rssLagging Economic Indicator Sets Up 2010 GOP Rhetoric
Wednesday, October 07, 2009 at 6:00 am
- 25 Comments
House Minority Leader John Boehner
When the Labor Department last week revealed that the economy shed more than 260,000 jobs in September, Republicans knew exactly where to place the blame.
House Minority Leader John Boehner (R-Ohio) said the figures indicate that the “tax-and-spend policies” of the Democrats “are completely out-of-step” with the country’s challenges. Minority Whip Eric Cantor (R-Va.) blasted the White House for “a massive disconnect” between Americans’ struggles “and the president’s claims of success.” And Rep. Tom Price (R-Ga.), chairman of the Republican Study Committee, claimed the “failed economic policy” of the Obama administration is directly “crippling” more and more families with each passing month.
Illustration by: Matt Mahurin
“All we have to show for the president’s archaic policies is rising unemployment and skyrocketing debt,” Price said.
The accusations lend a glimpse at what voters can expect to hear during next year’s campaign season. But, many experts say, they also ignore the simple economic reality that job creation has trailed almost every other indicator of economic recovery in the wake of recessions going back at least 20 years. The reasons are varied — ranging from employers’ fears of hiring before the downturn ends, to the reemergence of idle workers who had stopped looking for jobs altogether. But the result, in each case, has been to delay the post-recession recovery of the labor market. And this time around, economists are warning, will be no different.
“Unemployment is typically a real lagger,” said Chad Stone, chief economist at the Center on Budget and Policy Priorities, a liberal policy analysis group. “No one expected there to be job growth at this point.”
Desmond Lachman, economist at the conservative American Enterprise Institute, echoed that sentiment, arguing that the labor market recoveries of recent decades haven’t occurred before “a quarter or two after the economy has bottomed.”
“That’s the normal pattern,” Lachman said.
The comments arrive in the wake of government figures revealing that the nation’s employers let go of 263,000 more folks last month than they hired, hiking the unemployment rate from 9.7 percent to 9.8 percent — the highest level in 26 years. And, despite some indication that production is slowly on the rise, experts expect unemployment to get worse before it gets better. Indeed, economists of all stripes are predicting jobless rates to flirt with 10.5 percent in 2010, and remain elevated through the entire year — a trend that threatens Democrats in the next election.
It wasn’t supposed to happen this way. When the Democrats passed their $787 billion economic stimulus bill in February, White House officials said the bill would keep unemployment below 8 percent. In the House, not one Republican voted for the measure, leaving GOP leaders plenty of room to exploit the issue straight into next year’s mid-term elections. All signs indicate that they’re set to do just that.
“With roughly three million private sector jobs lost since the ‘stimulus’ was enacted, Americans can’t be blamed for asking, ‘Where are the jobs?’” Boehner said in a statement last week.
Yet many economists say the jobs are right were they should be considering the degree to which the economy sank in the past 21 months. Heidi Shierholz, economist at the liberal Economic Policy Institute, estimates that the stimulus bill is saving or creating between 200,000 and 250,000 jobs each month. “This is exactly what we would expect given the magnitude of the losses,” Shierholz said of the recent unemployment figures.
There are a number of reasons that job creation is slow to take hold in the wake of a recession. For one, despite the assurances of Federal Reserve Chairman Ben Bernanke, employers are still wary that the recession might not be over. Rather than jumping the gun on new hires, “they’d rather squeeze extra time out of their existing workforce,” said John Schmitt, senior economist at the liberal Center for Economic and Policy Research.
Also, employers have cut back hours, leaving plenty of room to meet an increased demand for production without bringing on new employees. Indeed, though the unemployment rate is 9.8 percent, that number jumps to nearly 17 percent when the Labor Department includes part-time workers who wish to work full time.
Additionally, a number of people typically quit searching for jobs in down economies, effectively dropping out of the labor market, which means they’re not counted in the government’s jobless tallies. When the economy begins to recover, many of those folks will likely reenter the labor pool, thereby swelling unemployment figures even though their individual employment situation remains unchanged.
Jagadeesh Gokhale, economist at the libertarian Cato Institute, described another trend delaying the labor market recovery. In normal economic times, Gokhale said, companies tend to hold on to even unproductive workers because the cost to hire and train new employees exceeds that to keep the others. But when demand drops in a recession, and profits fall along with it, then it becomes more cost-effective for employers to shed those ineffective workers. The practice bumps up unemployment numbers without reducing production significantly. “That’s pretty much the standard pattern,” Gokhale said.
The consequences of these trends speak for themselves. Following the 1990 recession, for example, it took 15 months after the economy hit bottom before employment figures moved into positive territory. In 2001 the labor market recovery was even slower, requiring 19 months before job creation began to nibble away at unemployment rates.
