Free Markets, Free People

Economy

Depression-Era Unemployment Looms

Since the Great Depression, the peak unemployment rate was 10.8% in November, 1982.  We will, in all likelihood, set a significantly higher record for the unemployment rate in the next 12 months. Here are 12 reasons why the unemployment rate will reach at least 12%.

I would also remind you that if we currently reported the unemployment rate as they did in the 1930′s, our current rate of unemployment would be around 17.2%  In any event, here are just two of the most compelling reasons why the job picture is going to remain very cloudy:

For the first time in at least six decades, private sector employment is negative on a 10-year basis (first turned negative in August). Hence, the changes are not merely cyclical or short-term in nature. Many of the jobs created between the 2001 and 2008 recessions were related either directly or indirectly to the parabolic extension of credit…

But when we do start to see the economic clouds part in a more decisive fashion, what are employers likely to do first? Well, naturally they will begin to boost the workweek and just getting back to pre-recession levels would be the same as hiring more than two million people. Then there are the record number of people who got furloughed into part-time work and again, they total over nine million, and these folks are not counted as unemployed even if they are working considerably fewer days than they were before the credit crunch began…So the business sector has a vast pool of resources to draw from before they start tapping into the ranks of the unemployed or the typical 100,000-125,000 new entrants into the labour force when the economy turns the corner. Hence the unemployment rate is going to very likely be making new highs long after the recession is over — perhaps even years.

There are other compelling reasons at the link, but the two above are enough to ensure that the unemployment rate will remain high for quite some time.

Some Good News Among All The Bad

It looks like the looming Copenhagen Climate Summit is shaping up to be a bust:

British officials preparing for next month’s UN summit in Copenhagen said the best that could be hoped for was that national leaders would make “political agreements” on emission cuts and payments to help poor countries to adapt to climate change. These agreements would be non-binding, however, and could later be revised or rescinded by national parliaments.

[...]

The admission that no treaty will be signed at Copenhagen marks the failure of the process agreed at a UN meeting in Bali in December 2007, when industrialised countries agreed to deliver a binding climate-change agreement within two years. The delay has angered developing countries, which say they are already suffering from man-made climate change.

No surprise that “developing countries” are angry about this – their opportunity to loot the richer countries has again been delayed. They’re angry because the payday is guaranteed since the “developed” nations have foolishly, in the past, agreed they’re the cause of the problem and should pay the “developing” countries for that.

Artur Runge-Metzger, the European Commission’s negotiator on climate change, said in Barcelona that the absence of commitment from the United States on emission cuts was a key factor contributing to the delay, although other countries were also to blame. He said that without a treaty the EU would agree to cut its 1990 emissions by only 20 per cent by 2020, whereas with a treaty it would agree to a 30 per cent cut.

And they can’t even blame Bush for this one. My question is, if Europe is so hot to trot on this idea, why they don’t take the lead for once and ratchet down their emissions to 30% unilaterally?

I’ll tell you why – because they know what effect it will have on their economy and won’t do anything without being assured everyone is sharing in the suffering.

The one good thing that may come out of this is the economy of Copenhagen may see a nice little economic up-tick as representatives from 190 countries fly in and hit all the posh hotels for a week or so. I wonder what the carbon footprint of that event will be?

~McQ

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Unemployment Hits 10.2% – “Stimulus” Not Stimulating

As President Barack Obama said on Feb. 9 when touting the “stimulus”: “The biggest measure of success is whether we stop contracting and shedding jobs, and we start growing again.”

Well, guess what?  Despite all the happy talk about the end of the recession, unemployment hit 10.2% today.  And, as Dale and others have said constantly, if we were computing it like we did in the ’70s, it would be at 17+%.

So taking the President at his own word, something it seems this administration would prefer everyone not do, it would appears the “stimulus” is still chasing success.

That’s because despite his protestations to the contrary, the the “stimulus” was one, giant earmark.  And it is not having the desired effect despite the bogus “jobs created and saved” numbers.

In fact, the reality of the situation is not at all good as the BLS noted in their press release today:

The number of unemployed persons increased by 558,000 to 15.7 million. The unemployment rate rose by 0.4 percentage point to 10.2 percent, the highest rate since April 1983. Since the start of the recession in December 2007, the number of unemployed persons has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points.

And as for those “shovel ready projects” the “stimulus” was supposed to target?

The unemployment rate for the construction field keeps mocking those “shovel-ready” promises: Another 62,000 jobs in construction lost last month, with the average at 67,000 jobs lost per month for the last six months.

The solution? Watch for it – a second “stimulus”, something Paul Krugman has been whining about for months. Any guess what it would look like if it happened? Well the fact that this “stimulus” was used to track radioactive rabbit feces and subsidize golf cart purchases should give you a hint.

