Salon.com > Recession

April’s flaccid jobs report

Fri, 03 May 2013 16:58:00 +0000

We remain in the gravitational pull of the Great Recession. The Labor Department reports that 165,000 new jobs were created in April – below the average gains of 183,000 in the previous three months.

We can’t achieve escape velocity. Since mid-2010, the three-month rolling average of job gains hasn’t dipped below 100,000 but has exceeded 250,000 jobs just twice.

This isn’t enough to ease the backlog of at least 3 million (estimates range up to 8 million) job losses since 2007, just before the Great Recession began. (And as I’ll point out in a moment, 2007 wasn’t exactly jobs nirvana.)

Moreover, most of the new jobs now being created pay less than the ones that were lost.

What’s wrong?

First, government is doing exactly the opposite of what it should be doing. It raised payroll taxes in January (ending the temporary tax holiday), thereby reducing the incomes of the typical family by about $1,000 this year.

More damaging, government cut spending through the damnable sequester – thereby reducing overall demand for goods and services. (Direct government employment dropped another 11,000 in April.)

Obama’s senseless Social Security cuts

Sat, 13 Apr 2013 12:00:00 +0000

The reason President Obama's proposal to cut Social Security benefits is tragic is that it is simply not necessary. His plan is to use a different method to compute how benefits are raised to offset inflation. But Social Security will add very little to federal spending over the next 30 to 40 years. As a proportion of national income (GDP), It will rise from 5 percent to 6 percent. At the same time, retirees are set to get much less money from their pensions because so many were forced to depend on 401(k)s and defined contribution plans rather than traditional pensions with defined benefits.

But a new report from Goldman Sachs economists puts the Obama decision in an even harsher light. The federal deficit is coming down rapidly on its own. In a piece entitled, “The Rapidly Shrinking Federal Deficit,” Goldman notes that the deficit averaged 4.5 percent of GDP in the first calendar quarter, compared to 10.1 percent in fiscal year 2009. The reasons are faster economic growth, higher taxes and reduced government spending.

Gov’t downsizes amid GOP demands for more cuts

Fri, 22 Feb 2013 15:59:00 +0000

WASHINGTON (AP) — Republicans and other fiscal conservatives keep insisting on more federal austerity and a smaller government. Without much fanfare or acknowledgement, they've already gotten much of both.

Spending by federal, state and local governments on payrolls, equipment, buildings, teachers, emergency workers, defense programs and other core governmental functions has been shrinking steadily since the deep 2007-2009 recession and as the anemic recovery continues.

This recent shrinkage has largely been obscured by an increase in spending on benefit payments to individuals under "entitlement" programs, including Social Security, Medicare, Medicaid and veterans benefits. Retiring baby boomers are driving much of this increase.

Another round of huge cuts — known in Washington parlance as the "sequester" — will hit beginning March 1, potentially meaning layoffs for hundreds of thousands of federal workers unless Congress and President Barack Obama can strike a deficit-reduction deal to avert them.

With the deadline only a week off, Obama and Republicans who control the House are far apart over how to resolve the deadlock. While last-minute budget deals are frequent in Washington, neither side is optimistic of reaching one this time.

Britain faces triple-dip recession

Fri, 25 Jan 2013 18:26:00 +0000

LONDON (AP) — Britain's economy contracted by a worse-than-expected 0.3 percent in the last three months of 2012, raising the possibility that it might fall back into recession for the third time since the global financial crisis.

The Office for National Statistics said Friday that there was no growth in the nation's big services industry while output of production industries fell by 1.8 percent, including a 1.5 percent drop in manufacturing.

Britain emerged from a nine-month recession in the third quarter, when GDP grew by 0.9 percent. But if the economy shrinks again in the first quarter of 2013, it will be officially back in a technical recession, defined as two consecutive quarters of economic contraction.

"Today's numbers have greatly increased the risk of a new recession and a downgrading of the U.K.'s AAA credit rating," said Chris Williamson, chief economist at financial data company Markit.

All three of the big rating agencies — Moody's, Standard & Poor's and Fitch — have placed Britain's rating on negative watch.

The latest figure was worse than the market consensus of a contraction of 0.1 percent, and came just two days after the chief economist of the International Monetary Fund said it was time for the government to reassess its focus on spending cuts.

Debt is ingrained in America’s way of life

Sun, 06 Jan 2013 17:00:00 +0000

DEBT IS UBIQUITOUS. It is also insidious, since debt imposes a power relationship (amplified by the state) between borrower and creditor. We are diminished by debt. The ongoing financial crisis has revealed the degree to which most Americans (myself included, alas) are seriously indebted — and being so, we are more controlled than controlling.

