Free Markets, Free People

unemployment

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NY Times still clueless about economic woes

Cluelessness seems to be a fairly rampant disease among those who seem unable to peer objectively at reality and analyze it.  They prefer to pretend they know what they’re talking about and unhelpfully prescribe exactly the wrong antidote every single time (in this case, more of what we’ve watched fail for two plus years).  And, as it turns out, the New York Times editorial board is peerless among that group:

It was not surprising to hear the Republican presidential candidates repeat their tiresome claim that excessive government spending and borrowing were behind Friday’s terrible unemployment report. It was depressing to hear President Obama sound as if he agreed with them.

And the NYT’s claim as to why that’s not the case?

There has never been any evidence that the federal debt is primarily responsible for the persistent joblessness that began with the 2008 recession. The numbers have remained high because of weak consumer demand and stagnant wage growth, along with an imbalance between jobs and job skills.

Who has ever argued that “federal debt is primarily responsible for the persistent joblessness?”  Certainly there are other factors.  However, there’s no question that excessive government spending – i.e. borrowing to spend – has had a hand in the stagnation we’re now undergoing.  In fact, increased and excessive government spending has had no effect and, given the promises made, could be argued to have had a negative effect. 

The debt is the indicator of the problem – excessive and unaffordable spending.  As we’ve been pointing out for months, revenue isn’t the problem – spending is.   So pointing to this strawman, as the NY Times does, is just more politics from the side who thinks it prudent to penalize those who produce in order to bail out those who spend what they produce (and the reason the Democrats insist on calling the present income tax levels “Bush tax cuts”).  What doesn’t seem to penetrate the thinking of those who continue to push this line is one of the reasons we’ve had weak consumer demand and stagnant wage growth is the unsettled business and regulatory atmosphere this administration has created in its 2 plus years.  That, of course is pushed aside by the NYT in favor of this argument:

The president may have a nebulous approach to unemployment, but he is hardly indifferent to it. His re-election hinges on reducing it. It is hard to understand, though, why Mr. Obama has adopted the language of his opponents in connecting the economy to the debt. To his credit, he talked about the one step that would work — investing money in rebuilding the country. But the debt-ceiling ideas he is now considering would make that investment much less likely by pulling hundreds of billions of dollars out of the economy at precisely the moment when the spending is needed most.

Yeah, there’s absolutely no connection between the “economy” and the “debt” is there?   Of course there is?   And pretending that borrowing money we don’t have to push it out in the economy and calling it an ‘investment’ doesn’t fool most rational folks.  The NYT even points out that the last time the money was thrown out there is it mostly went to service state debt which only delayed the inevitable.  Now, apparently, that will somehow be different in the face of “weak consumer demand”.   Really?   And, of course, the jobs the NYT laments about aren’t private sector jobs but government jobs (state and local) which we all know are the engine of our economy (/sarc).

The types of increases in revenue that government should be encouraging are those that come from private sector jobs.   They provide tax revenue from created wealth.   They don’t require the government to borrow money to “invest” (i.e. borrow money, create jobs and then tax the jobs created with the borrowed money and claim “increased revenue”.  Make sense to you?).

So while I don’t disagree with the Times when it says “his re-election hinges on reducing” unemployment, it appears the Times would opt for the easy and wrong way to do it – borrow more money, pump it into creating make-work jobs just long enough to get Obama past the 2012 election.   Then, who care?   Debt ceiling, increased drag on the economy’s GDP and all that stuff, forgetaboutit.  Well, at least till they get this guy re-elected.  Then, of course, I expect a clarion call by the Times wondering how this could have all be so mismanaged and spinning and twisting it, as they have in this editorial, so it all ends up being the fault of the Republicans.

~McQ

Twitter: @McQandO


“Unexpectedly”, we’re back at 9.2% unemployment

urea am glad we wasted all the money on Stimulus so we could stay below the promised 8% aren’t you?

U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dousing hopes the economy would regain momentum in the second half of the year.