By the way, where is “Sheriff Joe” with his policing of the “stimulus” money and calling out those who are wasting it? Overwhelmed by the job, I guess.

Finally there is the economy killing legislation – health care which is front loaded with taxes and cap-and-trade which will raise the cost and price of everything – which the Democrats are determined to pass.  Yup – they’ve got a real handle on this, don’t they?

~McQ

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Top 10 Reasons To Pass Cap-And-Trade

No, I’ve not lost my mind, I just wanted your attention for this great list from the American Energy Alliance:

10) It’ll be the largest tax increase in history and will help pay for the government takeover of health care.

9) America’s unemployment rate is only 10 percent. Higher energy prices and the resulting transfer of American businesses overseas will help us double it.

8 ) The U.S. has been the world’s number one economic superpower for long enough. It’s time to lie down and give someone else a turn.

7) Expensive energy is good. Really expensive energy is even better.

6) By making it more expensive to produce more of the vast amounts of American oil we have right at home and transitioning to affordable, commercial-scale alternatives that don’t exist, we can end our dependence on foreign oil in 10 years!

5) Spending billions of taxpayer dollars to create temporary, government jobs at the expense of long-term, private sector jobs not only makes perfect sense, it’ll be a boon to the nation’s struggling economy. Just look at Spain.

4) Energy is the lifeblood of the American economy – it is, literally, the capacity to do work. Hence, making American energy more expensive and less available will strengthen our economy and enhance our capacity to put Americans to work. Get it?

3) California and Massachusetts have adopted similar policies and they’re now enjoying some of the highest energy prices and unemployment rates in the nation. We need to level the playing field so every state can reap the benefits of expensive energy and abundant joblessness.

2) It will create millions of well-paying green jobs without destroying the jobs of Americans who are currently employed. Who put the green welfare provisions in there, anyway?

1) Reducing economic growth while achieving virtually no environmental benefit is simply a good idea. Don’t ask questions.

Sounds like a heck of a deal, no? ~McQ

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China Buying Oil Leases Off American Shore?

That’s the word from Mark Tapscott at the Washington Examiner:

Gas prices here in the U.S. are creeping back up towards the $3-per-gallon mark even as news breaks today that China’s state-owned energy firm just closed a deal to buy interests in four development leases on the American Outer Continental Shelf (OTS) in the Gulf of Mexico.

The deal, which requires approval of the U.S. government, is between Norway’s Statoil and China National Off-Shore Oil Corporation (CNOOC). This is the same CNOOC that would have bought Unocal four years ago for $18.5 billion but for pressure from Congress, according to The New York Times, quoting an energy industry trade publication.

Because it must be approved by the U.S. government, the Statoil/CNOOC deal puts President Obama and Ken Salazar, his Secretary of the Department of the Interior, which controls OTS leasing, in a difficult position.

Really? Why does it put the government in a “difficult position”? Oh, you mean the apparent willingness to sell these leases to foreign entities vs. opening them up to domestic American exploration?

The deal also focuses renewed attention on Salazar’s slow-walking of a new plan for approving energy exploration and development in the OTS, which includes approximately 1.7 billion acres, and, according to Interior, holds up to 86 billion barrels of recoverable oil and more than 400 trillion cubic feet of natural gas.

The administration is moving much too slowly to open more of the OTS to development for domestic U.S. uses, according to Jack Gerard, president of the American Petroleum Institute …

But it apparently isn’t moving too slowly to open up the OTS to foreign competitors.

In the meantime:

If the administration approves the deal, it will be more vulnerable to charges that the White House is being careless with U.S. national security issues in the energy sector, and that it is putting the interests of a foreign power before those of U.S. energy consumers.

If Obama and Salazar reject the deal, it will likely complicate relations with China, the emerging Asian superpower that defense experts predict will be able at will to challenge U.S. legitimate national security interests around the globe in the near future.

Oil isn’t going away anytime soon and its use is critical during any transition to alternate energy sources (which, for the most part are vaporware). Additionally, the charge that the Obama administration is playing fast and loose with US national security will resonate if the public becomes aware that domestic producers have been barred from OTC production but foreign producers are given access.

So the dilemma facing the administration is one of its own ideological making. Its “slow walking” of the plan for domestic producers to explore the OTC is a decision it made to thwart the desires of a majority of the nation to secure those assets for the US’s use. And now it’s going to hand them over to China?

That will not play well in at all in middle America.

