Today’s unemployment situation data is…wierd. Most noticeable is that the Civilian Non-Institutional Population declined by 185k people, from 238,889k to 238,704k. Did a lot of people die last month? (Update: Ah. It was an annual population adjustment by the BLS. Carry on.) At the same time, we continue the trend of large increases in the population that dropped out of the labor force, with 319k dropping out last month. Since January, 2010, 2,039k people have left the labor force. On the plus side, 117k more people say they are employed this month than last month.
Still, that 9% unemployment rate is an artifact of 504k people disappearing from the population, not the creation of new jobs, something the anemic 36k new payroll jobs number makes clear. Also, the adjusted U6 unemployment rate surged From 16.6% to 17.3%. In fact, U-3, U-4, U-5, and U-6 all rose sharply. U-3 (Total unemployed, as a percent of the civilian labor force) rose from 9.1% in December to 9.8% last month. So, we got that goin’ for us.
Getting to the numbers, for a more accurate view of unemployment:
Civilian non-institutional adult population: 238,704
Historical labor force participation rate: 66.2%
Proper labor force size: 158,022
Actually Employed: 139,323
Unemployment Rate: 11.8%
UPDATE: Well, this is embarrassing. I’ve made a calculation error in the Excel spreadsheet, which provided an incorrect unemployment rate, above. I reversed the division between the labor force and the number of employed persons. I noticed that while writing the post above, on how I calculate the number. I’ve corrected the Excel spreadsheet, to prevent the error from recurring in the future.
Or so sayeth the CBO. Good thing they waited until today to announce it. Otherwise we might have heard snickering and outright laughter during the SOTU when our deficit-hawk President talked about how serious he was about reducing the deficit and the debt.
The budget deficit is now estimated to have widened this year to $1.5 trillion, the CBO said. That compares to a budget deficit of $1.3 trillion for the fiscal year that ended Sept. 30.
The increase in the deficit would bring it to 9.8 percent of gross domestic product, the CBO said, following deficits of 10 percent and 8.9 percent during the previous two years.
Do you remember how he promised to half the debt by the end of his first term in office? Yeah? Well that means he could run a deficit of $750 billion and keep his word. Funny how that works out, huh?
The CBO’s projections assume that current laws remain unchanged. If the nation continues on its current path, the CBO said, the total national debt will rise from 40 percent of GDP in 2008 to 70 percent by the end of 2011, reaching 77 percent of GDP by 2021.
But hey, this is all the other guy’s fault, remember? Oh, and one more point, those of you on the left having fun with Rep. Paul Ryan’s factual response? Make sure you go find someone who can explain the ramifications of this to you, ‘kay? And have them point out who it is that the CBO agrees with in principle as well:
“To prevent debt from becoming unsupportable, the Congress will have to substantially restrain the growth of spending, raise revenues significantly above their historical share of GDP, or pursue some combination of the those two approaches,” CBO Director Douglas Elmendorf wrote in a blog post announcing the report.
While you’re at it, have them explain the appetite for tax increases. Wait, I’ll save you the question – there is none. See December’s extension of the current income tax rates. Now, given that – try to focus. What does that leave? Yes, they’re left with “substantially restrain[ing] the growth of spending”. As in “no more new spending” and “cut back existing spending”. Precisely what Ryan has been saying, isn’t it?
So when Rep. Ryan makes the point that:
Under the terms of a House resolution passed Tuesday, Ryan is to set ceilings at 2008 levels or less.
He has a good reason, one backed by the facts of the situation and not some meandering mewling from Paul Krugman. This is the medicine for the addiction. America has said and is saying again that the voters are not willing to give you a single nickel more until government proves it can significantly cut it’s spending habit. No cuts, no increased taxes. In fact, if the cuts are indeed significant enough, the perhaps no new taxes are needed at all.
Yeah, I know, living within your means like all the rest of us have to do – what a concept.
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While all the angst and hang-wringing continue over the Giffords shooting and the false flag of “vitriolic rhetoric”, Moody’s and Standard & Poor’s Corp have again warned the US it’s credit rating is in jeopardy:
Moody’s Investors Service said in a report that the U.S. will need to reverse an upward trajectory in the debt ratios to support its triple-A rating.
"We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase," said Sarah Carlson, senior analyst at Moody’s.
Standard & Poor’s Corp. also didn’t rule out changing the outlook for its U.S. sovereign-debt rating because of the recent deterioration of the country’s fiscal situation. The U.S. has a triple-A rating with a stable outlook at both raters.
