Despite some modest improvements in the jobs picture with the release of today’s Labor Department report, I would guard against any irrational overexuberance that problems with employment or the economy are being solved.
A smaller-than-expected 80,000 gain in nonfarm payrolls was bolstered by upward revisions in the prior two months, amounting to 102,000 additional jobs. So over the past three months the establishment survey has averaged 114,000. It’s really nothing to write home about.
A 2 percent economy is simply way too slow to generate the kind of 300,000 per month job gains the country needs. Economic growth at 5 percent would be more like it.
And this should be a warning to members of Congress who are flirting with higher tax rates as part of the supercommittee deficit deliberations. There’s loose talk about raising the top Bush tax rates and adding to that a surcharge on millionaire tax rates. That would be a big negative for future growth. Moving the top rate for investors, small-business owners, and other successful earners from 35 percent to 50 percent in the name of deficit reduction would be a devastating blow to growth. By the way, it would not even remotely solve our deficit problems, which are the result of overspending across the board.
Turning back to the employment report, one of the biggest problems is the lack of income and earnings power. Average hourly earnings are only 1.2 percent annually over the past three months, compared to a consumer price increase of 4.8 percent. So after-tax post-inflation income is still falling.
Meanwhile, aggregate hours worked rose by only one-tenth of a percent in October and only 1.7 percent over the past three months at an annual rate. So even when you combine hours worked with hourly earnings, there’s still a shortfall in real income.
The best part of the jobs report is the recent surge in the household survey, which picked up 277,000 in October and has averaged 335,000 over the past three months. This is a good sign for small business, and it’s responsible for the small drop in unemployment to 9 percent from 9.1 percent.
But it seems as though the difference between nonfarm payrolls and the household survey is starting to narrow. Over the past year, for example, corporate payrolls have increased 125,000 per month while households have increased 102,000. This is a normal pattern over time.
Again, while there’s progress on the jobs front and the economy is moving away from recession, the numbers are relatively small. That’s why Washington must be mindful of the tax and regulatory barriers which continue to impede economic growth. Republicans in particular should not be lulled into a bad deficit package that could inhibit growth.
Tax incentives matter enormously, and we’re still in a very slow-based economy.
Like Mr. Kudlow says, this is a little bit of progress, but not enough. Coming after a decade of stagnation, this type of minimal growth isn't even keeping up with population growth. A major change in policy focus is needed before things turn around. External Link
Reply to this commentLinkReport AbuseHey Larry,
I'm in agreement with you.
Still, wouldn't you say that the absence of economic achievement, or punch, is a function of things like just in time inventory and labor controls that go back a few business cycles?
Since the early eighties we've had very sluggish performance into early recovery... and have asked time and again '...where's the growth...'
And yet, slow and steady mean the absence of inflationary pressures, or early overheating. Low inflation suggests longer term, more sustainable growth, no? Longer business cycles and better performance out of the asset markets, no?
It's my judgment that these low inflationary cycles led us to leave rates too low for too long, and led to the bubbling in both NASDAQ and the housing market. Still, right now, a long term, low inflationary cycle might me a very, very good thing.
I also feel that businesses would spend on skilled labor, but feel under siege by their government... and so part of the sluggishness we're experiencing may be behavioral, due to the absence of wage pressure.
At the end of this (or beginning) is a complete dearth of leadership. And confiscatory, class warfare making policies.
My feeling is, though, that we muddle through.
Reply to this commentLinkReport AbuseWhile I appreciate the behavioral economics idea of talking up the economy, when you have a market at record correlation with the Euro, the system is so swamped with currency that there is basically no economic activity. The U6 unemployment number of the BLS is at 18%, the SGS alternate measure is at more like 24%, so no, unemployment did not drop.
Reply to this commentLinkReport AbuseKudlow is right about taxes as they affect employment. But the only tax policy that will help bring several million manufacturing jobs back from overseas is a hefty tariff.
Without manufacturing jobs, we'll continue on our path to "poverty of nations." Does anyone really think we can exist by producing little, consuming much, and borrowing the difference?
