The president’s Green Jobs loan guarantee program, which we’re hearing a lot about, thanks to the Solyndra fiasco, does not appear to be a complete bust. In all fairness, it has to be said that this program has been instrumental in directly creating jobs. Indeed, the Washington Post reports that, after having spent $17.2 billion of the original $38.6 billion appropriated for the green jobs program, the Administration can now claim the creation of 3,545 permanent new jobs as a direct result. That’s 3,545 of our fellow Americans who now have gainful employment, thanks to the Obama Administration’s Green Jobs program. I’m sure they, and their families, are grateful.
Of course, if you do the math, that comes out to a cost of $4,851,904.09 per job. That seems…inefficient. I’m pretty sure that if the government gave me $4.8 million, I could at least double that rate of job creation.
At this rate, once the entire $36.8 billion is spent, we may employ 7,000 people via the Green Jobs program. Or to put it in other terms, 4,000 fewer people than the increase in those who claimed unemployment compensation for the first time this past week.
Today’s economic statistical releases—and there are a number of them, none of them particularly good:
Consumer inflation remains a bit heated with the headline CPI increase at 0.4% for the past month, while the core rate—less food and energy—rose by 0.2%. On a year-over-year basis, inflation rose to 3.8%. worries about Stagflation are not eased by this report.
Business conditions in the New York manufacturing region continue to contract. The Empire State Manufacturing Index fell to -8.82 from last month’s –7.72.
Jobless claims jumped 11,000 in the September 10 week to an unexpectedly high 428,000. The four-week average rose 1,000 to 3.741 million.
Manufacturing slowed significantly in August, as industrial production rose only 0.2%, compared to last month’s 0.9%. Capacity Utilization also fell slightly, to 77.4%.
The nation’s current account deficit narrowed slightly in the second quarter to $118.0 billion.
The Bloomberg Consumer Comfort Index in the September 11 period was -49.3, near this year’s low of -49.4.
The Philadelphia Fed Survey indicates that business conditions in the Mid-Atlantic region continue to contract, with the General Business Conditions Index at –17.5.
Today’s statistical releases:
Producer prices were restrained last month, with the overall PPI remaining unchanged, and the core rate rising only 0.1%.
Retail sales were weaker than expected, with the month-over-month sales rate increase in August unchanged from July. Less autos, the change was only a 0.1% increase.
Business inventories rose only 0.4% in July against a 0.7% rise for business sales.
MBA Purchase Applications for the September 9 week rose by 6.3%, the first overall increase in several weeks.
As it happens, there are no statistical releases for today, so we get a slight breather. But we are awaiting some important releases over the course of the week, with the most important of them hitting Wednesday and Thursday. The highlights of the coming week are as follows:
- Tomorrow’s Import/Export prices is of moderate importance, as is the afternoon’s release of the Treasury budget
- Wednesday brings us the PPI and Retail Sales
- Thursday is the big day of the week, with the release of the CPI, Philly Fed, Industrial Production, and Jobless Claims.
- Consumer sentiment closes the week out on Friday.
Obviously, the inflation numbers for producers and consumers are the key data for this week. The consensus estimate for the PPI is for a –0.1% drop in prices, and a 0.2% price increase at the consumer level.
The gift that keeps on giving: The White House’s chart of unemployment predictions in the Stimulus/no Stimulus world. Superimposed is the graph of actual unemployment, but now, with wall street economists predictions for the near-term future.
I think a big speech will help, though. ‘Cause that’s what we’ve been missing. Speeches.
The analysis of that speech is pretty straightforward and simple. We’ve spent $800 billion for TARP, $1.4 trillion in the stimulus package, and $2 trillion in quantitative easing from the Fed. Now, if we spend another $430 billion on the American Jobs Act, that’ll be the fix we’ve been looking for, and everything will be peachy.
The president’s child-like faith in the power of government is touching. And frightening.
A reasonable summary? How about, ‘”let’s put aside partisan bickering because I need a political boost and spend half of what was spent on the stimulus to do exactly the same thing that hasn’t yet worked.”
As most predicted two things were evident in the speech. A president out of ideas and trying once again to shift blame to Congress. And the fact that he still doesn’t understand that the spending spree is over.
Instead of suggesting a regulatory roll back, or cutting government red tape, or even, horror of horrors, a corporate tax cut, we’re essentially get much of the failed stimulus plan repackaged. The entire purpose of addressing a joint session of Congress (instead of doing the speech from the Oval Office) was to again attempt to establish the House GOP as the bad guys in all of this.
The proposal is simply a redo of the stimulus plan, something Obama has been trying to get Congress to do since the first one failed. Obama proposed a payroll tax cut extension, an extension of unemployment benefits, the creation of an infrastructure bank, a new job training initiative, and providing aid to state and local governments, which have been hard hit by job losses.
