Uh-Oh…
…this is not good:
The United States economy shed 190,000 jobs in October, and the unemployment rate reached a 26-year high of 10.2 percent, up from 9.8 percent in September, the Department of Labor said Friday in its monthly economic appraisal.
While the pace of the job losses has slowed significantly since the peak of the recession last winter, the unemployment rate, which measures the number of people actively seeking work, continues to climb, and economists do not foresee relief until well into next year.
It’s time for people on both sides of the aisle to admit that the first stimulus was a failure and take some lessons learned away. The number one problem the stimulus was meant to tackle was jobs, and we were told by the Administration that its passage would halt the unemployment slide at 8%. That was spectacularly wrong.
The number one lesson is that Keynesian “prime the pump” “any spending is good spending” economics has once again proven to be in error. All spending IS NOT good spending, and it DOES matter where the federal dollars are allocated.
We had a real opportunity here to make a coordinated effort to tackle our country’s aging infrastructure. Instead, the stimulus bill became a typical Congressional pork-barrel affair with a little something for every pet interest group.
What we got was a higher deficit and an unemployment rate that hit the rate that we were direly warned we would hit if the bill didn’t pass.
This is a big-time failure, and no amount of spin will take that away…
I think you’re failing to acknowledge your own spin here, Mark. Of course the 8% number has proven to be quite wrong, as is evident, but that in itself is not evidence of anything but the fact that projections at the time of how bad the economy was were quite incorrect. It is not prima facie evidence that the stimulus has failed. Only that the prediction of the stimulus’s effect was based on assumptions that were too-rosy by quite a bit.
That unemployment is now at 10.2%, versus the estimated (rosy?) worst case 8%, proves nothing about the accuracy of the predicted worst case scenario. The only thing it proves is the failure of the stimulus to stem and stop the rise in unemployment.
Fargus, obviously the projections were wrong, but I submit they were wilfully wrong. Obama’s estimates were acknowledged even at the time by outsiders to be too rosy – some, like Krugman, argued that meant we needed MORE stimulus. Others, mostly on the right, said you can’t “stimulate” your way out of the economic cycle because government spending just crowds out private spending.
I do believe a stimulus bill was a reasonable approach in light of the magnitude of the problem lawmakers were facing at the time. I just think it was a bad bill, and that a good bill would have been focused almost entirely on critical infrastructure needs, providing good jobs and addressing a problem that hasn’t gone away…
It is hardly evidence that it worked.
Apparently no level of unemployment will prove it failed.
But we knew that because of the “saved or created” BS line they use.
Fargus, why don’t you read the non-Fox news stories about how the “saved or created” figures are made up by counting raises and phantom jobs. Plenty out there recently, starting with the school district that employs 550 but is counted as “saving or creating” about 900.
I will repeat one more time that government spending is the worst and slowest option to stimulate the economy.
It now appears likely that unemployment will reach 10.5%. Will we hit 11%?
The way to fix this is not to offer business opportunities to businesses that they have to spend months preparing estimates for and bidding against opponents and produce hundreds of pages of documentation for the simplest of jobs.
The way to fix this is to put money back in the pockets of businesses as quickly as possible. This has been, and always will be, tax cuts.
I know libs hate those words, but I don’t understand why. They seem to think that tax cuts lead to huge deficits, but so do spending increases. If I have to chose between spending increases and tax cuts, I choose the one likely to create long term economic growth every time. And that’s tax cuts.
Obama should have cut the corporate tax rate to zero instead of passing a trillion dollar stimulus package. The recession would now be over, and unemployment would probably be around 7%. Maybe lower.
Yes, I’m aware that it’s not quite that easy. If you did exactly what I said, you’d suddenly find every single taxpayer in the U.S. incorporating themselves. So, yes, you’d have to do a little more than I said. Still, though, you could probably pass a 30 page bill to do it, not a several hundred page one.
We need recall elections. I’m not sure America can survive 3 more years of this kind of (willful?) incompetence.
Also, while it’s nearly impossible to find any empirical data to support or refute such a conclusion, I firmly believe that “health care reform” and “cap and trade” are big reasons unemployment keeps rising.
If you’re a small business owner, and you see those two things on the horizon, and you know you’re going to have to pay more in taxes next year, or pay more for insurance for your employees, would you hire? These two things go directly to the bottom line, and small businesses don’t typically have big profit margins.