~McQ

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Stimulus Funds For Mapping Radioactive Rabbit Feces

I‘m not kidding.  So says none other than the New York Times:

A Week Mapping Radioactive Rabbit Feces With Detectors Mounted On A Helicopter Flying 50 Feet Over The Desert Scrub. … $300,000 In Federal Stimulus Money.” … “A government contractor at Hanford, in south-central Washington State, just spent a week mapping radioactive rabbit feces with detectors mounted on a helicopter flying 50 feet over the desert scrub. … the helicopter flights, which covered 13.7 square miles and were paid for with $300,000 in federal stimulus money, took place in an area that had never been used by the bomb makers. … Marylia Kelley, the executive director of a California group called Tri-Valley Communities Against a Radioactive Environment, said the rabbit cleanup was ‘kind of funny, in a sick way.”

A great way to stimulate the economy, no?

No?

Well how about this:

“President Obama’s Stimulus Plan… Is Now Paying Americans To Buy That Great Necessity Of Modern Life, The Golf Cart.”…“Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama’s stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart. The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart.”

Let’s not forget that our president is a great fan of golf afterall. What better way can you think to stimulate the economy?

Oh, how about this?

“The other third of the stimulus, government infrastructure spending, has been the most controversial from the start. Some proposals have been criticized as wasteful, Such as a $6 million snowmaking facility in Duluth, Minn.”

A snowmaking facility in Duluth, MN – the 15th “snowiest” city in America. Why that’s a perfect way to stimulate the economy.

But if that doesn’t resonate, there’s this:

“A big chunk of the money that will pay for a new spring-training baseball complex on Ttribal land in the East Valley will be delivered via a financing program that’s part of the Federal Economic-Stimulus Plan. The Salt River Pima-Maricopa Indian Community says it may borrow as much as $30 million of the estimated cost of the $100 million complex near Scottsdale that will become the spring home of the Arizona Diamondbacks and the Colorado Rockies.”

Because, of course, MLB is going broke.

You can read the whole disgusting list here.

Wasn’t Joe Biden going to police this?

Oh wait, I forgot – he and John Kerry are preoccupied deciding our new strategy in Afghanistan.

Yeah, nothing can go wrong with that, can it?

~McQ

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Don’t Tell Anyone, But The Recession Is Still With Us

Despite all the happy talk from the administration and the lap-dog press eagerly parroting the “good news” that the recession is over, the numbers just don’t support the talking point.  Liam Halligan delivers the news:

So I was pleased last week when I heard that, after four successive quarters of contraction, America’s economy grew by an impressive 3.5pc between July and September, compared to the quarter before. “The US is out of recession” numerous newspaper headlines screamed. No wonder share prices surged.

As ever, the numbers warrant a closer look. For one thing, this is annualised data. So the US economy actually expanded by only 0.9pc during the third quarter – a fact most newspaper reports ignored. What growth we did see resulted from a 3.4pc annualised rise in US consumption between July and September, which was in turn caused by a 22.3pc spike in spending on consumer durables.

As mentioned here that “spike” was driven by “cash for clunkers” and the $8,000 first time homeowners tax exemption. Halligan agrees. It wasn’t a trend, it was exactly what Halligan reported – a spike. So digging into it, what are the real numbers?

In other words, this latest US growth spasm stemmed from one-off government “giveaways” – with the public only able to take advantage of such gimmicks by going deeper into debt. The rise in US consumption coincided with a 3.4pc fall in household disposable income and a plunging savings rate too. With government and household debt spiralling anew, America’s so-called “return to growth” is nothing but a return to higher leverage. [emphasis mine]

Not quite what the administration cracked it up to be, is it? And Halligan reminds us:

Over the last 40 years, all US slumps have been interrupted by at least one quarter of positive growth, followed by a renewed downturn.

Of course, with an administration desperate for any good news, ignoring history is to be expected. After all, they’re quite the masters at ignoring the laws of economics and expecting results which run counter to them, aren’t they? Why shouldn’t they believe that one quarter of government give-aways equals pulling out of the recession? Can’t wait to hear the excuses when we’re back in the negative GDP growth trend next quarter. And you can also expect to hear the inevitable cries for a second stimulus (Porkulus II) crescendo.

~McQ

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White House Stuck On Stupid

Well, über defensive and stupid, to be more accurate. At least with its war on Fox News there was some calculated ability to garner sympathy and support from the fevered progressive masses. Taking on one of the most reputable reviewers of the car industry, when it’s giving you good news, is just plain idiotic:

It is an odd, and we’d say regrettable, pattern of this White House that it lets itself get dragged down into fights with specific media outlets.

[...]

But in addition to Fox News, now The White House is going after highly-respected and influential car site Edmunds.com.

They’re actually using The White House blog to dispute the site’s analysis of Cash-For-Clunkers (via Detroit News).

The post is snarkily titled: “Busy Covering Car Sales on Mars, Edmunds.com Gets It Wrong (Again) on Cash for Clunkers”

For its part, Edmunds.com responded with a sober yet forceful smackdown. After pointing to the obvious flaws in the White House’s (defensive) thinking, they put the once-venerable office to shame:

With all respect to the White House, Edmunds.com thinks that instead of shooting the messenger, government officials should take heart from the core message of the analysis: the fundamentals of the auto marketplace are improving faster than the current sales numbers suggest.

