Posted on 05/05/2012 11:14:10 AM PDT by Signalman
The economy has stalled.
Friday’s jobs report for April was even more disappointing than March. Employers added only 115,000 new jobs, down from March’s number (the Bureau of Labor Statistics revised the March number upward to 154,000, but that’s still abysmal relative to what’s needed). We need well over 250,000 new jobs per month in order to begin to whittle down the vast number of jobs lost in the Great Recession. At least 125,000 new jobs are necessary each month just to keep up with an expanding population of working-age people.
With only 115,000 jobs in April, the hole is getting even deeper.
Most observers pay attention to the official rate of unemployment, which edged down to 8.1 percent in April from 8.2 percent in March. That may sound like progress, but it’s not. The unemployment rate dropped because more people dropped out of the labor force, too discouraged to look for work. The household survey, from which the rate is calculated, counts as “unemployed” only people who are actively looking for work. If you stop looking because the job scene looks hopeless for you, you’re no longer counted.
In the winter months — December, January, and February – hiring had seemed to pick up, averaging over 250,000 new jobs per month. Then the mini-surge stopped. The simplest explanation is that the mild winter across much of the United States gave an unusual boost to hiring then, leading to a correction by the spring.
Most of the job gains in April were in lower-wage industries – retail stores, restaurants, and temporary-help. That means average wages continue to drop, adjusted for inflation – continuing their long-term decline. Most of the new jobs that have been added to the U.S. economy during this recovery have paid less than the jobs that were lost during the downturn.
What does all this mean? Together with other recent data showing slower economic growth during the first quarter of this year, it’s safe to say the economy has stalled.
This is bad news for millions of Americans.
It’s also bad news for Obama and the Democrats. Voters don’t pay much attention to the economy in an election year until after Labor Day, so it’s not necessarily a huge help to Romney and the Republicans. But it’s a bad political omen nonetheless.
No set of policies between now and Election Day are likely to expand the economy. To the contrary, government at all levels continues to contract, acting as a fiscal drag when government needs to be doing the exact reverse – boosting the economy through additional spending. In 2013, when spending major cuts are scheduled, we’ll fall off a fiscal cliff.
Obama needs to push back loudly and clearly, saying he won’t support additional spending cuts until the economy is showing clear signs of improvement.
But widening inequality is the underlying culprit here. As long as almost all the gains from economic growth continue to go to the top, the vast middle class doesn’t have the purchasing power to boost the economy on its own. And rich Americans spend a much smaller portion of their incomes than does the vast middle class. Their marginal satisfaction from additional spending falls off. The second yacht isn’t nearly as much fun as the first.
Get it? We’ve still got a terrible cyclical problem – we can’t get out of the gravitational pull of the Great Recession.
Yet the underlying problem is structural, and it’s been growing for decades. The structural problem of stagnant or declining real incomes for most people, and soaring income and wealth at the top, was masked during the boom years when the middle class could turn their homes into piggy banks and extract home-equity loans or refinance. But the mask came off in 2008 as home values plummeted.
There’s no way to put the mask back on. We’ve got to face the truth. Obama and the Democrats have to explain to the American people why inequality isn’t just unfair; it’s also economically unsustainable.
I am sure that the miserable little bump of a man wants another trillion dollars in flaccid stimulus.
The problems are deeply systemic and won’t be solved until two things happen:
1. Immigration is restricted. We can’t get past the #1 issue in the labor market that the supply of employees is growing faster than job growth, and that just makes all the other fiscal problems worse. We need to create 150K jobs/month JUST to keep up with population growth, and most of that population growth comes from immigration.
2. “Free trade” has hollowed out the US economy and shipped entire industries off-shore, resulting in a facade of an economy in the form of “service sector” jobs, which are very easy to create... but also often very non-essential and easily eliminated as people decide to not engage those optional services and either do without or do for themselves.
And yet the unemployment rate went to 8.1% for April. Zeros fuzzy math. Look for 7.x% by election time.
The medicine isnt working so we need more of the same.
How do they do it, every month?
“REVISED”: 115,000 -—> 154,000
???
If we small businesses “revised” our numbers like that every month, we’d be arrested for fraud. Oh wait, they’re ***The US Govt***, and they can do that legally, can’t they?
Reich is wrong if the gap between between the rich and everyone else is fundamentally the result of our meritocratic system. If, however, it’s the result of something else, like collusion between the government and the wealthy — i.e. a rigged system — then he might have a point.
Sorry, posted before I wrote out what the second “must do” item is:
We must quit engaging in stupid trade agreements which don’t benefit us. The WTO regs allow responses to currency manipulation on the part of trading partners, and no one is using those features of the WTO - because everyone is doing it and as soon as one country makes some noise, everyone will be bringing an action.