"The view of markets is that the U.S. will continue to benefit from the exorbitant privilege linked to the U.S. dollar" to fund its deficits, Carol Sirou, head of S&P France, said at a conference in Paris on Thursday. "But that may change. We can’t rule out changing the outlook" on the U.S. sovereign debt rating in the future, she warned. She added the jobless nature of the U.S. recovery was one of the biggest threats to the U.S. economy. "No triple-A rating is forever," she said.
Note the line I emphasized. That is the primary reason it hasn’t happened yet. The dollar is the true benchmark currency of the world. Or perhaps a better way of saying that is it is the benchmark currency of the world at least for the time being. But busting through 14 trillion dollar debt ceilings and continuing uncontrolled spending is a very quick way to have other countries consider other currencies or perhaps a market basket of currencies to replace the dollar.
If that happens, our triple-A rating will disappear faster than a pizza at a Weight Watchers convention. But even if it doesn’t, we’re well on the way to a downgrade anyway:
The most recent official figures show the ratio of federal debt to revenue averaging 397% of gross domestic product in the period to 2020, while the ratio of interest to revenue will rise to 17.6% by 2020, from 8.6% in the last fiscal year. "These figures are "quite high for an Aaa-rated country," Moody’s said.
Debt affordability is "very important to the rating process," Ms. Carlson said. U.S. general government debt affordability, including states and municipalities, is "rising over time to a high level for an Aaa-rated country," the report said.
Or said more succinctly, the only thing keeping us at the Aaa level is the fact that we are the home of the dollar. Otherwise the ratios above would most likely have seen us downgraded already.
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Daniel Mitchell provides a bit of ground truth that we’ve recently seen demonstrated via the census numbers:
The world is a laboratory and different nations are public policy experiments. Not surprisingly, the evidence from these experiments is that nations with more freedom tend to grow faster and enjoy more prosperity. Nations with big governments, by contrast, are more likely to suffer from stagnation. The same thing happens inside the United States. The 50 states are experiments, and they generate considerable data showing that small government states enjoy better economic performance. But because migration between states is so easy (whereas migration between nations is more complicated), we also get very good evidence based on people “voting with their feet.” Taxation and jobs are two big factors that drive this process.
Seats were gained by two types of states – those with "right to work" laws and states without income tax. The states with relatively low income taxes also gained.
…growth tends to be stronger where taxes are lower. Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England. Altogether, 35 percent of the nation’s total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade.
For the “we have the lowest taxes in the world” bunch that continue to claim our taxes should be even higher, these numbers should drive the point home. Americans are indeed voting with their feet and they’re fleeing to states that encourage vs. discourage businesses (and thus the creation of jobs) and states which don’t tax the income of job holders. Unsurprisingly those states are mostly found in the South where free markets and free people are concepts that aren’t esoteric thought exercises, but something which those that live there both desire and demand.
Certainly that doesn’t mean the South is perfect by any means. It’s just much better than the rest of the country when it comes to those two things that people hold to be important – enough so that they’re moving there in record numbers to take advantage of the business climate. Texas, for instance, picked up 4 House seats. Florida 2. The rest of the South, except Louisiana (the Katrina effect), picked up one each.
This is another indicator of why I see Democrats and their agenda having problems in 2012. That message hasn’t yet sunk in. Whether it will or not, remains to be seen. But to this point, they’re still a “big government” party. Republicans seem, at least on the surface, to understand what the voters said the last election. Spine, however, is an ever fleeting commodity in Washington, and if they – as they usually do – buy into this “need” for “bipartisanship”, then they’re fools and they’ll fail. Bipartisanship is vastly oversold. If ever the GOP played hardball, now is the time.
Of course, the other side of that is if the GOP succeeds in some small way and convince President Obama to sign those victories into law, Obama will obviously try to claim he’s the reason it became a law. A little reflective glory. Spin cycles will be on overdrive and the GOP must be as transparent as possible during this next Congressional period so any such occurrence will reflect favorably on them and not the President.
Let’s be upfront here – we need Obama playing golf permanently in 2013.
Anyway, the demographics of the new census and the why and wherefores of the population shift were just too interesting to pass off. Daniel Mitchell then asks the most salient of questions in conclusion:
This leaves us with one perplexing question. If we know that pro-market policies work for states, why does the crowd in Washington push for more statism?
The one word we all know and loath, of course – power.
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Dear media, the House vote last night – which sends the bill to President Obama for his signature – wasn’t an $801 billion tax cut bill, as the NYT headline blares. Certainly there are tax cuts in it, but not to the tune of $801 billion. Nor did "millionaires" get a “tax cut. “
All that happened is the House voted to maintain the current income tax rate for everyone. Nothing changes. No one gets "more" in terms of tax savings than they do right now and have gotten for most of a decade. Well, except, perhaps, those who don’t pay any taxes into the system. They may get more in the way of a “refundable credit”.