Here’s a blog post that appears to support my belief. Yes, I know this is anecdotal, but I can’t help believing that this is a significant truth. I wish Rasmussen or Gartner or someone who polls businesses would ask about this.
It is well-established (to the extent that it is possible to establish these things) that the multiplier for government spending is larger than the multiplier for tax cuts.
Hence the preference for spending over tax cuts, as a source of fiscal stimulus.
The preferred method for combatting recessions is neither of these. The preferred method is monetary policy. But that is currently unavailable to us.
The recession is now over — by the conventional measure of GDP growth. (Unemployment lags GDP growth by a considerable period in most recoveries; this one may well be worse.)
As to the assertion that unemployment would now be 7% in some alternate universe where corporate taxes were set to 0, that is complete fantasy, totally unmoored by reality.
In the real world, where corporations are losing money, laying off workers, and trying to avoid Chapter 11, cutting corporate taxes doesn’t do anything in the short term — because they don’t have any profits to be taxed on. Duh!
No doubt having interest rates essentially at zero limits our options…
The number of people filing initial unemployment claims has dropped dramatically:
Nov 2008 to April 2009: average 645,000 per month
May – July 2009: 357,000 per month
August – September 2009: 188,000 per month
Unemployment claims down 75% since Obama took office: looks like progress to me.
The economy had so much downward momentum last winter when it was in freefall, that it is fatuous to insist that it reverse direction in two quarters. It’s like a car going North at 80 mph: it has to slow down, go to zero, and then change direction before it can reverse course.
Do those straws you’re grasping, Peter and Jacques, actually hold you up?
Following up on my pointto Fargus, the freaking New York Times on 11.4.09 had a report on how many jobs are “created or saved:
The stimulus was a fraud and everybody but the dead enders know it.
The Dow is over 10,000, up 60% or so from March. I guess Obama’s March to Socialism is getting a pretty warm reception on Wall Street.
Indeed, they did:
Of course, the reports collected from recipients of stimulus money contain errors (both over- and under-counting). Duh!
But your fact-free leap, from that obvious point to the assertion that the whole program is a fraud, is no more credible than your usual fare.
Furthermore, this affects health care reform costs estimates negatively. Twice.
First, there’s more unemployed, so potentially more uninsured that the government will have to pay for. This, of course, means increased costs.
Second, higher unemployed for an extended period means significantly lower tax receipts. This, of course, means that the increased costs can’t be paid for.
Therefore, deficits will be higher than projected, and Obamacare will cost more than projected.
Sign me up for that.
Peter, the statistics you cite would’ve been impressive 6 months ago. Now they’re only laughable. The point of a stimulus isn’t to get the numbers going the right direction slowly, but to get them going in the right direction quickly.
3.5 million jobs lost since Obama took the Oath of Office. There’s just no way to spin that into good news. Or even into “not horrible” news.
Mark, I agree with you that ideally, the stimulus would have been just about entirely focused on job-creating critical infrastructure projects, rather than having a large portion of it subverted to tax cuts.
DOW 10,000!!!! Oh Wait, Make that 7,537
And you note that all of that loss (in fact, more than all of it — taking account of the rebound since Obama took office) took place on George W. Bush’s watch.
Is that really the point you were trying to make?
And, of course, it’s not just the Federal gov’t having this deficit problem I mentioned earlier.
Receipts are down for the individual states as well, and will likely continue to be for some time. This will encourage more requests for non-existent funds by the states from the Federal gov’t. Despite the funds being non-existent, many of these requests will be approved. In fact, you can be certain that we’ll be told that some of them “must” be approved.
Of course, this will only further increase the federal deficit spending.
We are zooming towards a financial black hole. In fact, we may have already passed the event horizon.
As I said, obvious except for the dead enders, Jacques.
I am amused that now, Wall Street’s judgments are to be trusted.
FYI, I did a little further research.
Jan. 21, 2009
USDX 85.58
DOW 8279.63
DOW value at USDX 100 = 7085.71
Current Value (as of when I started this research)
USDX 75.753
DOW 10004.22
DOW value at USDX 100 = 7578.50
Mr. Obama can claim to have increased the value of the DJIA by about 7% since he took office. But that’s hardly the 21% the media would have you believe. Still, if you’re looking for solace in numbers, there is something you can point to, if you’re an Obama supporter. However, the articles I read suggest that a USDX at 73.50 could be a tipping point in foreign countries willingness to buy US bonds. Any such hesitancy would be guaranteed to have a negative effect on the stock market, though, so Obama’s 7% increase in value may be very short-lived.
