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Tags: Economic Collapse

What the ‘Pre-Recession Peak’ Job Numbers Really Mean



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By now you’ve probably begun your weekend-long bender in celebration of the news that the U.S. economy (which, in a market version of Zeno’s paradox of Achilles and the turtle, just keeps getting better but somehow never reaches the level of not-half-bad) has now created a level of “payroll employment” that is “back to pre-recession levels.”

I hate to kill the buzz, but this is the kind of good news where what you see is, literally, what you get: We are exactly back to the number of jobs that existed in early 2008. Unfortunately, the U.S. population, and the available workforce, have continued to grow, at a fast enough rate that the anemic level of job creation in the post-recession era still hasn’t been enough to keep pace. As a function of people who can and arguably should be working, job creation is still so weak that it will probably be at least four more years before the jobs recession can truly be called over. 

“We’re probably still about seven million jobs below trend,” George Washington University economics professor Tara Sinclair tells NRO. ”We’re just excited because we’ve been at fewer jobs than January 2008 for such a long time.”

Sinclair notes that the news, while underwhelming, is good. The May job creation rate of 217,000 is substantially higher than the 180,000-or-so-per-month rate that has been the average since President Barack Obama took office. And the non-adjusted return to pre-recession peak is being widely celebrated. Even Bill McBride, who runs the essential Calculated Risk blog, has announced that he will probably be retiring his “scariest chart ever,” which compares peak-to-peak job losses and recoveries since the end of World War II.

But this is a symbolic victory at best. According to the Hamilton Center’s jobs gap calculator, a rate of 217,000 jobs per month, if it could be maintained indefinitely (and there are no guarantees on that), would put us back to the previous peak in May 2018. Hiding the denominator is one of the oldest tricks in politics. What matters isn’t the total number of jobs but the total number of jobs relative to the working-age population. In other words, when will we see a reverse in the nearly 15-year-decline in the labor-force participation rate?

“That’s the million dollar question,” Sinclair says. “We saw a huge drop in unemployment last month, but that was people leaving the labor force. . . . I would not be terribly distressed by an unemployment rate that goes up for a few months, because it would mean more people were reentering the labor force.”

In the meantime, let the Fifth Annual Summer of Recovery begin. Or not.

Tags: Economic Collapse , Jobs , Recession

The Ugly Truth About Our Economy



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Of course there’s State of the Union reaction and Rubio-mania in the Morning Jolt, but also an examination of the economic truths you didn’t hear last night, and probably won’t hear from an elected official for a while:

The Ugly Truths About the American Economy Since 2009

Okay, forget what the president said. Why has hiring been so sluggish since the Great Recession began?

I’m going to look at a post from Zero Hedge, an economics-minded blog that is always interesting and sometimes understandable. Charles Hugh-Smith argues:

Those who have spent their careers in government or academia have little idea what it takes to hire more people. Number one is a business with strong demand for one’s products or services. In a developed world with too much of everything except energy, that is no small challenge: the world is awash in over-capacity in every field except niche industries such as deepwater oil rigs.

Second, you need a process that generates so much value (specifically surplus value) that you will generate immediate profits by hiring more people.

If the value added by additional labor is low, then you have no reason to hire more employees, even if Ben Bernanke personally knocked on your door begging you to borrow a couple million dollars at low rates of interest.

If an additional unskilled worker will cost $10 an hour and might generate $100 a day in additional gross revenues, that is $20 in gross profit. But the overhead costs of operating a business are rising faster than inflation: junk fees imposed by cities, counties and states, workers compensation and disability premiums, healthcare costs (if you hire full-time workers), energy costs, and so on.

For most businesses, overhead costs 50% to 100% of total employee compensation–wages plus benefits and payroll taxes. So adding another employee to gross 20% more doesn’t make it worthwhile–it actually generates a loss once overhead costs are paid.

The only time it makes sense to hire another worker is if that worker will create 100% or more surplus value from their labor. For example, a worker paid $200 a day in total compensation generates $400 more in gross revenues–enough to not only support the added overhead but net the business a profit.

