t care.”

Keynes pulls a Lazarus

8 December 2009  “Obama outlines bailout for Main Street”

President Barack Obama outlined new multibillion-dollar stimulus and jobs proposals Tuesday, saying the nation must continue to “spend our way out of this recession” until more Americans are back at work.Without giving a price tag, Obama proposed a package of new spending for highway, bridge and other infrastructure projects, deeper tax breaks for small businesses and tax incentives to encourage people to make their homes more energy efficient….

A major part of his package is new incentives for small businesses, which account for two-thirds of the nation’s work force. He proposed a new tax cut for small businesses that hire in 2010 and an elimination for one year of the capital gains tax on profits from small-business investments.

Obama also proposed an elimination of fees on loans to small businesses, coupled with federal guarantees of those loans through the end of next year. He called for more government spending on infrastructure projects such as roads, bridges and water projects and for new tax breaks for consumers who invest in energy-efficient retrofits in their homes.

Works for me.  While I’d prefer to see more direct job creation in the form of federal jobs programs a la the Works Progress Administration or other New Deal agencies, my main reaction is what a difference a couple of weeks makes.

Back to work?

5 December 2009

Hard to believe that news of double-digit unemployment could be considered good news, but in this case it really is.  The standard unemployment rate edged down from 10.2% in October to 10.0% in November; the number of jobs fell once again, but by 11,000, by far the smallest decline in about two years.  Consensus forecasts had been for a slight uptick in the unemployment rate and about 150,000 jobs lost.

By one measure, this news from the BLS (Bureau of Labor Statistics) is even better than that.  The 11,000 figure is from the BLS’s survey of employers (i.e., “establishments,” “nonfarm payroll employment”), whereas the BLS does a separate survey of households, which shows an increase in employment of 227,000 and a reduction in unemployment of 325,000.  (See Table A in the BLS report.)  I’m guessing the reason that the administration and the media did not trumpet the household data is because those data are considered less reliable than the establishment data.  Still, they’re not worthless, and they are the basis of the unemployment rate figures.

President Obama correctly notes that we’re still not out of the woods yet.  The unemployment rate is still about double its normal “full employment” level.  The BLS’s alternative measures of the unemployment rate are always worth a look, and they show that the labor market is not only still deep in the woods but in some respects not improved at all:

  • The long-term unemployment rate was slightly higher in November than in October (5.9% using the standard seasonally adjusted (SA) figure, 5.6% using the non-seasonally adjusted (NSA) figure).
  • The most comprehensive measure of unemployment and underemployment, the U-6 unemployment rate (which counts all unemployed plus discouraged job-seekers plus involuntary part-timers), is still extremely high:  17.2% (SA) or 16.4% (NSA).  The SA figure fell from 17.5% to 17.2%, but that seems to be the seasonal adjustment factor at work.  The NSA figure, which corresponds to actual people without any such adjustment factor, was actually slightly worse in November, rising from 16.3% to 16.4%.

With roughly one-sixth of the potential labor force either jobless or underemployed, this is no time to declare victory and withdraw on the job-creation front.  Nate Silver argues persuasively that the case for a strong federal jobs bill is a strong as ever.

Happy repeal day!

4 December 2009

MenckenDecember 5 is the 75th birthday of the 21st Amendment, which ended the ghastly experiment known as Prohibition.   I’ll drink to that.