You’re wasting your time talking to Jacques, Bob. It’s just far easier and better to ignore someone who has no interest in having an intellectually honest conversation.
Stimulus? Four words: more nuclear power plants.
Yeah but I prefer to mock them instead. More fun.
Especially the more stuffy among them.
The dollar value of the Dow has absolutely nothing to do with anything related to this thread – it’s a red herring. But since the Dow is denominated in dollars, Dow 10,000 now is way worse than Dow 10,000 before.
And we’re talking about jobless Americans – not a class likely to cheer an upsurge in the stock market.
Indeed the USDX has fallen. But that fall was preceded by a huge run-up. On Mar 18, 2008, it was at 71.20. It stayed relatively flat through the spring and summer, but started to rise sharply in the fall, reaching 88.41 on Nov 21, and 89.78 on Mar 6, 2009.
Why the run-up? Because, as the global financial system melted down, international investors fled to the safety of US Treasuries.
Yes, it’s fallen back, to 75.86, as the confidence of international investors has returned. But it’s not as low as it was through the Spring and Summer of 2008, when — as far as you are concerned — we were experiencing economic nirvana.
Speaking of economic nirvana, you dismiss the 7% increase in the USDX-normalized DOW during the 9 months of the Obama Administration. Shall we measure the 8 years of the Bush Administration by the same standard?
Jan 22, 2001
USDX 110.21
DOW 10578
DOW value at USDX 100 = 10579
Jan. 21, 2009
DOW value at USDX 100 = 7085
Not a 7% increase, but a 33% decline. I wonder why you “forgot” to mention that?
Anyway, as I think Mark was saying, normalizing the DOW by the USDX is stupid way to measure the returns seen by US investors (we count our wealth in dollars, not in a basket of international currencies). The DOW is a stupid measure of the performance of the Stock Market as a whole (better to use the S&P 500). And the stock market is not exactly an accurate gauge of the state of the overall economy (to pick one example, the world economy did not suddenly collapse on Monday, October 19, 1987).
For myself, I think the fact that US GDP grew at an annualized rate of 3.5% in Q3 2009, is the real measure of whether we are (as you would have it) swirling down the economic toilet.
I gather however, that looking at the growth of the real economy is what Bob calls “grasping at straws.”
Well, the 3.5% was welcome, no doubt…but it was helped by cash for clunkers, and yes, the stimulus…the interesting thing to see will be whether the GDP slides again in Q4…I certainly hope not, but I do fear it…
There is no reason to fear that GDP will slide in Q4. The Conference Board’s index of Leading Economic Indicators has risen for six consecutive months, and the growth rate is the highest since 1983, when the Reagan recession ended.
http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1
What’s happening now is typical of nascent recoveries: things are bumpy on the bottom, people are fearful, and job losses continue, albeit at a much slower pace. Leading economic indicators point up and coincident indicators are flattish. I can’t tell you if the recovery will be shaped like a V, a U, or a W, but I can tell you that we’ve been through the worst and things are getting better.
There are no US troops in Baghdad! The Republican Guard has destroyed the invaders! All is well!
The recession is over!. Unemployment is a lagging indicator! All is well!
I particularly love the fact that the same people who dismissed the 2002 “jobless recovery” now think unemployment doesn’t matter. They are even from the party of the worker!
No Bob, all is not well. The worst economic disaster in eighty years, which is the result of Republican mismanagement of the economy and deregulation of the financial markets, is ending. You can thank Harry Reid and Nancy Pelosi (as well as Bernanke and Paulson) for saving the economy. Not that you would.
Pbbbtt…hilarious.
Yep, Harry Reid and Nancy Pelosi saved the economy.
That’s fantastic…you’re the next Richard Pryor!…
Without Pelosi, Reid, and Democratic votes in Congress, you would not have had TARP or a stimulus package. Without these programs, the economy would have continued to collapse.
The Republican plan — to the extent that there was one — was basically to continue the policies which got us into this mess. Enough Democrats supported Bush and Paulson, and then later Obama, to pass legislation which ultimately rescued the economy from complete collapse.
It’s that simple.
I will ascribe this to faulty memory on your part.