Nonfarm payrolls rose only 18,000, the weakest reading since September, the Labor Department said on Friday, well below economists’ expectations for a 90,000 rise.

The unemployment rate climbed to a six-month high of 9.2 percent, even as jobseekers left the labor force in droves, from 9.1 percent in May.

So here we are in Recovery Summer II, huh?   You know, I’d go through all the reasons for this but I think you know them pretty well by now.

The results, however, should be reviewed, because we’re suffering them because of this administration’s cluelessness, the Fed’s cluelessness, and the government’s over-regulation and war on business – not to mention the mounting debt.  Oh, wait, I just went through all the reasons again, didn’t I?

"The message on the economy is ongoing stagnation," said Pierre Ellis, senior economist at Decision economics in New York. "Income growth is marginal so there’s no indication of momentum.

Gee, wish we’d been saying that for the last few months/years.  As Dale has said for quite some time on our podcast, we’re looking stagflation directly in the eye and in the process of recreating the Japanese “lost decade” – except it is possible this may linger for more than a decade given our debt.

The report shattered expectations the economy was starting to accelerate after a soft patch in the first half of the year. It could prompt calls for the Federal Reserve to consider further action to help the economy, but Fed officials have set a high bar.

The U.S. central bank wrapped up a $600 billion bond-buying program last week designed to spur lending and stimulate growth.

"This confirms our view that the Fed will continue to keep rates on hold into 2012 and if weak employment continues it will be pushed out even further," said Tom Purcell, chief economist, RBC Capital Markets in New York.

Classic, obviously predictable (I mean, we did it) and inevitable given the way the problem was tackled.

Oh, btw, 10% is not at all impossible, given the continued policies of this administration.

Just saying’, so it won’t be considered “unexpected” if it happens.

~McQ

Twitter: @McQandO


New CAFE standards could cost a quarter million jobs

When is a "green job" not a job? When you lose yours because of the initiative:

The Detroit News’s dogged David Shepardson has unearthed a study by one of world’s most respected automotive research firms that reveals that President Obama’s radical CAFE mandate that vehicles average — average! — 62 MPG by 2025 “could force vehicle prices up by nearly $10,000, reduce sales by 5.5 million vehicles annually, and eliminate more than 260,000 jobs.”

Shepardson is quoting from the Michigan-based Center for Automotive Research and the 260,000 job loss figure (consistent with past job losses from CAFE rule hikes) is another dent in White House’s propaganda that Green creates jobs.

The CAR study also reveals that Obama’s NHTSA and EPA have been gaming the figures when it comes to the cost of their new rules. The center’s study predicts it will cost between $3,744 and $9,790 per vehicle, while the agencies have low-balled the figure at $770 to $3,500 per vehicle.

The resulting costs would shrink the new-car market, with 5.5 million potential buyers disappearing (and manufacturing jobs with them) by 2025. That assumes that the auto fleet can even be built to meet such an absurd spec. Currently, no car — much less the average — meets 62 mpg. Indeed, only a handful of small vehicles meet the 35-mpg fleet-wide standard mandated in just five years.

Yes friends, just like the story I covered the other day, we have an administration which is more agenda driven than reality driven. We’re in the middle of a horrible recession, unemployment hasn’t really moved in over a year, the future doesn’t look much better, but the agenda to raise the price of energy (at the cost of jobs) and CAFE standards (at the cost of even more jobs) continues apace.

If you’ve ever wondered what market distortion and intrusion by government looks like, this is a good example.  And this intrusion will cost hundreds of thousands of jobs and price many consumers out of the new car market (again, this administration sees that as a feature, not a bug). 

Another in a litany of reasons Mr. Obama needs to be retired in 2012.

~McQ

Twitter: @McQandO


Does the economy doom Obama’s re-election hopes?

I’m beginning to wonder if the Republicans can run just about anyone for President (note the qualifier – “just about” – not everyone, even among the declared candidates) and win given this economy and this president:

Americans’ disapproval of how President Barack Obama is handling the economy and its growing budget deficit has reached new highs amid broad frustration over the slow pace of economic recovery, according to a Washington Post-ABC New poll released on Tuesday.