In short, the unemployed, the departed-the-workforce, the just-entered-the-workforce and soon-to-enter-the-workforce cannot be sufficiently productive to justify the expense of hiring them. And we know this pretty much has to be true, because corporations are sitting on roughly $1.7 trillion in cash right now. It’s not that they don’t have the money to hire people. They just don’t think that hiring people would generate more money than having it just sit there in their accounts, which is a phenomenally depressing conclusion.

Speaking of those about to enter the workforce, isn’t perhaps one of the fundamental problems facing our economy that we have a lot of English majors and not enough folks who can or are willing to work in fracking? What I mean is, how many of our economic doldrums stem from a fundamental mismatch between the skills of the soon-to-be-working and new workers and the actual work that needs to be done?

Allow me to set your blood to simmer, by pointing to this November Salon article:

In the John Waters-esque sector of northwest Baltimore — equal parts kitschy, sketchy, artsy and weird — Gerry Mak and Sarah Magida sauntered through a small ethnic market stocked with Japanese eggplant, mint chutney and fresh turmeric. After gathering ingredients for that evening’s dinner, they walked to the cash register and awaited their moments of truth.

“I have $80 bucks left!” Magida said. “I’m so happy!”

“I have $12,” Mak said with a frown.

The two friends weren’t tabulating the cash in their wallets but what remained of the monthly allotment on their Supplemental Nutrition Assistance Program debit cards, the official new term for what are still known colloquially as food stamps.

Magida, a 30-year-old art school graduate, had been installing museum exhibits for a living until the recession caused arts funding — and her usual gigs — to dry up. She applied for food stamps last summer, and since then she’s used her $150 in monthly benefits for things like fresh produce, raw honey and fresh-squeezed juices from markets near her house in the neighborhood of Hampden, and soy meat alternatives and gourmet ice cream from a Whole Foods a few miles away.

“I’m eating better than I ever have before,” she told me. “Even with food stamps, it’s not like I’m living large, but it helps.”

Mak, 31, grew up in Westchester, graduated from the University of Chicago and toiled in publishing in New York during his 20s before moving to Baltimore last year with a meager part-time blogging job and prospects for little else. About half of his friends in Baltimore have been getting food stamps since the economy toppled, so he decided to give it a try; to his delight, he qualified for $200 a month.

Title of that article? “Hipsters on Food Stamps.”

Folks, the art world and publishing world are fiercely competitive even in the very best of times, so you’re going to need a backup career just in case things don’t work out. This also applies to those who aspire to fame and fortune in journalism, professional athletics, the music industry, most of the entertainment industry, and most of the jobs that the world covets. You’ve got to be really talented, and really hard-working. And yes, lucky. I realize I’m very, very, very, very lucky to have a job that I (usually) enjoy and that allows me to make a living. Of course, I suspect those outside those fields overestimate the role of luck. My buddy Cam — now on the Sportsman Channel — will periodically hear from someone, “boy, you’re really lucky to find a job where you get to host a radio show!” and he has to bite his tongue and refrain from mentioning all the years he worked as reporter and assistant news director, driving all over the state of Oklahoma on any assignment he could get, long hours, lousy pay, and so on.

Nobody just hands you a plum job in journalism. Okay, unless you’re Chelsea Clinton, nobody just hands you a plum job in journalism.

Perhaps most unnervingly, perhaps a significant chunk of our younger workforce isn’t really well-prepared to do much of anything. As the intriguing, rarely updated blog The Last Psychiatrist suggested:

It’s hard to accept that the University of Chicago grad described in the article isn’t employable, that the economy doesn’t need him, but it is absolutely true, but my point here is that not only is he not contributing, the economy doesn’t need him to contribute. Which is good, because there’s nothing he can do for it. 1. Anything requiring science is out. 2. “He can work manual labor!” I love how people assume economics doesn’t apply to construction. The demand for those jobs is very high AND hipsters suck at them. At any wage, Gerry the hipster will always be outworked by Vinnie the son of a longshoreman, who will always be outworked by a Mexican illegal, i.e. the system will always be able to find someone who can do the job better AND with lower labor costs . . . 3. Hipsters are not good at retail or sales unless detached irony is required, which it is not, which is why they’re on food stamps.