That economic reality, however, has not prevented some liberals from going after the White House for doing too little to control the rising tide of unemployment. New York Times columnist Bob Herbert, for example, argued this week that if the economy doesn’t generate jobs on its own, “then the government needs to step in.”
“Faced with the relentless monthly costs of housing, transportation, food, clothing, education and so forth,” Herbert wrote, “[the unemployed] have precious little time to wait for this lagging indicator to come creeping across the finish line.”
Many experts on the left had argued in February that the $787 billion package was too small to address a problem so large — and they feel vindicated in that position today. “The stimulus is the thing that brought us back from the abyss,” Shierholz said Tuesday. “But it wasn’t big enough. We have an enormous hole to fill.”
Lachman pointed to another flaw in the original bill: It was designed, he said, so that too much of the spending won’t occur until 2010 and beyond. Indeed, since the bill passed, the government has spent less than $200 billion on projects and tax cuts designed to stimulate job creation. “The size was right,” Lachman said, “but they back-loaded it, which allowed unemployment to go up at a much faster rate than was necessary.”
Economists on both sides of the divide are arguing for more stimulus spending, including funding to help states survive severe budget crunches. Increases in federal dollars for Medicaid and COBRA, for example, were included in the first stimulus bill, but those increases in funds expire at the end of the year.
Another stimulus bill, though, won’t be an easy sell on Capitol Hill, where Republicans and even many Democrats have grown wary of enormous deficits — even before the debate over a $900 billion health reform proposal began.
Cato’s Gokhale, who didn’t support even the original bill, points out that the slow-spending of the stimulus money means that there’s plenty left over for 2010 — a situation precluding the need for another influx of cash.
And will that funding help stem the continued rise in unemployment?
“It all depends,” Gokhale said, “on the rate at which they can spend the money.”
25 Comments
Pingback posted October 7, 2009 @ 6:15 am
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Comment posted October 7, 2009 @ 10:08 am
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Comment posted October 7, 2009 @ 1:31 pm
The Republican comments are noise. That's not to say it won't make sense politically for them to make that argument, but it's still nonsense.
o It's been a deep recession.
o Jobs are a lagging indicator
o Stimulus spending is only just really getting going
o There is still a mountain of debt that will be a drag on the economy as long as it is a mountain – some of that needs to get worked out of the economy before we will really see big new growth
The current employment situation is better than it was in Reagan's first term. Where were the screaming howling Republicans then???
I would agree with the idea that more stimulus spending should wait a bit, at least until what is already in the pipeline is well on the way to getting spent (it is a bad idea to appropriate money a lot faster than it can be sensibly spent – although right now, 'sensible' really means the fastest way to get it spent, in order to have the most stimulative effect – 'Helicopter Ben' was probably not far from the mark). Then, we can see what the economy is doing and decide whether more is needed or not.
I have been howling about the Republicans' stupid idea that tax cuts are the solution for every problem; they are not. However, once we see the economy start to accelerate, if we decide it needs some more juice, then, at that point, tax cuts might make sense, in order to accelerate growth to generate jobs. Growth awaits demand pull, regardless what the tax rates do.
Comment posted October 7, 2009 @ 5:59 pm
Yes the pipeline of stimulus $$ seems to have plenty of kinks in it—maybe if we do what Bush did when he wanted to spend federal $$$: send shrinkwrapped pallets of US currency to Baghdad. Hoo boy, THATS how you bust thru the red-tape!! Git'r done!
Seriously though, we haven't seen an example of responsible disbursement for 8 years, so I suppose I'd rather this extreme than the Bush/Cheney method if I had to choose one…
Pingback posted October 7, 2009 @ 9:26 pm
[...] good news here, if Cantor’s comments are indication, is that Republicans, while poised to exploit the jobless numbers to their advantage in next year’s elections, also wouldn’t stand in [...]
Pingback posted October 8, 2009 @ 12:15 am
[...] good news here, if Cantor’s comments are indication, is that Republicans, while poised to exploit the jobless numbers to their advantage in next year’s elections, also wouldn’t stand in [...]
Comment posted October 8, 2009 @ 1:31 pm
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Pingback posted October 8, 2009 @ 6:09 pm
[...] won’t be easy. While employment figures are always among the last indicators to rebound from recession, the extent of the current job losses has caught many economists off guard. Indeed, [...]
Comment posted October 9, 2009 @ 7:17 pm
Leading indicators are positive (i.e. stock market, GDP,% of Leading Indicators), to mixed (Cyclical Score of Leading Economic Indicators). This shows that the economy in bottoming out or improving. Yes, it could be a 'dead cat bounce', but only a crystal ball can see the future.
Lagging indicators (Unemployment Rates, the Honorable Representative John Boehner) remain poor.
Think about what these 2 groups tell us.
Leading indicators carry information about today and the future.