The ratings boost Obama received after the killing of Osama bin Laden has dissipated with his job approval rating back to 47 percent. Forty-nine percent disapprove of his performance.

Obama’s approval rating bounced to 56 immediately after bin Laden was killed last month.

But it went back to a plurality very quickly.  On the key issue, however, it hasn’t returned to a particular percentage – it’s gotten worse.  Much worse:

Fifty-nine percent, a new high, gave Obama negative marks for his handling of the economy, up from 55 percent a month earlier.

Obama’s approval rating on the deficit issue hit a new low of 33 percent, down 6 points since April.

Anyone who doesn’t understand that is where the election will be decided hasn’t been paying attention to politics very long.  Bill Clinton knew it when he rode to victory on his “It’s the economy, stupid”.   Ronald Reagan knew it when he continually asked, “are you better off now than you were 4 years ago”?   And Barack Obama would probably kill to have the economic problems Jimmy Carter faced – not that he’d do any better than Carter.

The point is, in bad economic times, incumbents have a tough road ahead of them at election time.  That’s because economic issues, joblessness, insecurity and fear are felt and understood by everyone.   Pocketbook issues are personal issues.   And the public has always voted those issues in general elections – much to the disadvantage of incumbent politicians, especially presidents.  There’s a number going around out there which claims that no president  since FDR has been re-elected with unemployment over 7.2% .  Of course keep in mind only a some of them since then have run for re-election and not all of them had bad unemployment numbers at the time.   The point, however, is that this sort of issue is critical to re-election chances.

The survey reflects a broadly pessimistic public mood as high gasoline prices, sliding home values and high unemployment numbers raised concerns about the pace of the U.S. economic recovery, The Washington Post said.

Eighty-nine percent of Americans say the economy is in bad shape; 57 percent say the recovery has not started and 66 percent said the United States was seriously on the wrong track.

Forty-five percent said they trust congressional Republicans over Obama to handle the economy, up 11 points since March.

If much of what is listed in the first paragraph isn’t improving fairly dramatically when 2012 arrives, Obama is in for a long year and, just guessing here, an “upset” loss.  The shine has worn off.  The cache of electing a black president has run its course.  History has been made.  And now the results part of the show come to bear.   Having been a moment in history won’t save Obama if the economy still sucks as badly as it does now.

My dad used to always tell us boys, “you live between your ears”, meaning attitude was critical to how you approached life and overcame obstacles.  Attitude is also critical in economies.  Pessimism isn’t the predominant mood one wants within the citizenry when they’re hoping to see it turn around.   And it certainly isn’t the mood a president wants through out the lane when he’s running for re-election.

Yeah, this is going to be an interesting year and a half until election day 2012.  I’m betting it’s not better economically and, again depending on who the GOP eventually nominates, Republicans stand to win the election.  Or, and you heard it here first with all the caveats – it is most likely the Republican’s election to lose.

Of course, knowing them, I have little doubt they can manage to do that.

~McQ

Twitter: @McQandO


Employment: Why “government spending” should be shelved in favor of encouraging private investment

In macro terms its really fairly simple.  We have always come out of busts with booms.  Wondering what the next boom is going to be and how to help it launch itself is where government should be looking and trying to act  – not at deficit funding government make work projects and future energy schemes still some decades from reality.

For instance – a little look into the not to distant future and a scenario that would help us in both the balance of trade and employment, arenas (the latter almost immediately).

But also, we will help to satisfy burgeoning demand for petroleum in Asia, South America and Africa. Yes, the US is an oil importer. But if we import less, that will help to satisfy world demand just as much as if a new exporter appeared on the market. If we import a billion barrels a year (2.74 million barrels a day) less, at current prices that works out to $100 billion off of our huge trade deficit. This could also be a huge engine of job growth. We now have about 2,000 rigs drilling, and more are being added all the time. For each rig there are the roughnecks, the service companies, the drilling pipe and casing producers, the local service providers, etc. It is big business, and growing fast.