So quit spinning this as something it isn’t. There is no permanent tax rate. They aren’t “Bush era tax cuts”. They’re the current tax rate. Period.
Keeping that rate doesn’t "cost" the government one red cent, because they never had the money to begin with. Pretending that somehow anticipated revenue from an increase in taxes is somehow a "cost" is a perversion of the English language as well as a misuse of an economic term.
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Get your “Captain Krugman” decoder rings out and follow me through this Paul Krugman piece.
Today the line of attack on what he calls the “Obama-McConnell tax cut deal ” is to put forward the argument that the reason we’re in this mess to begin with is because of the debt carried by American families. Yes, that’s right – you did it, now shut up and take the medicine. Oh and the banks – yes, the banks because they “abandoned any notion of sound lending and because everyone assumed housing prices would never fall”.
Yeah, you guessed it – not a thing about the Community Reinvestment Act, Congressional pressure on banks to lend to very marginal borrowers or Freddie Mac and Fannie Mae. It was you, dear citizen … and the banks. The government? Sparkly clean by omission.
Anyway, because that debt is so high in relation to income and the families are in the middle of trying to deleverage that debt, they’re not spending much – or as much as is needed to kick start the economy, in Krugman’s opinion (they might if they had more but then that means even deeper tax cuts and Krugman ain’t going there). And of course there’s that problem with high unemployment to factor in as well.
So, backing into this favorite theme of the past two years (Deficit? Screw the deficit – spend, spend, spend), what or who should be spending to get the economy going?
Why yes Sparky, he means the government.
What the government should be doing in this situation is spending more while the private sector is spending less, supporting employment while those debts are paid down. And this government spending needs to be sustained: we’re not talking about a brief burst of aid; we’re talking about spending that lasts long enough for households to get their debts back under control. The original Obama stimulus wasn’t just too small; it was also much too short-lived, with much of the positive effect already gone.
It’s true that we’re making progress on deleveraging. Household debt is down to 118 percent of income, and a strong recovery would bring that number down further. But we’re still at least several years from the point at which households will be in good enough shape that the economy no longer needs government support.
But wouldn’t it be expensive to have the government support the economy for years to come? Yes, it would — which is why the stimulus should be done well, getting as much bang for the buck as possible.
Remember that last phrase because that’s the point of the post. Now, with all of that background, Krugman says that this “Obama McConnell tax cut deal” will provide some stimulus but not the sustained stimulus Krugman says is needed from government. And that first stimulus was too small – even though it was much larger than Krugman said was necessary at the time. Nope a massive stimulus is still needed no matter what we have to do to pump that money out there (even while the Fed is trying to sponge up the multi-trillion dollar spill of cash they tossed out there before):
The point is that while the deal will cost a lot — adding more to federal debt than the original Obama stimulus — it’s likely to get very little bang for the buck. Tax cuts for the wealthy will barely be spent at all; even middle-class tax cuts won’t add much to spending. And the business tax break will, I believe, do hardly anything to spur investment given the excess capacity businesses already have.
This is the point where cognitive dissonance smacks right into the Krugman “reasoning”. A) he wants a new and much bigger stimulus – that’s no secret. B) he claims this bit of stimulus (tax cut deal) will “cost” more (deficit) than it will deliver (bang for buck). C) you can’t be trusted (shades of Clinton) to spend your own money the way the government would (perfectly, of course – properly, with no waste, and at exactly the right time and in the right place – having a coughing fit yet?).
For such a supposedly gifted economist it is like he missed Econ 101 in favor of Propaganda 101. Either that or he really does believe, in the face of much evidence to the contrary, that a government spending money in a recession always returns “more bang for the buck” than does an individual (millions of individuals) in a market being allowed to keep and spend more of his money. I am forever at a loss to explain that sort of thinking.
Pushing money out into an economy just to be getting it out there isn’t going to solve our economic problems. In fact, if government has to be the big consumer of loan money to do so, guess what there’s less of for the private side of things? Can you say “vicious circle”?And what does Krugman think a pure borrowing-based second stimulus plan is going to do to the debt? Given the “bang for the buck” we received with the last stimulus, what makes Krugman think this one would be a better deal and superior to letting people keep more of their own money?
What I expect, instead, is that we’ll be having this same conversation all over again in 2012, with unemployment still high and the economy suffering as the good parts of the current deal go away.