Of course, we won’t hear many comments in this vein from our policymakers, because it would be perceived as blaming the unemployed for their grim circumstances.

Tags: Economic Collapse , Economy , Jobs

Data: So-Called ‘Recovery’ Worse for Household Income Than Recession



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If this data is sufficiently aired and discussed before the American electorate, we will be attending and watching Mitt Romney’s inauguration in January:

Household income is down sharply since the recession ended three years ago, according to a report released Thursday, providing another sign of the stubborn weakness of the economic recovery.

From June 2009 to June 2012, inflation-adjusted median household income fell 4.8 percent, to $50,964, according to a report by Sentier Research, a firm headed by two former Census Bureau officials.

Incomes have dropped more since the beginning of the recovery than they did during the recession itself, when they declined 2.6 percent, according to the report, which analyzed data from the Census Bureau’s Current Population Survey. The recession, the most severe since the Great Depression, lasted from December 2007 to June 2009.

Obama approached our economic woes and gave it his best shot; his approach has failed. Another four years of his leadership guarantees another four years of similar results.

Need hope? Change presidents.

Tags: Barack Obama , Economic Collapse , Mitt Romney

Number of Families With No Savings, Huge Debt Increases Under Obama



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USA Today this morning:

One out of five families owes more on credit cards, medical bills, student loans and other unsecured debt than they have in savings, according to a new University of Michigan report. And the number of families surveyed at the end of 2011 that have no savings at all increased to 23.4%, compared with 18.5% in 2009.

“The people who were down and out, without much money, in the recession have ended up staying there or even worse,” says Frank Stafford, professor of economics at University of Michigan Institute for Social Research and co-author of the report.

…Now, 10% of families owe more than $30,000 in unsecured debt, up from 8.5% in 2009. “I talk all the time to people who are still just hanging on by their fingernails,” Cunningham says.

Forward!

I suppose this explains why Obama’s approval rating on handling the national debt isn’t in single digits; some Americans relate to having a debt problem they can’t seem to control or mitigate.

Tags: Barack Obama , Economic Collapse

Occupy Wall Street, Wrecking Obama’s Needed ‘Recovery’ Narrative



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As Sen. Harry Reid declares that private-sector job growth is doing “just fine,” the AP poll finds that the percentage of Americans who describe the economy as “very poor” has reached a new high.

A sizable majority — more than 7 in 10 — believe the country is headed in the wrong direction and, in a new high, 43 percent describe the nation’s economy as “very poor,” according to a new Associated Press-GfK poll. Among those surveyed, less than 40 percent say Obama’s proposed remedies for high unemployment would increase jobs significantly.

The pessimism is not a good sign for the nation’s recovery hopes and presents a more urgent challenge for Obama as he mounts his re-election bid.

About 4 in 10 think unemployment will rise in the coming year; just 23 percent expect it to decrease. And few expect the government to be able to help. Only 41 percent say the government can do much to create jobs, and less than 40 percent say the main elements of Obama’s jobs proposal would increase employment significantly.

What’s more, expectations for the coming year have not improved, with 41 percent believing the economy will remain the same, 27 percent saying it will get worse and 30 percent saying it will improve.

Until now, much of the analysis of the political impact of the Occupy Wall Street protests has focused on whether they can get Americans to blame Wall Street instead of the administration for the state of the economy, or whether the Democrats will marginalize themselves by wholeheartedly embracing a bunch of loons who poop on police cars and sneak into others’ tents to sniff their feet.

But maybe we’ve been missing another ripple effect from the protests, and more broadly, the “We Are the 99 Percent” argument showcasing tales of economic woe: In this environment, it makes it all but impossible for Obama or any other Democrat to argue that the economy is in recovery and that better times are just over the horizon. Obama’s election was heavily driven by the sudden onset of economic hard times; now he cannot really argue that we have recovered (at least not in a way most Americans can feel) and he can’t argue that a real recovery is just around the corner.