Fortunately, we have lots of places to drill, in various shale formations around the country. (It’s not “shale oil” in the classic sense, better to call it, “shale associated oil”). For those who think that Yankee ingenuity is a thing of the past, just look at our oil and gas industry. It serves as a powerful testament to the power of the free enterprise system that a great many people chipping away at the same problem can come up with creative new ways of extracting oil from the earth that a centralized government program of oil production would never (and has never) originated. You don’t see these new drilling techniques coming from Russia, which is still sadly statist in its efforts to exploit natural resources.

We have the resources, we could be exploiting them now (relatively speaking) and have them benefit our economy while we do the pie-in-the-sky energy research the Democrats think is the panacea to all our problems.  I’ve never understood their insistence on ‘either/or’ in that regard.  Why can’t we do both simultaneously – which seems both logical and would help do exactly what they claim they want – employ Americans. 

Timothy Siegel’s point about innovation is well taken as well.  One of the reasons we’re moving past the peak oil predictions of the past is because of innovation from private oil companies that is allowing them to extract harder to reach and exploit oil and gas at a reasonable price.   We, as a nation, should be encouraging that instead of doing everything in our power to cripple such innovation.

Instead we get solutions like those below from the left.  Government should spend money when one of the greatest engines for economic revival is left sitting at idle while the administration figures out how to get more sugar in its gas tank.

It’s freakin’ nuts.

~McQ

Twitter: @McQandO


Dems double down on government spending in face of stimulus fail

It seems “insanity” has indeed gripped the party of the left.  That is, doing the same thing over and over again and expecting different results:

House Democrats this week have amplified their calls for new spending on infrastructure and other federal projects in the face of May’s discouraging job-creation figures.

Even as Republicans are insisting on "trillions" of dollars in spending cuts, Democrats maintain that a targeted injection of additional federal dollars in the near-term would go a long way toward reversing the hiring slump. Friday’s disappointing job report, they say, only bolsters their case.

I’ll again remind readers that it was the Obama administration and Democrats who said that if we’d give them the almost one trillion dollars in borrowed stimulus money, they’d keep unemployment under 8%.  And, of course, the plan was to spend all that money on “infrastructure and other federal projects”.

Worked real well didn’t it?

Now, with much of every dollar spent still coming from borrowed money, they want to repeat the failure while saddling the economy with even more debt?

It all comes down to what they believe the role of government to be:

"The American people, while concerned about the deficit, place much more emphasis on job creation, and they see a role for the government," Rep. Raul Grijalva (D-Ariz.) told The Hill. "A fast injection of job stimulus on the public side would help tremendously. … It [the job report] helps our argument about investment."  

No.  It wouldn’t “help tremendously”.  If that were the case, the stimulus would have helped “tremendously” and we’d be looking at less than 8% unemployment as promised instead of 9.1%.  But as is obvious to everyone but Democrats, it didn’t help at all.    In fact, considering that 9.1% unemployment rate, it can be argued that things got worse.

That’s because where the government actually could help, it won’t, can’t or isn’t willing to help.   Deregulation, for instance.  Make it easier for businesses to do business and hopefully expand and hire.   They can quit making war on the private sector as well.  The NLRB’s shameless politically motivated attempt to shut down Boeing in South Carolina at the behest of unions.   The seemingly permanent moratorium in the Gulf of Mexico and the slow-walking of the permit process that has crippled domestic oil and gas production and cost thousands of jobs and millions, if not billions, in economic impact.  Cut taxes and leave more in the pockets of both consumers and business.  Cut spending – deeply – and quit borrowing money.

Unfortunately, all that is boring economics and at conflict with the “government is the answer” mindset that is prevalent in Democratic circles:

Rep. Earl Blumenauer (D-Ore.) said that only in Washington is targeted new spending being demonized.

