Free Markets, Free People

Economy

Quote of the Day: Unemployment reality check edition

James Pethokoukis provides us with the quote (a little context when you hear all the “sunshine and roses” employment reports):

[T]o restore the job market to the state it was in back in 2007, before the recession, would require the creation of 14.8 million jobs in today’s terms, a daunting task to say the least.

FRED supplies the graphic:

 

040212obamajobsgap

 

Enough said.

~McQ

Twitter: @McQandO

Economic Statistics for 30 Mar 12

The following statistics were released today on the state of the US economy:

Personal income rose 0.2% last month, while personal spending rose 0.8%. On a year-over-year basis, income rose 3.2% while spending rose 4.1%.The PCE Price Index, an inflation indicator, rose 0.3% for the month, and 2.3% for the year. The core PCE rose 0.1% for the month, and 1.9% for the year. Analysts had expected significantly higher consumer spending increases.

The Reuter’s/University of Michigan’s consumer sentiment index continues to improve, rising to 76.2 in the latest 2-week period.

The Chicago PMI indicates business activity remains strong, though growth has slowed a bit, to 62.2 from last month’s 64. Any reading above 50 generally indicates economic expansion. This report is often seen as a precursor to the national PMI, due out Monday.

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Dale Franks
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Economic Statistics for 29 Mar 12

The following statistics were released today on the state of the US economy:

The Commerce Department’s final estimate for 4Q GDP was 3% annualized, matching analysts’ expectations.

Initial jobless claims in the March 24 week fell 5,000 to 359,000 from a revised 364,000 in the prior week.

Corporate profits in the fourth quarter shrank to $1.494 trillion annualized, compared to $1.502 trillion in the third quarter.

The Bloomberg Consumer Comfort Index rose to -34.7, simultaneously a recessionary reading, yet the 2nd highest in four years.

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Dale Franks
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Economic Statistics for 28 Mar 12

The following statistics were released today on the state of the US economy:

The MBA reports Purchase Applications rose 3.3% last week.  Sadly, re-fis dropped -4.6%, so overall mortgage applications fell -2.7%

Durable goods orders rose 2.2% in February, which is up 12.2% from February, 2011. Ex-transportation, orders rose 1.6% for the month, 8.5% from last year.

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Dale Franks
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Economic Statistics for 27 Mar 12

The following statistics were released today on the state of the US economy:

Retail sales look lackluster according to ICSC-Goldman, whose year-on-year same-store sales increase is only 2.7% for the week. Redbook is more positive, though, with a same-store sales increase of 3.8%.

The S&P Case-Shiller Home price index was unchanged for the month on a seasonally adjusted basis. Unadjusted, however, the index is down -0.8% for the month, and -3.8% from last year.

Consumer Confidence dipped slightly in March, to 70.2 from 70.8 last month.

The Richmond Fed Manufacturing Index fell to 7 in March from 20 last month.

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Dale Franks
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Why “tax the rich” rarely lives up to expectations

Bruce Bartlett takes a look at Britain’s experience and a study that documents it and concludes the same is probably true for here:

The study concluded that the behavioral effect of raising the top rate was much more powerful than anticipated. Two factors in particular had a large effect on revenues.

There was a timing effect. People moved income that they anticipated receiving forward so it would be taxed before the new higher rate took effect. They also postponed the receipt of income into the future in anticipation of a change in the tax rate after the election of a new government.

Also, because the British top rate had increased above that in all other major countries except Japan, many Britons relocated in reaction. For example, 1,379 people in high-income occupations moved to Switzerland in 2010, a 29 percent increase over the previous year.

The point, of course, is those who fall in the bracket in which the tax is increased are going to do what is necessary to minimize the impact of that tax.

Human nature 101.  Consequently, the revenue projections are almost always high – and wrong.