Reply to this commentLinkReport AbuseA couple of points.
First, the phrase "irrational exuberance" was one of the best phrases coined by Alan Greenspan.
Second, it is possible to decrease the deficit by cutting spending. It is also possible to decrease the deficit by increasing taxes. In the past, we have increased the deficit both by cutting taxes and increasing spending (including on unpaid for wars in Iraq and Afghanistan).
My point is simply this. Mr. Kudlow's statement that our deficit is "the result" of overspending across the board is dishonest propaganda rather than fact. Our deficit has many causes. The Bush tax cuts, Bush's gambit to win re-election with his new Medicare Part D program, high levels of medical inflation that are impossible to address rationally in a poisoned partisan environment, and decisions not to decrease spending. One of the biggest causes of our current deficit, of course, is the financial crisis, which in turn has caused the biggest recession since the Great Depression. As a result of this crisis, tax revenues are way down while spending on automatic stabilizers like unemployment benefits are way up.
To act as though the only way to address the deficit is by cutting spending is fundamentally dishonest. Raising taxes on higher earners (and others; I favor rolling back the Bush tax cuts in their entirety) would definitely contribute to deficit reduction. The concept of shared sacrifice would suggest that we should use a variety of tools at our disposal to address the problem. The decision of Republican politicians to put their pledge to Grover Norquist above their pledge to serve the country and uphold the Constitution suggests that a balanced solution is not possible at this time. That is too bad. Dishonest statements by people I respect like Larry Kudlow (despite his tendency to be wrong most of the time) only exacerbate this problem.
Third, while marginal tax rates and regulation certainly matter, they do not matter as much as Kudlow and other propagandists make it sound. At a certain point, wealthy individuals are motivated less by the ability to buy yet more stuff (which they would not even have time to consume), and more for a desire for greater relative status. Furthermore, the idea that higher marginal tax rates greatly dampen appetites for risk taking is contradicted by the facts. Marginal tax rates are at historical lows by the standards of recent history. Yet, economic growth is much worse now. Consider that the tech boom that occurred in the 90s when we had higher tax rates.
What we have here is a disconnect between the facts that actually exist and what conservative propagandists want to tell us. That marginal tax rates matter or that regulation matters does not mean that their effects need to be exaggerated.
Cutting taxes or eviscerating regulation isn't going to cure our economic ills. Indeed, even addressing our national deficit in the short-term will not do much. Indeed, cutting the deficit too much too soon (which means higher taxes or lower spending dampening economic activity) is likely to have the unintended consequence of making our already bad situation even worse.
Conservatives need to face reality and accept that the facts are not exactly as they wished them to be. It would be possible to make deals with rational conservatives. For example, we could work to simplify regulatory compliance without undermining its purpose in exchange for short-term stimulus combined with a balanced deal that makes gradual upwards adjustment to taxes and downwards adjustments to spending over the medium-term after the economy improves. But lets face it. Such deals are not in the cards. Conservatives value their pledge to Grover Norquist more than they value anything else. So, economic stagnation is destined to continue until the people rise up against Republican politicians and teach them that their only important pledge is to the Constitution and to the American people.
Reply to this commentLinkReport Abusethe problem is absolutely the overspending. It has been aggravated by the lower tax reciept dues to the recession, but consider this. in 2007 tax reciept were roughly 2.6T and spending was 2.8T for a deficit of about 150B (rough numbers from memory here) In 2011 the tax reciepts had fallen to 2.3T, but spending was up to 3.7T. So yes, the lower tax recipts do have some effect, but the major part of the 1.3T deficit is the extra 1T in spending over just 4 years. So the real question is....will any canidate for president propose to cut that 1T in extra spending? Well one has, but he is called a nut by the others who make pithy comments about throwing the baby out with the bathwater, and chopping off your arm and such. They, meanwhile, all have a "revenue neutral" tax reform plan which makes them "serious candidates". I guess I'll have to vote for the "nut, fringe, can't win" candidate. Ron Paul for president 2012.....or bust.