President Obama already knows he’s almost certainly going to be in a tough spot on the “Are you better off now than you were four years ago?” question. But even worse for him, he now can’t argue that his policies just need a bit more time, and that 2013 will see the significant recovery Americans have been waiting for. The one indisputable message of the OWS/We Are the 99 Percent crowd is that economic opportunities are few and far between and that the basic goals of modern American life — getting a good education, finding a job, providing for one’s family, buying a house, being able to afford insurance and take care of one’s health — seem increasingly difficult or even impossible. Even Americans who have education, jobs, houses, and health insurance see the daily coverage of the protests and are reminded of their own economic anxieties.

That’s about as far from a “stay the course” message as you can imagine, and toxic for any cry of “four more years.”

Tags: Barack Obama , Economic Collapse , Occupy Wall Street , Polling

Wall Street Gets What It Paid For



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You don’t say:

Democratic U.S. Rep. John Yarmuth lashed out at President Barack Obama’s economic team Thursday, saying they show more concern for Wall Street than average Americans in a blunt election-year assessment from an Obama loyalist frustrated by a tepid economic recovery.

What started out as a bashing of Senate Republican leader Mitch McConnell by union activists, who pressed for more public transportation projects, shifted gears briefly when Yarmuth took aim at Obama’s inner circle of economic aides.

“I’m not real happy with our economic team in the White House,” Yarmuth said. “They think it’s more important that Goldman Sachs make money than that you make money. And that’s where we’ve got to change the attitude of this country.”

Dear Representative Yarmuth: There is a reason that Goldman Sachs acts like it owns the Democratic party. It does:

Goldman Sachs is one firm that’s learned that politics matters: The sinking investment bank received some $12 billion in bailout funds while its competitor, Lehman Brothers, was allowed to go bankrupt. Goldman operators move easily between government and the private sector and have played key roles in both Democratic and Republican administrations. But like the rest of Wall Street, they have tilted heavily Democratic of late. Goldman Sachs was the biggest business donor to Democrats in 2008, according to a Center for Responsive Politics report. Some 73 percent of Goldman Sachs’s millions in 2006–08 donations went to Democrats, but its outlook has been informed by bipartisan pragmatism: The banking bailout came from a Republican administration and was marketed by Goldman Sachs alumnus Hank Paulson, who literally begged, on bended knee, for the money. It was managed by assistant treasury secretary and former Goldman Sachs foot soldier Neel Kashkari and was politically nudged along by Bush’s chief of staff, Josh Bolton, another Goldman veteran.

With Democrats now controlling the elected branches in Washington, Goldman has an even stronger hand: Former chairman Robert Rubin is the dean of the Goldman Sachs Democrats, the group that ran economic policy under the Clinton administration and is doing the same under Obama. Rubin acolytes Larry Summers, Timothy Geithner, and Peter Orszag already are filling key economic-policy positions, and Rubin’s son, Jamie, is raising money on Wall Street for Democrats and acting as a talent scout for the Obama administration. The elder Rubin is sure to have the ear of all the major players. Geithner, hurt in the ruckus over his unpaid taxes, has turned to the bank for a reliable loyalist, hiring former Goldman lobbyist Mark Patterson as his top aide. And Geithner’s replacement at the New York Fed? William C. Dudley, former managing director of Goldman Sachs.

Other major nodes on the Goldman-Democratic nexus include Al Gore’s London-based private-equity firm, Generation Investment Management, which was founded with assistance from former Goldman boss Paulson and includes in its ranks a half dozen prominent Goldman veterans. Former Goldman Sachs Asset Management CEO David Blood is its CEO, earning the firm its nickname, “Blood and Gore.” Goldman Sachs is a significant investor in E+Co, Blue Source, and APX, all firms positioned to profit from the cap-and-trade schemes that are at the heart of Gore’s global-warming crusade.

You get what you pay for.

Tags: Economic Collapse , General Shenanigans , Obama , Wall Street Democrats

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