"Once you get outside the Beltway, almost everyone agrees that we should be rebuilding our crumbling infrastructure and investing in clean American energy that reduces our dependence on oil," Blumenauer said.

I have no idea where this guy gets this nonsense, but I live out here and I don’t hear anyone claiming that the solution to our problem lies in “rebuilding our crumbling infrastructure” and “investing in clean American energy”.  Not once have I heard the typical Americans I know ever mention those two options as how government should be responding.

So either Rep. Blumenauer has selective hearing, or he’s making it up on the fly.  Most people I’ve talked too are convinced that government is the problem, not the solution.  That government can contribute to a recovery by getting the heck out of the way, quit throwing road-blocks in front of business, reduce taxes and cut spending and getting its own house in order.

But double down and increase spending on make work and pie-in-the-sky energy projects? 

No, not what I’m hearing.  At all.

~McQ

Twitter: @McQandO


The QandO Podcast for 05 Jun 11

In this podcast, Bruce, Michael, and Dale discuss Weinergate, employment, and the budget.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.


Bad job numbers

I’m sure they’re “unexpected”:

Private-sector employment growth decelerated sharply in May, according to Automatic Data Processing Inc.’s employment report released Wednesday, in another possible sign of a sputtering U.S. recovery.

Employment in the nonfarm private business sector rose a seasonally adjusted 38,000 in May, well below the 175,000 increase expected by economists. In April, private payrolls showed an increase of 177,000, ADP said.

“This is exceptionally weak,” said Eric Green, chief market economist at TD Securities Inc. in New York.

“This was a dismal report, indicating a significant slowdown in job creation after six months of solid gains,” said Nicholas Tenev, economist at Barclays Capital Research.

“Sold gains?”  Yeah, not so much.  We’ve yet to hit the threshold of job creation – about 300,000 or so – necessary to tread water, much less be adding jobs.  The gains we’ve seen in the past six months have been “positive” in that there were net jobs created, but 38,000 is about 10% of what we need  per month to begin to chip away at unemployment.

The government will report its version of the numbers on Friday (the above is the ADP report):

On Friday, the government will report on U.S. nonfarm payrolls for May, data that also include government workers.

Economists polled by MarketWatch are looking for a gain of 175,000 in payrolls and for the nation’s unemployment rate to tick lower to 8.9% from 9.0% in April.

That would mark a slowdown from the healthy 244,000 jobs added in April.

It would also tell us that there is no real slowdown in hiring government workers, wouldn’t it – you know, despite “budget woes”, etc.  And note too that we again, despite “a dismal report”, see economists saying the unemployment rate will “tick lower” to 8.9%?  Yup, the Ministry of Truth is available to feed you whatever data you want to believe (which may explain why “improvements” in the unemployment rate don’t seem to boost consumer confidence at all).  Again, not being at the “tread water” level with job creation, you have to wonder how the calculations are figured and what is being considered and not considered to anticipate the unemployment rate coming down in the face of “a dismal report”. 

Dale has covered the real numbers for quite some time – well into double digits.  But there is indeed a larger question out there – is the workforce actually shrinking and the old norms no longer the standard by which we should measure unemployment.  I.e. are older workers looking at the job market and saying, “to heck with it, I can retire and I’m going too”?

Don’t know for sure, but regardless, the numbers from ADP remain “dismal” for May.

~McQ

Twitter: @McQandO


Is the economy set on "rebound"?

That’s kind of what some pundits are hinting with the latest "official" unemployment numbers.

But as the three of us noted on yesterday’s podcast, that number is only a slight glimmer in an otherwise dark picture. And the underlying unemployment numbers (and trends) don’t really support the reduction of last week (the number of new private sector jobs was not enough to maintain the unemployment number). Or said another way, it is most likely a temporary blip. Another ominous development that doesn’t bode well economically is the precipitous rise in oil prices and the impact that will have on any recovery. In a word, the impact it will have is "bad".

Oil is one of those commodities that has a very broad impact on economic activity. It is, until an alternative or substitute is found, the literal life-blood of our economy.