The infrastructure bank is somewhat new, but aimed at the same sort of programs at which we previously threw over $800 billion in stimulus money. How did that work out? The payroll tax and unemployment benefit extensions haven’t produced more jobs yet, have they? In fact some argue the continuing extension of unemployment benefits works to the opposite effect. We’ve had job training programs since time immemorial and they too have very little positive effect. The one key point that those who propose such initiatives always seem to miss is there have to be jobs available for such a program to be successful. And finally, pumping money into state and local governments is a very temporary fix. It allows them to keep employed workers who they otherwise couldn’t, at least for a while. But, as they learned with the stimulus funds, once the money ends, so do the jobs. Hardly what one would consider a “jobs program”.
Obama also tried to waive off criticism of cost by claiming his plan was all paid for. AP disputes that:
OBAMA: "Everything in this bill will be paid for. Everything."
THE FACTS: Obama did not spell out exactly how he would pay for the measures contained in his nearly $450 billion American Jobs Act but said he would send his proposed specifics in a week to the new congressional supercommittee charged with finding budget savings. White House aides suggested that new deficit spending in the near term to try to promote job creation would be paid for in the future – the "out years," in legislative jargon – but they did not specify what would be cut or what revenues they would use.
Essentially, the jobs plan is an IOU from a president and lawmakers who may not even be in office down the road when the bills come due. Today’s Congress cannot bind a later one for future spending. A future Congress could simply reverse it.
Currently, roughly all federal taxes and other revenues are consumed in spending on various federal benefit programs, including Social Security, Medicare, Medicaid, veterans’ benefits, food stamps, farm subsidies and other social-assistance programs and payments on the national debt. Pretty much everything else is done on credit with borrowed money.
So there is no guarantee that programs that clearly will increase annual deficits in the near term will be paid for in the long term.
To actually pay for this, the revenue must be diverted from this years budget, not some future year(s) budget. Again smoke and mirrors to sell more spending. Eric Cantor caught all sorts of grief for claiming disaster relief needed to be paid for elsewhere in the budget. That is how you cut and control spending. What Obama has again done is use the old DC jargon that claims something is paid for if they say they plan for it in the future.
That’s simply not acceptable.
Obama challenged the Republicans with a falsehood:
OBAMA: "Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans, including many who sit here tonight."
THE FACTS: Obama’s proposed cut in the Social Security payroll tax does seem likely to garner significant GOP support. But Obama proposes paying for the plan in part with tax increases that have already generated stiff Republican opposition.
For instance, Obama makes a pitch anew to end Bush-era tax cuts for the wealthiest Americans, which he has defined as couples earning over $250,000 a year or individuals over $200,000 a year. Republicans have adamantly blocked what they view as new taxes. As recently as last month, House Republicans refused to go along with any deal to raise the government’s borrowing authority that included new revenues, or taxes.
So, as AP points out, the claim is fraudulent. In fact, there are many things in the proposal that the GOP has been against.
And perhaps the biggest falsehood of the night?
OBAMA: "It will not add to the deficit."
THE FACTS: It’s hard to see how the program would not raise the deficit over the next year or two because most of the envisioned spending cuts and tax increases are designed to come later rather than now, when they could jeopardize the fragile recovery. Deficits are calculated for individual years. The accumulation of years of deficit spending has produced a national debt headed toward $15 trillion. Perhaps Obama meant to say that, in the long run, his hoped-for programs would not further increase the national debt, not annual deficits.
Perhaps. But then if that was so, he should have said it, shouldn’t he? Instead he played politics.
Probably most interesting was the man who has been driving the lead clown car in the political parade admonishing Congress to “stop the political circus and do something”. It has taken the circus ringmaster 3 years to figure out this is what he should have been focused on from the beginning. And for 2 of those years, he had an all Democratic Congress.
They guy who called for an end to politics has done nothing but played politics throughout this whole ordeal. And now, with his popularity at an all time low, his political future dimming and with him finally turning from his political agenda to that to which he should have been paying full attention from day one, he falls back on one of his favorite political tricks – blame shifting.
What he doesn’t seem to understand is this is all his now. And while the GOP should consider the proposal, it should also be unremitting in pointing out that the proposal isn’t paid for, will add to the deficit and is simply another attempt at a second stimulus throwing money at old programs and ideas which have yet to prove their worth in either improving the economy or increasing jobs.
(UPDATE) If you really want to know how bad the plan is, Krugman liked it:
First things first: I was favorably surprised by the new Obama jobs plan, which is significantly bolder and better than I expected. It’s not nearly as bold as the plan I’d want in an ideal world. But if it actually became law, it would probably make a significant dent in unemployment.
Yeah, just like the last one did, huh Paul?
Today’s economic statistics releases:
Exports increased and imports decreased, resulting in a smaller than expected trade deficit of $44.8 billion. The trade gap in all three components—petroleum, non-petroleum, and services—declined.