The biggest violator in the market is the PRC, with their peg of the yuan to the dollar. No one wants to take on the PRC, because now the PRC has, thanks to the systemic imbalances, accumulated so much USD-denominated reserves of surplus cash, they’re able to play the sugar daddy to bail out one insolvent nation after another.... with strings attached. They’re rapidly becoming a global economic super power, and we, the US, and idiot “conservatives” among them, have given them this power, thanks to our trade policy.
Someone needs to take on China’s mercantilist power.
There's only so long you can keep saying 2+2=5 and believe it.....there comes a point where they have to cry "Uncle" and declare that 2+2=4 (and one of the 2's are missing)
I’ve been talking with my partners about a new division we’re opening up in the business. I say we hire ONLY veterans due to the 3D factor(dedication, determination, discipline)They say we can’t; it’s discrimination. I said: “Watch me.”
Amazing! Robert Reich without a doubt sees the problem, describes the problem, and then prescribes the same old Leftist idiocy as the resolution to the problem. Same thing over, and over again expecting different results. That’s a Lefty for you.
Leftists shouldn’t be allowed in office period. Let them tour with a guide, but never let them in.
According to a report I read in Investors Business Daily, the 115,000 jobs gained coupled with 342,000 people giving up looking for work was the cause of the drop of 0.1%.
A dedicated Obama fanboy on another forum I visit claims that the 342,000 represent baby boomers retiring rather than discouraged job seekers. And, of course, that's not Obama's fault. (I'm looking for a way to refute that claim but haven't found anything solid yet.)
The Lollipop Guild reports sales down 35%. Even munchkin economists are feeling the pinch.
Most of these numbers are generated via statistical sampling and model adjustment.
As more and more hard data becomes available through surveys and other sources, they revise the numbers - in some stats, several times. For example, GDP is revised at least twice after being reported for a quarter - and the second revision is over a year out.
Now, the real nut of the issue with they methodology behind these government stats is that they worked pretty well until 2007 going into 2008. None of these statistical series being published by the Fed, BLS, BEA, Census, et al, really have a grip on what happens to the economy during a debt deflation. Most all of our modern economic stats start in the post-WWII era. Most people don’t know how long it took to come up with a national unemployment figure during the Depression - we had no systemic, comprehensive study of unemployment in the 1930’s until about 1960 to 1962. Before that, the BLS didn’t track unemployment - they tracked things like injuries and deaths on the job, but not unemployment.
The fact that these statistical series are so grossly under-reporting various issues (eg, numbers of long-term unemployed, real unemployment) and lack of jobs being taken due to what I like to call “debt immobility” (people are upside-down on their mortgage, and for them to sell their house to take a job in another area *now* would require them selling at a huge loss and then having to go pay the bank the difference) are simply not accounted for in these statistical series and have to be created or inferred from other sources.
This, I believe, is going to cause problems for Obama as we plod onwards into the next downturn. They’re going to be crowing about the 7.something% unemployment rate... and lots of people aren’t going to believe him, because they’ll be looking around their families, neighborhoods, etc and saying “Barry, you’re simply full of crap. I’ve lived through 7% unemployment before... and this ain’t it.”
I submit the hypothesis that we have arrived at a point where for the next six months at least, uncertainty is going to grow and grow. When uncertain outcomes are far away temporally it doesn’t matter anything like when the uncertainty is close, temporally.
The uncertainties that are going to be resolved in the near future include Supreme Court rulings on health care and imigration, the election, huge spending cuts, expiration of tax cuts that would result in devasting tax increases for everyone who pays taxes, especially the middle class and investors.
Why should we be surprised if employers quit hiring completely in the face of so much uncertainty?
Agreed, NVD.
Personally, I believe the 15-16% figures - I’ve also heard 23% numbers - are far more accurate, using the U6 data. The U3 data is tainted and skewed lower.
I’ve been in two community colleges recently and from my observation, the hardest working, no-BS young guys in the classes are all vets. They might be rude, crude and highly non-PC, but they bust their asses and when it comes down to results, they’re as serious as heart attacks.
You might get a complaint, but it wouldn’t go very far. The military and veterans are very well supported in public opinion, and if some Obama cadre came down on you for not hiring some one of his slack-jawed OWS cohort, you just say “We make it our policy to hire military veterans” to the local news media and watch it snowball.
If you don’t own at least a sportcoat and tie, you might want to get one ahead of time, for media appearances...
Well, it isn’t just that U3 is gamed lower than reality.
It is that fundamental macro-econ assumptions in BLS employment models are now being challenged by events.
For example, there is no category for some types of long-term unemployed. There are people out there who have had their entire industry obliterated under their feet, and they have to take very low-wage jobs, if they can find them.