Lagging indicators carry information about the past
I think it's hilarious that not even the American Enterprise Institute can get Boehner, Cantor, & Rice to either 1) pretend to understand economics, or 2) shut up.
Comment posted October 10, 2009 @ 12:58 am
(Gold As Hedge – Dollar has Collapsed and Expected to Devalue)
[Effects of a Jobless Recovery]
The Empire Jobless Recovery, has only lead to rising, unemployment, and ever increasing government spending in unemployment benefit payouts which have surged as jobless figures have climbed, which has caused a big drop in tax revenues, upon which the Empires power rests as the revenue source of taxation is needed to support it and Tax’s take up (1/2) One-Half of every Dollar earned, but that power no longer exists, and nobody has an idea of just who is left for the Empire to tax, those who have already gone bankrupt with debt, with inflation rising, out flow of jobs increasing. Yet the Media Messiah Imperial President continues encouraging yet more debt both in household debt asking the trading in of clunkers for car payments, and Government Debt, asking for Government Health Insurance adding yet another (40%) Forty-percent, of debt, which will require additional tax revenues, the out flow of cheap labor is rising (illegal workers can’t afford to work in the Empire), as the Media Messiah Imperial President encourages unions to strike, closing more businesses, creating yet more unemployment.
[The Alarm Bells Are Ringing]
To all those Dreamers, Thinkers, Workers, and Ponders, ask not why the Alarm Bells are ringing, they are ringing off the wall due to the [544/DC] Degenerate Democratic and Republican Crooks remaining fast asleep at the helm of the ship of state, as the Media Messiah Imperial President continues the unrestricted policy of spending [Taxpayer Dollars] and borrowing [From Foreign Investors], when serious action tackling the dangerous budget deficits is required. With no tax base left, the Empire Economists solution is to offer more attractive, higher interests rate of return on worthless [T-Bill / Empire Terrorism Bills/Bonds] trying to lure foreign investors, increasing the Empire’s Debt. As the Empire continues spending taxpayer’s and foreign investors borrowed funds, far and beyond Empire limits, you can not continue to spend with Champagne Taste on a Beer Tax and Borrow budget. But even those foreign investors have been scared off from purchasing worthless Empire Treasury debt, in the form of [T-Bill / Empire Terrorism Bills/Bonds] which have only contributed to the devaluation of the Empire’s Currency, and once again increasing the debt, just how much worthless paper can foreign investors governments economies afford to underwrite.
[Debt Estimate One]
The huge surging Empire deficit by Empire Estimates, equal to [9.9%] Nine-Point-Nine-Percent of the Empire [GDP] Gross Domestic Product, or [$1.6T/€1.09T] One-Point-Six-Trillion-Dollars/One-Point-Zero-Nine-Trillion-Euros
[Debt Estimate Two]
While others estimate the [Total] Empire Debt at, ($36.6T/€25.6T) Thirty-Six-Point-Six-Trillion-Dollars, a true deficit of [$11.7T/€8T],-Dollars/Eight-Trillion Euros in household debt, and a ($13.8T/€9.6T), Thirteen-Point-Eight-Trillion-Dollars/Nine-Point-Six-Trillion Euros, business debt of, that is a whopping ($80K/€55.28) Eighty-Thousand-Dollars/Fifty-Five-Point-Twenty-Eight-Thousand Euros, of debt owed by each an every individual in the Empire, starting the minute of entering the world, and taking their first breath past exiting this world with their last breath paying with an (Inheritance Tax).
[Gold Currency]
Glenn Beck a prominent, Television/Tele, personality, and Numeraire Author, both in paperback and hardback, in the Empire, having as one of his advertising base [primarily of gold merchants], and which both are advising his audience to invest in gold, and with the devaluation of the Empire Currency no longer just some crazy idea, one of the reasonable course’s of action is to invest in gold. Gold prices were ($1K per-ounce /€70M per-twenty-eight grams), and expected to raise to ($1.5K/€1.4K), gold is seen as a hedge against the now and not some future devaluing of the Empire’s Currency, and no longer seen as some bizarre idea. Gold may not be the way some speculators would advise, due to the value depending on new vanes of gold a new [California Gold Rush] being made, technological improvements in mining vise [Panning for Gold] in a California creek bed, and the needs of industrial applications [Shooting it into space], etc. The Peoples Republic of China a member of the [BRIC] Brazil, The Russian Republic, India and The Peoples Republic of China [Sphere of Influence] has been putting there pallets of [T-Bill / Empire Terrorism Bills/Bonds, and Empire Currency] were their mouths are, buying Gold doubling its reserves to (1050) One-Thousand-Fifty, Metric Tonnes, using, ($U.S.) dollars, from its reserves, driving the price of Gold rising over (1K/€700M) One-Thousand-Dollars/Seven-Hundred-Million-Euros, per ounce/[437.5 Grains] and has begun the process of de-coupling in favor or the (21st) Century the Diversified/Multilateral Currency Regime, so if it is not a bizarre idea to either Glenn Beck, primarily of gold merchants, or The Peoples Republic of China it may not be a bizarre idea to hedge your own financial bets. It’s not what’s in your wallet but what makes up your portfolio, Gold may need to be part of the total package.