Initial Jobless claims continue held steady in the last week, up 2,000 to 414,000. The four-week moving average rose 3,750 to 414,750 which is nearly 9,000 higher than last month.
U.S. consumer confidence last week fell to -49.3, the second-lowest reading this year.
UPDATE: Speaking of joblessness and jobs, as we await the president’s big jobs speech tonight, Darryl Issa’s House Oversight Committee reports on the depth of the employment problem. It doesn’t look good. The key takeaways:
Two and a half years after its implementation, at a cost of $825 billion, the economy has lost 2.3 million jobs
In the months following the stimulus, unemployment rose well above the ceiling of 8 percent promised by President Obama and Administration officials to over 10.1 percent
Less than 55 percent of Americans have full time jobs—the lowest percentage in modern times. Some 25 million people are unemployed or unable to find full time jobs
A study by Ohio State University in May found that instead of creating jobs, the stimulus "destroyed/forestalled one million private sector jobs" but did create 450,000 jobs in the government sector
8.1 million workers are employed part time because they are unable to find full-time jobs or their hours have been cut
An additional 1.1 million discouraged workers have stopped looking for jobs because they do not believe there were any available—taken together, true unemployment tops 16 percent
So, when you hear the president talk about jobs "saved or created" by the stimulus tonight, remember that the true phrase should be "destroyed or forestalled". Because the president seems to be wanting a Stimulus II, to add to the awesome economic power of Stimulus I. And TARP. And Quantitative Easing I. And Quantitative Easing II.
There seems to be more and more evidence and economic consensus that a double dip recession may be about to occur, something we’ve been warning about for some time.
The outlook for economic growth in developed countries has got much worse in the last three months, the OECD said on Thursday and urged central banks to keep rates low and be ready to pursue other forms of easing.
The latest estimates marked a sharp slowdown from the Paris-based organization’s last forecasts in May but used different methodology so were hard to compare precisely.
The Organization for Economic Cooperation and Development forecast growth across the G7 group of major industrialized economies would average 1.6 percent on an annualized basis in the third quarter before slowing to just 0.2 percent in the final three months of the year.
"With respect to three months back the growth scenario looks much worse, one would say that growth is stagnating," said OECD chief economist Pier Carlo Padoan.
"We are witnessing a growth slowdown across OECD countries."
Not good. To put it in graphic form, check out this projection from OECD:
Those are not good numbers for growth. Now check out this particular graphic. One of the obvious keys to economic growth is consumers since they make up about 70% of the GDP numbers. What you’ll see is not something which inspires feelings of well being:
The title is an understatement. Consumer confidence, especially in the US, has tanked. In fact, if you look closely, it is slightly less than at the depth of the recession in 2009.
Again, not good.
Economies have a strong self-reinforcing nature. When people are optimistic, they spend, which begets hiring and then more spending. When people are anxious, they pull back, which leads to a cycle of hiring freezes and further anxiety that often lasts for months.
And history tells us:
The United States appears to have entered some version of the vicious cycle. Most ominously, job growth has slowed to a pace that typically signals the start of a recession .
Over the last 50 years, every time that job growth has been as meager as it has been over the last four months,the economy has been headed toward recession, in a recession or in the immediate aftermath of one. From early 2010 through this spring, by contrast, employment was growing fast enough to make the economy look as if it were in a recovery, albeit a modest one.
That’s not the case now.
More immediately, the main significance of the recent slowdown is that the economy may not merely be going through a weak phase that will soon pass, as many policy makers hope. Instead, history seems to suggest that the situation will probably get worse before it gets better.
In a recent research paper, Jeremy J. Nalewaik, a Federal Reserve economist, described this concept as “stall speed”: once the economy slows markedly, it often continues to do so. (He did not make a forecast.) In the other two severe downturns of the last 80 years—in the 1930s and the early 1980s—the economy suffered just such a stall and fell into a second recession not long after the first.
So the consensus opinion forming is we’re in big trouble economically:
“For the U.S, we now expect GDP growth in the second half of 2011 to average just 1.3 percent at an annual rate, down from 2.8 percent,” said HSBC Chief US Economist Kevin Logan in a research note.
“Don’t be fooled by an autos recovery in the third quarter,” said Logan Jonathan Loynes, the chief European economist at Capital Economics, feels similarly about Europe.
“The latest activity indicators suggest that the euro-zone economy might soon slip back into recession.
In the second quarter, the economy expanded by just 0.2 percent, compared to 0.8 percent in the first quarter of 2011,” said Loynes.
“Growth this weak means the economy will likely remain on recession watch throughout the remainder of this year,” Logan said of the U.S. He believes the key risk is stagnating consumer spending.
On the economic side of things, this is not something anyone wants to see, but the metrics are lining up to indicate that a double dip is what we’re going to see. On the political side of things, if that’s the case, it spells big trouble for the incumbent president.
There’s your economic setting for the big Presidential jobs speech tonight.