The long and short of it is, this about isn’t economics, it’s about politics. What Krugman wants is anything he can call economic improvement because he knows that Obama and the Democrats are in awful political shape. His belief is if the Obama administration will quickly pass a huge stimulus and pump money into the economy, things will look somewhat better than they do now and he can make rosy predictions that should help carry the day for Obama’s re-election in 2012. If it all collapses after that, who cares? There will be plenty of time to make stuff up on the fly again and, of course variously blame the Republicans, the American people and, of course, the banks for any problems the economy may suffer.
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Let’s get a few things straight, shall we? For the most part, this deal between Obama and the GOP on the Bush era tax rates isn’t a “tax cut”. It is a maintenance or extension of the current tax rates. There is nothing – absolutely nothing – permanent about any tax rate. They’ve ranged all over the place in the history of the income tax and are, in fact, subject to the whims of Congress. Within this package there are some tax cuts (payroll taxes for a year) and tax giveaways (EIC, etc). Other than that, it’s about keeping the current tax rates for everyone in a time of economic hardship.
Consequently it isn’t costing the government anything except a few rosy revenue projections if it had been able to increase taxes on the wealthy. And consequently, at least that part, adds nothing to the deficit. Got that? Nothing. What adds to the deficit is spending based in borrowed money.
And that problem is found in the extension, again, of unemployment benefits. So if there’s a spending negative, that’s it. Some may argue that it’s necessary. I personally wonder about that.
Anyway, it is important, as the spin begins to come out on both sides about this deal that the basics be understood.
Yesterday a petulant president tried to defend the deal at a hastily called news conference. Once into questioning, a bit of bitterness began to show through. This particular quote struck me:
And I will be happy to see the Republicans test whether or not I’m itching for a fight on a whole range of issues. I suspect they will find I am. And I think the American people will be on my side on a whole bunch of these fights. But right now I want to make sure that the American people aren’t hurt because we’re having a political fight, and I think that this agreement accomplishes that.
It reminded me of the kid picking himself up off the dirt of the playground after getting his rear end kicked and yelling “next time your butt belongs to me” at his antagonist. Obama then goes on to call John Boehner a “bomb thrower” and compare the Republicans to hostage takers (to be fair, he was none to kind to the “professional left” and even took a shot at the New York Times).
But the bottom line remains, the GOP succeeded in getting the tax rates extended for all to include thousands of small businesses who would have otherwise been hit with higher taxes. And what Obama is left saying is, “you know that line in the sand about doing away with tax cuts for millionaires, the one I drew 3 years ago and have promised to do away with ever since? Yeah, well, wait till 2012, by gosh”.
Another interesting quote from the newser was this:
So the issue — here’s the choice. It’s very stark. We can’t get my preferred option through the Senate right now. As a consequence, if we don’t get my option through the Senate right now, and we do nothing, then on January 1st of this — of 2011, the average family is going to see their taxes go up about $3,000.
Is that a fact? What have we heard for years concerning what the left continues to call the “Bush tax cuts”? That they were primarily “tax cuts for the rich”. Of course, they were much more than than and as is obvious, Democrats can’t allow them to expire or that nasty little truth would suddenly become widely known.
Finally, this struck me the wrong way:
This country was founded on compromise.
No. It wasn’t. It was a nation founded in a principle – that which said people have the right to be free from oppressive government and have the right to do what is necessary to accomplish that. Any compromise had to do with the particulars of accomplishing the principle, not in the principle itself. Obviously politics is the art of compromise. What isn’t to be compromised is that founding principle and it is the ongoing compromise of it – or at least an attempt to do so – that has people figuratively up in arms. Those Gadsden flags are waiving for a reason.
Anyway, each side is busily spinning a “win” for themselves on this particular deal. All the while, political resistance is forming on both sides of the aisle in Congress. Pelosi and Reid both seem less than enthusiastic about it and have signaled by their language that they may not have the votes to pass it.
Politically, the next few days should be interesting.
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I’d like to say I’m “shocked – shocked I tell you”, but in all honesty I’m not. Rasmussen reports that:
More than one-out-of-four Americans (27%) think the government should manage the U.S. economy, according to a new Rasmussen Reports national telephone survey. Nearly as many (24%) say it’s better for the government to stay out of economic decisions altogether.
First, just off the top, I can’t imagine how 27% can think the government would do a good job managing the economy except via abject ignorance about how the economy actually works. Secondly, if they’re at all literate they must know that some of the worst economic failures as states have been those in which the government managed the economy. And if they follow world events even in passing, they can find current examples of that failure in Cuba, Venezuela, Zimbabwe and North Korea to name a few.