Additionally, the Democrats like to imply that taxing the rich is a panacea for the spending problems we have.  In the name of “fairness” they imply that if the rich would only pay their “fair share” well everything would be hunky dory.  Of course we know the real problem is spending not revenue.  But regardless, the real effect of the “Buffet Rule” for instance, is negligible:

But a March 20 analysis from Congress’s Joint Committee on Taxation estimates that implementation of the so-called Buffett rule, which would require those making $1 million or more a year to pay an effective federal income tax rate of at least 30 percent, would raise only $46.7 billion over the next 10 years. That’s a drop in the bucket compared with the $41.2 trillion in federal revenues expected to be collected under current law.

Note that last number and remember, this is a government which is claiming that it can’t get by on $41.2 TRILLION over 10 years.

Where again is the problem?

~McQ

Twitter: @McQandO

The economy: A little graphic context

This chart will blow you away (via James Pethakoukis):

 

032612gapingmaw

 

The NY Fed explains:

The first figure shows how these three labor market variables evolved over the four post-1973 business cycles (excluding the short 1980 cycle), along with developments in the Great Recession and current recovery. We start at the lowest level of the unemployment rate before the recession and then follow the changes for three years after the rate reaches its maximum level. For the current expansion, the maximum unemployment rate occurred in October 2009.

The employment-to-population ratio displays a classic V-shape recession and recovery pattern in the 1970s and 1980s. In the recession and recovery of the early 1990s, however, the employment-to-population ratio instead displays a U shape, only returning to its pre-recession level three years after the peak in the unemployment rate. In the recession and recovery of the early 2000s, neither the participation rate nor the employment-to-population ratio returns to its previous level, so we see an incomplete U-shape pattern.

In the most recent cycle, the employment-to-population ratio traces out an L shape, but the unemployment rate falls because the participation rate declines substantially (a much more gradual decline was expected by many given the aging of the baby boomers); in other words, a larger share of the population is out of the labor force rather than participating and being unemployed.

We’ve seen a lot of happy talk about how well the economy is doing now.  Most of that comes from the media which has about as much of a grasp on the economy and how it works as does the current occupant of the White House.

A look at those four recessionary cycles gives context to the depth of the one we’re currently battling.    If you look closely at the part of the chart depicting our current situation, you realize that while we’ve seemingly bottomed out, the employment-to-population ratio is not rising.   And that, of course, is because of the horrendous drop in the labor force participation.

It points out two things – one that the “official” unemployment rate should be taken with a grain of salt.   And two, that the stimulus had little apparent effect (sorry, but I don’t buy the “it could have been worse” argument.  We have no way of knowing that) if the purpose was to shorten the recessionary cycle and keeping employment below 8%.  It did neither of those things.

Finally, no matter what numbers and happy talk the media and administration throw out there, unemployment and the state of the economy are a very personal things to voters.  Those who remain unemployed certainly aren’t seeing an “improvement” in the economy from where they sit.  And it is from there they’ll make their decision as to who they’ll vote for in November.  All the media smoke and mirrors about the improving economy aren’t likely to sway those who remain unemployed or are underemployed to see it their way.  They’ll, instead, vote the reality of their situation and are unlikely to vote for the candidate who they feel has done little to ameliorate their situation.

~McQ

Twitter: @McQandO

Economic Statistics for 26 Mar 12

The following statistics were released today on the state of the US economy:

The Chicago Fed National Activity Index fell to -0.09, mainly on a drop in production. The weakest factors, though, remain consumption and housing.

The Pending Home Sales Index fell -0.5% in February, to a reading of 96.5. All of the earlier optimism about a housing recovery seems to have been scorched by all the bad readings for February.

Expansion has slowed in the Dallas Fed region according to the Dallas Fed Manufacturing Survey which fell to 10.8 from 17.8.

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Dale Franks
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Economic Statistics for 23 Mar 12

Today’s economic release schedule is pretty sparse. The only thing on tap for today is new home sales. Speaking of which, new home sales fell 1.6% in February to a lower than expected 313,000 annual rate. Prices, though, rose by 8.3%, though this is counterbalanced by a 5.3 month supply of homes, the third lowest supply amount of what I laughingly refer to as "the recovery". February sales rose in the Northeast and West but fell sharply in the South, which is the key region for this series of data.

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Dale Franks
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