First, the basic facts. The 2001 recession was a “double-dip” recession, albeit, a very mild and very brief one. There were two quarters of negative GDP growth: Q1 and Q3 2001 (-1.3% and -1.1%, respectively). In the intervening Q2 2001, GDP grew by 2.6%, and in Q4 2001, it grew by 1.1%.
By contrast, the 2008/2009 recession was much deeper (the deepest since the Great Depression) and much more long-lived:
-2.7% in Q3 2008
-5.4% in Q4 2008
-6.4% in Q1 2009
-0.7% in Q2 2009
Now let’s look at the unemployment rate. I’ll just reproduce a table from the BLS:
Year Qtr1 Qtr2 Qtr3 Qtr4
1999 4.3 4.3 4.2 4.1
2000 4.0 3.9 4.0 3.9
2001 4.2 4.4 4.8 5.5
2002 5.7 5.8 5.7 5.8
2003 5.9 6.2 6.1 5.8
2004 5.7 5.6 5.4 5.4
2005 5.3 5.1 5.0 4.9
2006 4.7 4.7 4.7 4.4
2007 4.5 4.5 4.7 4.8
2008 4.9 5.4 6.0 6.9
2009 8.1 9.2 9.6
You’ll note that unemployment stayed stubbornly elevated through all of Bush’s first term (long after the 2001 recession was “over”). It didn’t fall below 5% (4.5-5% is considered “full employment” nowadays) until Q3 2005 — a full four years after the recession ended.
That’s what people were critical about, and justifiably so.
In the present case, we’re coming off of the deepest recession since the 1930′s, and we’ve had barely one quarter of positive growth and already you’re complaining that unemployment hasn’t abated.
Come back in 12 months, and if the unemployment picture hasn’t improved dramatically, then you’ll have some cause to complain.
I think Bob’s mind is already made up. No sense trying to confuse him with facts.
I said
Peter responded
Never let it be said that I don’t try to think the best of my fellow man. I was trying to give Bob the benefit of the doubt.
Still, the facts bear repeating because (except to people like Bob) the facts do matter.
In 12 months I’ll be celebrating GOP control of Congress.
My memory is fine, the recovery in 2002 was derided as creating no jobs and/or the wrong kind of jobs.
Now at unemployment levels nearly twice as high, you stimulus dead-enders continue to make the absurd claim that the stimulus worked. The simple fact is that, according to O’s own projections, if it did work, unemployment would have already started down. Yet the 3rd to 4th Q increase is greater than 2 to 3. There is no indication whatsoever that it has peaked.
Its going to hit 11 (maybe 12) and will be at 10+ all through 2010. Good luck running on that, guys.
You are referring, of course, to the Romer-Bernstein report, prepared in early January, before the Obama Administration even took office.
They projected an economic contraction that, while severe, was much shallower than the one we actually experienced. In their projection — with a stimulus plan, larger than what was actually passed — unemployment would peak in Q3 2009, and would start to decrease in Q4 2009.
Their report was criticized, at the time, by Krugman and others, as too optimistic. It was argued that — to achieve the impact they were expecting — a much larger stimulus was needed. (As usual, Krugman was right.)
Already, by the summer, it was clear that Romer and Bernstein had underestimated. That’s old news.
What we can say today, that we couldn’t say in June, is that a recovery is underway. Will this be a “jobless recovery”? I hope not but, to be honest, the signs are not encouraging.
Oh, and just as a small arithmetic point, 10.2% is not “nearly twice as high” as 6.2%.
I realize that arithmetic is not the sort of thing you’d be overly concerned with, but still …
And one last thought:
Doubtless this is the kind of GOP tidal wave you have in mind.
Owens already betrayed his campaign promise on the “public option”. I hope he enjoys his 14 months on the Hill. He won’t be back.
Care to share your thoughts on why he won, in the first place?
The local GOP chairmen nominated someone way to the left of the party, NY has a Conservative Party with a ballot line, there was a revolt among conservatives and standard special election low turn out. So between Dodo’s votes and her endorsement, enough votes were siphoned off to elect Owens even though he did not get a majority.
Hoffman was a first time candidate with so-so political skills which did not help from what I can tell. But if the local pols had nominated someone who was more moderate in the first place, that GOPer likely would have won.
Why do you call Dierdre Scozzafava Dodo? Mind if we call you Bobo?