HERCULE TRIATHLON SAVINIEN
Pingback posted October 10, 2009 @ 10:40 am
[...] had leveled off from last fall’s slight recovery bubble. But, as final confirmation of double-digit unemployment became reality with last week’s announcement of jobless figures, the market dropped [...]
Comment posted October 11, 2009 @ 6:08 pm
THE HUMPTY DUMPTY DOLLAR
[All the Asian Traders Couldn’t Stop the Slide Again]
The Humpty Dumpty Dollar sat on a Wall, The Humpty Dumpty Dollar had a great fall, and all the Asian Traders, couldn’t stop the Slide of the Humpty Dumpty Dollar, as the Empire comes to its end. On Thursday the [8th] of October, the Empire Dollar began the projected decline heading towards its devaluation. Asian traders made no effort to place a bottom support under its decline, there simply was no sense of even trying to draw a line in the sand as the Empire continues to play fast and loose with its own economy. The only effort made in response to the Empire Dollars decline into devaluation was to simply slow its rate of downward movement, and not any action to stop the upward and increasing values of other currencies against the Empire Dollars decline. This action was only driven by the self interests of The Peoples Republic of China, and those countries within its [Sphere of Influence], as it makes efforts to lessen the impact of the devaluation of the Empire Dollar in relationship to their export driven economies. Think of it as the difference between a blow out of the front tire or a vehicle in comparison to a slow leak, one leads to a major damage the other to a pull over with pulling the spare out, a sudden collapse as opposed controlled slow slide.
[The Upward Movement]
JAPANESE YEN: [Y88.22 – Y88.61]
TAIWAN TAIPEI: [T32 – T32.137]
THAILAND BATH [Bt31.79 – Bt33.29]
THE PEOPLES REPUBLIC OF CHINA: Invested [HK$8.525Bn/ €852M] Eight-Point-Five-Two-Five Billion Hong Kong Dollars/Eight-Hundred-Fifty-Two-Million Euros, to maintain its Hong Kong to Empire Dollar ratio of [$1/HK6.85] One-Empire Dollar to Six-Point-Eight-Five-Hong Kong Dollars.
THE EURO: The Empire Dollar with each passing day slips against the Euro, and at present The Empire Dollar is worth [76%] Seventy-Six-Percent of the Euro.
[Investing In Other Currency]
If the cost of Gold with its prices at ($1K per-ounce /€70M per-twenty-eight grams), and expected to raise to ($1.5K/€1.4K), are a little to rich for your blood and a little more than the old bank account can handle then investing in other currencies may be the next best thing, but de-coupling from the Empire Dollar is no longer an option, it is a necessity. There are those who have come up with ideas of the Norwegian Krone, or Australian Dollar but that is a decision of personal choice, the currencies of the [21st] Century will be those of the Diversified/Multilateral Currency Regime, and would also include a much broader trade-weighted basket. The Multilateral Currencies would be the GLOBAL NUMERAIRE CURRENCIES, [Euro, Pound Sterling, Japanese Yen, and Chinese Yuan], and hard currency [Gold, Silver, etc.], the trade-weighted basket would include [Oil Currency, Food Production Currency, Mineral Currency, and Production Currency]. Time is running out, basically the time is now or never.
HERCULE TRIATHLON SAVINIEN
Pingback posted October 15, 2009 @ 12:09 pm
[...] had leveled off from last fall’s slight recovery bubble. But, as final confirmation of double-digit unemployment became reality with last week’s announcement of jobless figures, the market dropped [...]
Comment posted October 18, 2009 @ 7:55 am
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Comment posted October 18, 2009 @ 4:28 pm
Economic indicators from the Federal Reserve 10/16/09.
The nation's capacity utilization rate has been steadily climbing since June. This is another reliable indicator that the economy is turning around or has already done so.
The Fed's index of industrial production rose by 0.7% in the month of September and at a 5.2% annual rate during the third quarter.
A third-quarter GDP annual growth rate above 4% is possible according to Paul Krugman..
In addition, first-time unemployment insurance claims are lower. Net job loss is still reality, but a continuing trend can only lead to growth.
Comment posted December 14, 2009 @ 11:29 pm
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Comment posted December 15, 2009 @ 4:29 am
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Comment posted June 3, 2010 @ 12:55 am
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Comment posted July 3, 2010 @ 3:08 am
The Fed's index of industrial production rose by 0.7% in the month of September and at a 5.2% annual rate during the third quarter.
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Comment posted November 2, 2010 @ 9:24 am
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