So you’d have to figure they at least have some cognizance of what “government management of the economy” means to hold such a belief, right? If so, then other than faith, what do they base their opinion upon? Certainly not facts – or even success stories.
They remind me of people who begin smoking fully aware of all the awful things that tobacco use will eventually do to them and somehow naively believe they’ll be the exception to the rule. One has to assume they have discovered a way that government management of the economy can work and are simply waiting for the right time to spring it on us all.
Or perhaps they’re just young, inexperienced and enamored with the theory. I guess everyone goes through a period of kumbyah economics where one believes that if everyone would just work hard and share and let a benevolent government manage it all, we’d live in an earthly paradise. But I never thought as many as 27% wouldn’t outgrow that.
Even more disturbing is the fact that more think the government should manage the economy than think it should stay completely out of it. I’ll bet that wasn’t at all the case in the 18th or 19th centuries. In those days our ancestors were of the opinion the less government the better. What a novel thought, huh? And with that freedom they built a nation that is the envy of the world – at least for the time being. Until that 27% have their way.
Seriously though – that number is a bit stunning. 27%. More than a quarter of those polled actually expressed the opinion that we’d be better off if government managed the economy. Does that bother anyone else? And if so, how do you explain it?
27% of our countrymen think somehow government could do a better job managing the economy than markets. Markets which now manage, quite successfully mind you, billions of individual transactions a day in which the two (or more) voluntary participants part perfectly satisfied at the conclusion. How would government do that better? How would it better allocate goods, money, raw materials, etc., than does the market? What signals would it use to satisfy changing demand and ensure the right goods are produced at the right time and sent to the right place for the right price and at a profit which keeps the whole system moving in a positive direction?
I’m asking because I’d love one of the 27% to drop in an enlighten us poor rubes who just can’t seem to wrap our heads around the idea they’re backing in a positive way. Then I’d ask them if they’d prefer Zimbabwe or North Korea to this poor benighted country and its ostensibly “free” markets. Because obviously they can’t be happy here.
Wow … a real head shaker.
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Once again this month, the employment report, weak as it is, hides even worse weakness in the labor market. Despite the banner headline of 39,000 new jobs, the number of Americans actually employed declined from 139.061 million to 138.888 million, a decline in employment of 173,000. And, of course, 39,000 new jobs isn’t really helpful anyway, when you consider that last month, the labor force increased by 122,000. We need to be creating 122k+ jobs a month just to keep even with population growth.
The real unemployment rate continues to rise, according to my personally devised measure of employment (Population numbers are in thousands):
Civilian Non-Institutional Adult Population: 238,715
Average Labor Force Participation Rate: 66.2%
Proper Labor Force Size: 158,029
Actually employed: 138,888
UNEMPLOYMENT RATE: 13.8%
Compare and contrast that with April of this year:
Civilian Non-Institutional Adult Population: 237,329
Average Labor Force Participation Rate: 66.2%
Proper Labor Force Size: 157,112
Actually employed: 139,455
UNEMPLOYMENT RATE: 12.7%
Since April, the number of Americans actually employed has declined from 139.455 million to 138.888 million, a drop of 567,000 employed.
Of course that’s the "official" number – as we’ve been pointing out for some time, the real number is well into double digits. But it again points out that markets are not at all happy with the business environment and consumers simply aren’t consuming at a level to push hiring even if it was settled.
In a significant setback to the recovery and market expectations, the United States economy added just 39,000 jobs in November, and the unemployment rate rose to 9.8 percent, the Department of Labor reported Friday. November’s numbers were far below the consensus forecast of close to 150,000 jobs added and an unemployment rate of 9.6 percent.
The increases tallied are mostly seasonal temporary work, meaning private companies aren’t creating many jobs at all (again, the economy has to generate around 125,000 new jobs a month just to stay even):
Private companies, which have been hiring since the beginning of the year, added 50,000 jobs in November. Most of those increases came from temporary help, where 40,000 jobs were added, and in health care, with an additional 19,000 jobs.
Retail jobs declined by 28,000 in November, while manufacturing, which had showed some strength earlier in the year, lost 13,000 jobs.
Government jobs dropped by 11,000 in the month.
Outlook? Bleak. Meanwhile the tax fight continues in the Congress. If you’re wondering why the business climate remains so unsettled, it is thinking like this which is typical of the majority party there:
Yeah, that’s right – this yahoo is claiming that small businessmen don’t ever make any decisions based on tax considerations. So they won’t mind a tax hike in the least.
How in the world does anyone take someone like that seriously? However, understanding that his thinking is most likely not uncommon there, it isn’t at all hard to imagine why Congress seems clueless as to how to stimulate the economy, is it?