You make it sound as if the election was a squeeker. It wasn’t.
Owens won 49.2% to 45.2% (with 5.5% going to Scozzafava). Even if Scozzafava’s voters had broken 4–1 for Hoffman (an unlikely eventuality), Owens still would have won.
Turnout was reported to have been much higher than expected (125,715), no doubt stimulated by the campaigning on Hoffman’s behalf, by Sarah Palin, Fred Thompson, the Club for Growth (which spent $1 million on Hoffman’s behalf), Rush Limbaugh, et al.
More moderate than Hoffman?!?
No, Dodo. She was too far left. A more centrist GOPer doesn’t provoke the conservatives.
Turn out may have been a bit higher than standard for a special election but those elections are all about turn out. The local AFL-CIO was pretty motivated. And the Dems spent plenty for Owens.
Maybe Hoffman was too far right as well but the local GOP made their bed. Better Owens with a chance to beat him later than Dodo forever.
We’ll see if Owens can hold it against, for instance, McHugh’s former Chief of Staff next year.
Good to see you are buying into NJ and VA are local but NY 23 was national theme. Ignoring the GOP gains in Pennslyvania, Westchester and Nassau counties and Connecticut too.
Peter, “Diedre” goes by “Dede” which begs for Dodo. Sorry if your tender ears are offended. Seems to me though that you like to insult women in Texas to their face which is far worse than an internet comment. At least “Diedre” is a public figure.
Crazy like a fox, eh?
I’ll give you points for creativity.
But, returning to the subject of this post, I think the graph here sums things up quite well.
Nice world wide chart. I wonder why he didn’t use a US one.
Because, in a worldwide economic downturn, it’s actually relevant to see how the world is doing.
If you’d bothered to follow the links, you could have seen graphs broken down by country, etc.
France and Germany pulled out of recession in Q2 2009 (for all the reasons that make them the darlings of American “conservatives”). Japan followed soon thereafter. The US, as we have been discussing, pulled out of recession in Q3 2009.
All of this is reflected in the graph shown.
What the graph doesn’t show (which is why you really should follow the links) is what things would have looked like, had we continued down the path we were headed — tracking the collapse of 1929.
That’s what you neo-Hooverites wanted us to do. I highly recommend checking out the graph and thanking your lucky stars that someone with more sense was in charge.
“for all the reasons that make them the darlings of American “conservatives”
You don’t even see the contradiction based on your own argument. Germany and France, without a huge “stimulus” bill, started their recovery sooner.
2008 was a classic bank panic with triggered a recession. It was a George Bush policy, TARP, that ended the panic and saved the economy. The huge, wasteful O “stimulus” did nothing. The recovery was independeant of the “stimulus” and no amout of “saved or created” spin will change that.
They recovered sooner, with a smaller fiscal stimulus precisely because they run the sort of generous welfare state that you abhor.
Because of it, their private-sector aggregate demand did not drop as sharply (their unemployed can still spend, unlike ours). Hence the public sector fiscal stimulus — which is supposed to compensate for the drop in private-sector spending — could be smaller.
In fact, comparing the course of the recession in those countries, versus countries which take a more US-style approach points out another thing. The usual rap against French- and German-style policies is that they lead to persistently higher levels of unemployment.
That’s only half-true.
It’s true during boom-times. But, during recessions, the opposite holds: they suffer fewer job losses (another reason why their drop in aggregate demand was smaller).
What French and German economic policies do — as it turns out — is smooth out the fluctuations in employoment levels: somewhat higher levels of unemployment during boom times than we get, but lower levels of unemployment during economic downturns.
Complete wishful thinking on your part.
If it were true, why did the recovery start in Q3 2009, and not in Q2? Or Q1? (I.e, before any of the stimulus spending went into effect)?
In fact, if the fiscal stimulus (ie, government sector demand) were not, in large measure, responsible for the rebound in GDP, you would have a very hard time, indeed explaining why unemployment is still rising, nime months after Saint George left office.
Where did the jump in private sector aggregate demand come from, if we are still shedding jobs?
(By the way, this is all teh funny, as I recall you expressing vehement opposition to the TARP.)
Your recollection is wrong. I was basically agnostic on the merits but recognized that it would pass.
Mark was vehement in opposition, not me.
Look at the left side of the screen. See the word “archives”. Look at the ones for September if you like.