Reply to this commentLinkReport Abusethe problem is absolutely the overspending. It has been aggravated by the lower tax reciept dues to the recession, but consider this. in 2007 tax reciept were roughly 2.6T and spending was 2.8T for a deficit of about 150B (rough numbers from memory here) In 2011 the tax reciepts had fallen to 2.3T, but spending was up to 3.7T. So yes, the lower tax recipts do have some effect, but the major part of the 1.3T deficit is the extra 1T in spending over just 4 years. So the real question is....will any canidate for president propose to cut that 1T in extra spending? Well one has, but he is called a nut by the others who make pithy comments about throwing the baby out with the bathwater, and chopping off your arm and such. They, meanwhile, all have a "revenue neutral" tax reform plan which makes them "serious candidates". I guess I'll have to vote for the "nut, fringe, can't win" candidate. Ron Paul for president 2012.....or bust.
Reply to this commentLinkReport AbuseWhere's those 'green shoots' Mr Kudlow?. And it was all BS and you know it. The economic situation is directly the result of the policies of the Obama Adminstration. Period. And anyone who says differently is a Useful Idiot.
Reply to this commentLinkReport AbuseKudlow, you are supposed to be some sort of expert on economic matters.
This is a very dishonest article. Look at the following:
September 2008 – 280,000 jobs lost
October 2008 – 240,000 jobs lost
November 2008 – 333,000 jobs lost
December 2008 – 632,000 jobs lost[2]
January 2009 – 741,000 jobs lost
February 2009 – 681,000 jobs lost
March 2009 – 652,000 jobs lost
April 2009 – 519,000 jobs lost
May 2009 – 303,000 jobs lost
June 2009 – 463,000 jobs lost
July 2009 – 276,000 jobs lost
August 2009 – 201,000 jobs lost
September 2009 – 263,000 jobs lost
October 2009 – 111,000 jobs lost[3]
November 2009 - 64,000 jobs created[4]
December 2009 - 109,000 jobs lost[4]
January 2010 - 14,000 jobs created[4]
February 2010 - 39,000 jobs created
March 2010 - 208,000 jobs created
April 2010 - 290,000 jobs created
May 2010 - 413,000 jobs created
June 2010 - 125,000 jobs lost
July 2010 - 131,000 jobs lost (143,000 Federal Census jobs lost) [5]
August 2010 - 54,000 jobs lost
September 2010 - 95,000 jobs lost (According to U.S. Labor Department, 64,000 private sector jobs are added but a net loss of 95,000 jobs are due to government layoffs) [6][7]
October 2010 - 159,000 gained (Private sector jobs net increase)
November 2010 - 93,000 gained
December 2010 - 121,000 gained
January 2011 - 68,000 gained
February 2011 - 235,000 gained
March 2011 - 221,000 gained
April 2011 - 244,000 gained
2008 (September 2008 – December 2008) – 2.6 million jobs lost
2009 (January 2009 – December 2009) – 4.2 million jobs lost[8]
2010 (January 2010-December 2010) - 863,000 jobs created
The US economy lost over 5.0 million between Sept 2008 and June 2009. That's 500,000 per month in job losses. Do you really believe that such damage could be repaired in under 3 years. During the period 2000-2008 there were only tax cuts.
What is the current state of wealth concentration in the USA?
In which class were most of the Job losses? Job Creators or Workers?
Read your history about whats happens in high inequality societies.
Reply to this commentLinkReport Abusei am amused - but hardly surprised -that messrs, welker and corbin froth and foam at kdulow's column - and the conservative principles he (re)iterates while literally ignoring the simple (and inarguable) fact that we had a near-trillion dollar fiscal stimulus expliciltly designed to reinvigorate the economy...and that (similarly) ignores QE1 & QE2 monetary policy interventions by the fed...
i have no problem with intelligent - or even simplistic - critiques of so-called 'conservative' economic proposal and policies....but i take serious issues with 'liberal' critics who behave as if a trillion dollar stimulus and unprecedentedly loose monetary policy never happened...
their dishonesty and hypocrisy does double duty of revealing weakness of both analysis and (more importantly) character
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