David Graeber — of Occupy Wall Street fame — has written, in Debt: The First 5,000 Years, a grand intellectual project and a call for action. He investigates debt across time and across cultures and finds it to be a primary institution, preceding exchange, money and any notion of “the economy.” Debt is a building block for ever more elaborate social organization, because it creates fluid structures of subordination. Though in principle the sum of all debts should equal the sum of all credits, in practice debtors are many and creditors few. Today, there is growing concern about income inequality in America — but it is wealth inequality that captures the relation of debtors and creditors.

Eurozone slides back into recession

Thu, 15 Nov 2012 21:56:00 +0000

LONDON (AP) -- The 17-country eurozone has fallen back into recession for the first time in three years as the fallout from the region's financial crisis was felt from Amsterdam to Athens.

And with surveys pointing to increasingly depressed conditions across the 17-member group at a time of austerity and high unemployment, the recession is forecast to deepen, and make the debt crisis - which has been calmer of late - even more difficult to handle.

Official figures Thursday showed that the eurozone contracted by 0.1 percent in the July to September period from the quarter before as economies including Germany and the Netherlands suffer from falling demand.

The decline reported by Eurostat, the EU's statistics office, was in line with market expectations and follows on from the 0.2 percent fall recorded in the second quarter. As a result, the eurozone is technically in recession, commonly defined as two straight quarters of falling output.

The eurozone economy shrank at annual rate of 0.2 percent during the July-September quarter, according to calculations by Capital Economics.

"The eurozone economy will continue its decline in Q4 and probably well into 2013 too - a good backdrop for another debt crisis," said Michael Taylor, an economist at Lombard Street Research.

2.5 million jobless adults living with their parents

Tue, 13 Nov 2012 21:26:00 +0000

As the New York Times' Economix blog reported Monday, despite signs of an improving economy, "the bundled-household phenomenon remains large." That is, a large number of adult children have moved back into their parents' house, unable to support independent households. The Times revealed new data from Moody's Analytics:

There are about 17.2 million adult children living in their parents’ homes this year, compared with around 15.3 million in 2007, the year the recession began ... And the numbers show that the greatest increases are accounted for by unemployed adult children who have moved in with parents. In 2007, 1.3 million unemployed adult children were living in their parents’ homes. This year, the total is about 2.5 million.

America’s not falling off a “fiscal cliff”

Mon, 12 Nov 2012 14:25:00 +0000

They don’t call it the "cliff” for nothing. It’s the fiscal spot where a nation’s representatives can gather and cry doom. It’s the place -- if Washington is to be believed -- where, with a single leap into the Abyss of Sequestration, those representatives can end it all for the rest of us.

In the wake of President Obama’s electoral victory, that cliff (if you’ll excuse a mixed metaphor or two) is about to step front and center. The only problem: the odds are no one will leap, and remarkably little of note will actually happen. But since the headlines are about to scream “crisis,” what you need to understand American politics in the coming weeks of the lame-duck Congress is a little guide to reality, some Cliff Notes for Washington.

As a start, relax. Don’t let the headlines get to you. There’s little reason for anyone to lose sleep over the much-hyped fiscal cliff. In fact, if you were choosing an image based on the coming fiscal dust-up, it probably wouldn’t be a cliff but an obstacle course -- a series of federal spending cuts and tax increases all scheduled to take effect as 2013 begins. And it’s true that, if all those budget cuts and tax increases were to go into effect at the same time, an already weak recovery would probably sink into a double-dip recession.

Bank on the economy bouncing back

Tue, 06 Nov 2012 15:00:00 +0000

Bloomberg finds that—regardless of who wins the election tomorrow—the economy is set for stronger growth in 2013 and beyond:

Consumers are spending more and saving less after reducing household debt to the lowest since 2003. Home prices are rebounding after falling more than 30 percent from their 2006 highs. And banks are increasing lending after boosting equity capital by more than $300 billion since 2009.

“The die is cast for a much stronger recovery,” said Mark Zandi, chief economist in West Chester, Pennsylvania, for Moody’s Analytics Inc. He sees growth this year and next at about 2 percent before doubling to around 4 percent in both 2014 and 2015 as consumption, construction and hiring all pick up.

Yes, there’s the fiscal cliff. But odds are best that Congress and the White House will avoid a situation where the economy is hit with a burst of contractionary policy.

The economy is still growing

Fri, 26 Oct 2012 18:47:00 +0000

For an election that was supposed to be a referendum on the economy, it's kind of amusing how the latest statistics on economic growth fit neatly into the narratives being pushed by both campaigns.