How does oil staying in the $104 to $107 a barrel range sound? Not very good, obviously. As one refiner told me, his only control over how much the fuel he refines costs when it leaves his refinery is the economies he can wring out of his equipment, but the cost of the goods coming in are beyond his control. So that cost per barrel is what he’s paying as the crude shows up at his refinery for processing.

How long will it stay over $100 a barrel? Well, many are saying quite some time:

Oil prices climbed to near $106 a barrel Monday as intense fighting between Libyan government forces and rebels appeared to be turning into a civil war and raised the prospect of a prolonged cut in crude exports from the OPEC nation.

By early afternoon in Europe, benchmark crude for April delivery was up $2.25 to $106.67 a barrel, the highest since September 2008, in electronic trading on the New York Mercantile Exchange. The contract had gained $2.51 to settle at $104.42 a barrel on Friday.

[…]

Citigroup said it raised its 2011 average forecast for Brent crude to $105 from $90, but doesn’t expect the violent protests in North Africa and the Middle East to spread to Saudi Arabia, the world’s largest oil exporter.

"We assume that output disruption is maintained through the second quarter," Citigroup said in a report. "Output disruption, or at least the threat of, will support a fear premium for the rest of 2011."

As mentioned in the article, most now view the war in Libya to be a civil war. And, reports today say that Gadhafi’s forces have had some successes against rebel forces (apparently neither side is particularly swift in the combat portion of battle). Reports also point to other countries possibly helping the rebels. And we know there are "friends" of Gadhafi, mostly found in the socialist South and Central American countries, who will try to help the dictator maintain power.

The initial shock of the turmoil in Libya has worn off the markets and they are now looking at a prolonged reduction of capacity with Libya off line.  And, we’re seeing unrest in other Arab oil producing states as well.  Unrest, or instability, drives the price of oil up.

So it isn’t surprising that in the last two weeks, the price of gasoline rose at its second fastest pace ever:

Gasoline prices in the United States posted their second-biggest increase ever in a two-week period, due to the rise in crude oil prices stemming from the turmoil in Libya, an industry analyst said Sunday.

The national average for a gallon of self-serve, regular gas was $3.50 on March 4, according to the Lundberg Survey of about 2,500 gas stations, up 32.7 cents from the previous survey on Feb. 18.

The most it ever jumped was in 2005 when hurricane Katrina hit.  But that was soon solved because the event itself wasn’t prolonged as is a civil war.  So chances are, this isn’t the end of the rising price of gasoline.

As you might expect our national leaders have managed to put us in a position where we essentially have nothing to answer with domestically.  In fact, as I recall, we’ve been told repeatedly for the last 20 or so years that bringing significant new assets on line would take at least 10 years or so and thus, I guess, shouldn’t be done.  Er, yeah, ok and where would we be now if we had committed to that 10 years of bringing them on line 20 years ago?  At least better off than we are now.

And most likely not talking about using the strategic reserve I’d bet.  FYI, the strategic reserve is not supposed to be a tool for the use of politicians to drive down the price of gasoline when their failed energy policies show up at the pump.  It is a reserve for use by our military in case we’re cut off from the foreign oil we’ve become even  more dependent upon.

But back to the economy.

Does anyone really need an explanation of the impact higher fuel prices will have on a barely recovering economy (not to mention unemployment)?  And, with the specter of inflation rising – not to mention food prices – how likely is the impact to be “minimal”?

Yeah, it’s not.

And, as usual, we’re in a basically no-win situation thanks to the foresight of our elected leaders and their wonderful job of putting a practical energy policy in motion.  A 10 month drilling moratorium (and the jobs that go with it) with no real end in sight.

Brilliant.

So to the original question – is the economy set to rebound?

Unfortunately if it was, it most likely will be one of the shortest rebounds in history.

~McQ


Observations: The QandO Podcast for 06 Mar 11

In this podcast, Bruce, Michael, and Dale discuss the situation in Libya, and this week’s employment numbers.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.

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