Isn’t this a piece of good news we can all cheer?

I’m not sure which is more pathetic: the fact that the White House clearly lost a blog war, or that it is stupid enough to get involved in one in the first place.

Venezuela – Hugo’s New Shower Rules

Hugo Chavez and his socialist government have handled everything so well that they’ve decided to go green and show the world how it is done:

Turn out the lights, shorten the shower to three minutes, buy a portable generator.

That is President Hugo Chávez’s message to the citizens of energy-rich Venezuela, where the “socialist revolution” has brought power cuts, water shortages and collapsing public services.

Heh … Chavez actually did try to push the green theme in his radio address discussing showering and turning off the lights. But it was a facade designed to hide the fact that the infrastructure is collapsing. As you might imagine, that’s sparking more than a little unrest:

“We’re accused of wasting electricity, but the fact is the government didn’t plan, didn’t invest and didn’t carry out maintenance,” Aixa Lopez, president of the Committee of Blackout Victims, told the TV news channel Globovisión.

In fact, as with all marginal leaders, Chavez blames all of his problems on others:

In early 2007, after winning re-election, Chávez decreed the nationalization of those parts of the electricity industry still in private hands — notably the Caracas power company EDC. Since then, there have been seven national power outages. In most parts of the country, weary consumers have grown used to frequent, unscheduled blackouts lasting hours.

This month, the president admitted there was a crisis in both the power and water industries. This came on the heels of a similar admission regarding healthcare. He put the blame mainly on the El Niño phenomenon for producing drought — Venezuela is 70 percent dependent on hydro power for its electricity — and on consumers for their wasteful habits.

Much of his ire was aimed at shopping malls because, he said, they foment capitalist values. “They’re going to have to buy their own generators,” he threatened, “or I’ll cut off their electricity.”

Ordinary Venezuelans have been urged to use less water and turn off the lights. “Some people sing in the bath for half an hour,” Chávez told a recent cabinet session, broadcast live. “What kind of communism is that? Three minutes is more than enough!”

Formal water rationing has now been introduced, government departments have been told to reduce their electricity consumption by a fifth, and the president has created a new Electricity Ministry in a tacit admission that the state has failed to manage the power industry correctly.

In fact, both the Water and Electricity Ministry are in a shambles:

According to Víctor Poleo, who was deputy minister for electricity at the beginning of the Chávez era, despite huge sums of money allocated, little has actually been done.

“My guess is that of every $100 pumped into [electricity] generation and transmission since 2003, $75 has been stolen by the politicians,” Poleo said.

Venezuela is a oil rich state from which 90% of its foreign earning are garnered. Chavez called his socialist economy “bulletproof”. However, it is now deep in recession:

Worse still, its shrinking economy has done little to blunt inflation, which is running at close to 30 percent a year — around three times the regional average. And the economic downturn is having a predictable effect on the government’s popularity, just as it gears up to fight crucial legislative elections next year.

The latest data from polling company Datanálisis shows voters evenly split, for the first time since mid-2004, over whether the president has been good or bad for “national wellbeing.” Only 17.2 percent say they would vote for him if the presidential election were imminent — down from over 31 percent in September.

Of course, as the article points out, the opposition is “incoherent” and unable to provide unified opposition at this point. But those sorts of things have a way of rectifying themselves if the economic and infrastructure problems continue. Chavez may have figured out how to position himself to be president for life on paper, but remaining president for life with the problems Venezuela is now beginning to face (and may see compounding) may be tougher then he thought.

~McQ

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GDP Growth – Real or Memorex?

My guess is you’re looking at GDP numbers that are about as accurate as the stimulus saved and created job numbers the administration put out recently.  Or perhaps a better way of saying it is they’re as deceptive as those job numbers.

The GDP is the combination of consumer, investor and government spending.  We know pure consumer spending is down.  We know that investor spending is down.  And we also know that government spending is way up.  That spending has spending has urges some consumers to spend – cash for clunkers and the $8, 000 incentive for first time home buyers.  But a spurt of government spending which encouraged a spurt of consumer spending does not a recovery make:

The nation’s gross domestic product expanded at an annual rate of 3.5 percent in the three months ending in September, matching the economy’s average annual growth rate from the last 80 years. But the end of government programs to encourage spending on things like cars and houses, alongside employers’ continued reluctance to hire more workers, means the recovery may not last, economists say.

The recovery will happen when investors invest, businesses hire and finally, consumers buy – not for a quarter, but in a constant and increasing manner. Until that happens, until we see the job numbers begin to lessen considerably, this is just a lot of hoopla over a quarterly blip driven by government spending.

~McQ

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