The government's first estimate of GDP growth for the third quarter of 2012 came in at a rate of 2.0 percent. That's better than the second quarter's final number: 1.3 percent. Yay! But it's not fast enough to significantly bring down unemployment. Boo!

It is, as White House chief economist Alan Krueger asserted, "further evidence that the economy is moving in the right direction." Yay! No recession, at least not this year. But it is also disappointing, as Mitt Romney was quick to note: " Slow economic growth means slow job growth." Boo.

There wasn't much inside the report that we didn't already know. Improvement in the housing sector and reasonably robust consumer spending contributed to growth. A sharp decline in business investment -- likely attributable to uncertainty about the fiscal cliff -- and a downturn in exports (slowdown in China, European recession) detracted from growth.

Unemployment doesn’t just hurt the unemployed

Tue, 16 Oct 2012 15:35:00 +0000

Every once and a while I hear someone say, “wait a sec, if the unemployment rate is 7.8% then 92.2% of labor force is working…that doesn’t sound so bad at all.”

That’s wrong simply in the sense that 7.8% is still an elevated unemployment rate (suppose the rate were 15%–would you feel better if someone pointed out the 85% are still at work? 100%-unemp is just not an elucidating metric).

But it’s more wrong in the sense that high unemployment has negative spillovers for most of those still at work. In a labor market like ours, with low unionization rates, bargaining clout for many in the workforce is very much a function of the unemployment rate. Excess labor supply over labor demand typically puts downward pressure on both nominal and real wages.

The figure below plots real hourly wages for non-supervisory workers—blue collar workers in manufacturing and non-managers in services (about 80% of the workforce). It also plots yearly nominal growth rates of that same hourly wage (before accounting for inflation).

Federal deficit tops $1 trillion for fourth straight year

Fri, 12 Oct 2012 21:35:00 +0000

WASHINGTON (AP) — The federal budget deficit has topped $1 trillion for a fourth straight year. But a modest improvement in economic growth helped narrow the gap by $207 billion compared with last year.

The Treasury Department said Friday that the deficit for the 2012 budget year totaled $1.1 trillion. Tax revenue rose 6.4 percent from last year to more than $2.4 trillion, helping contain the deficit.

The government's revenue rose as more people got jobs and received income. Corporations also contributed more tax revenue than in 2011.

Government spending fell 1.7 percent to $3.5 trillion. The decline reflected, in part, less defense spending as U.S. military involvement in Iraq was winding down.

Barack Obama's presidency has now coincided with four straight $1 trillion-plus annual budget deficits — the first in history and an issue in an election campaign that ends in three and a half weeks.

Obama's Republican challenger, Mitt Romney, contends that Obama failed to achieve a pledge to halve the deficit he inherited by the end of his first term.

When Obama took office in January 2009, the Congressional Budget Office forecast that the deficit for that year would total $1.2 trillion. It ended up at a record $1.41 trillion.

Art doesn’t pay

Sun, 30 Sep 2012 14:00:00 +0000

I was looking out at the mountains, thinking: Trees are so lucky, they don’t have to have jobs. Of course, as any elementary schoolteacher will tell you, trees do have an important job, which is to expel nice fresh oxygen into the air so we can all breathe, to provide a habitat for lots of necessary creatures, and so on. But they don’t have to have job jobs, where you show up at an office every day, or compulsively check your work email from home, or wait nervously for checks to arrive in the mail in hopes that your propane gas won’t get turned off. Trees don’t have to worry about things like that, and I envy them.

“Old. Tired. Sick. Alone. Broke.” This sad litany comes from an idiosyncratic novel by David Markson called The Last Novel, in which he tells the story, in fragmentary anecdotes, of an aging author writing his final book. The novel references hundreds of other writers and artists of various kinds, many of whom went unrecognized during their lives. Old. Tired. Sick. Alone. Broke. I can’t stand the thought of anyone ending up that way.

Education: The economy’s great elixir

Tue, 25 Sep 2012 20:38:00 +0000

The Next American Economy breakfast seminars resumed last week with a discussion with Professor Larry Katz focusing on his and Professor Claudia Goldin's book, The Race Between Education and Technology. If you haven't read this book, there is a great deal about our economy you won't understand. If you don't read at least the introduction now that you've been told, shame on you.

Larry has several fundamental insights. (These are the ones I picked out; he might prefer to highlight others.)

First, at a minimum, 25 percent of our productivity growth -- and therefore our economic growth -- over the 100 years between 1870 and 1970 is due directly to increases in the average number of years of education of the American people. It is highly likely that the actual contribution of education is significantly greater; 25 percent is a minimum.