One of the other issues are things like youth unemployment. The kids coming out of colleges didn’t have a working history that enters lots of BLS models, they graduate and have a degree... but there are no prospects for them. eg, people with law degrees. Finally, we have a downturn in the hiring environment for lawyers. How do you count someone with a JD who has no job prospects as a lawyer? Further, how do we square the facts the almost no job that doesn’t pay six figures will allow them to pay down their incredible student debt, and there are no prospects for their making six figures without being a lawyer in a top-tier firm, etc? These people are going to be economic dead weight for years to come ... .and there’s no way to reflect that in the models and stats.
Double down on that insanity, Robert. You Marxists can drive us over the cliff even before Labor Day if you just push a little more.
If I was an organ grinder my monkey would look like Robert Reich.
Terms not seen in the media since Jan 09:
McJobs
homeless problem
recovery for Wall $treet but not Main Street
The economy and unemployment is being hammered MOSTLY by high fuel prices, onerous Demcratic/Obama regulation, Obama’s business crucifixtion mob, the potential for the Bush tax cuts to expire again, general Democrat/Obama meddling and tinkering in the market place, and the looming possibility of Obamacare surviving. Fix those things and our economy would be on fire in months.
You mean the trillion dollar stimulus and Obamacare went to only the TOP? You Mean All those Shovel ready jobs went to Millionaires and Billionaires? No wonder I didnt get one of those Jobs.
I think the Insurance companies made a Mistake they Sent the renewal for my Healthcare and it went up 2500 dollars! I am going to send a Copy to Obama so he can take care of that error,Im Sure they meant it is a 2500 dollar Decrease.
Why cant these people report the truth that Obama says instead of all these lies,the Press sucks
Good picture; it accurately sums up what taxation has become.
I have been saying since 2008 that the depression would doom Obama to being a one-term wonder, with the economy still way down in November 2012. It didn’t take a genius to see this coming 3 years ago.
3. The debt overhang must be reduced to a manageable level through ongoing deleveraging. Nothing will solve that but a decade or two of time.
Can you find statistics on employment for those over 55? If their employment participation is not dropping then they are not retiring and the losses have to be coming from lost jobs, not retirements.
I agree. The reason Obama is a one-term wonder is because of people’s seat of the pants experience with unemployment and inflation. They don’t care about published economic numbers. All they know is that their 25 year old kid lives at home, the wife lost her mortgage title job and can’t find anything close in pay, and they just got a pink slip. Meanwhile food and gas are up in cost.
Seat of the pants economics will cause the independents to dump Obama this coming election. I won’t call it a landslide, but people are going to vote their pocket books like usual, and Obama will lose by a goodly margin, in the same was as a failing football quarterback hears the crowd screaming for the 2nd string backup. The crowd doesn’t want to hear that the backup QB may suck, they just want a change to anybody else.
This election will be “anybody but Obama”. He’s done.
Sure, Bob, sure. It seems clear to me that 0bama should raise taxes on the middle class. After all, he's stood tall on spending cuts in every budget the country has had over the last three years. Which would be none.
Good idea. I'll see if the numbers are broken out that way anywhere.
Good luck. I find that no factual argument, no matter how clearly documented, ever convinces a liberal. They are straight emotion and you have to make them “feel” your argument, not gleen your analysis. At least that has been my experience.
I have never one single time every laid out a well-supported argument to a liberal and had one say “OK, I can see that now.” Never. The only few times I have ever won arguments with liberals, it has been appealing strictly to their knee-jerk bleeding-heart emotions.
So good luck to you.
“They’re going to be crowing about the 7.something% unemployment rate... and lots of people aren’t going to believe him, because they’ll be looking around their families, neighborhoods, etc and saying “Barry, you’re simply full of crap. I’ve lived through 7% unemployment before... and this ain’t it.”
You’re right; I believe he will lose the election primarily based on the employment situation, and his discredited media won’t be able to do a thing to help him.
“All they know is that their 25 year old kid lives at home, the wife lost her mortgage title job and can’t find anything close in pay, and they just got a pink slip. Meanwhile food and gas are up in cost.”
From your lips to God’s ears; think of all of the people impacted by this that have a lot of motivation to vote him out (and his media can’t convince them otherwise). He will win 25% of the vote, but for politically correct reasons 100% of Americans will have to pretend they voted for our affirmative action token...
“Can you find statistics on employment for those over 55?”
I think this group is in the worst shape; they had “before-times” salaries for their “before-times” standard of living (which included such things as families, homes, cars, etc.), and have been targeted by companies because of their salaries/benefits. I don’t believe that their skills are obsolete, simply because some are finding similar work at “adjusted-down” salaries; today’s younger people are watching the devastation of this group (often their parents’ generation) and those that are able to consider such things economically are swearing off families and homes.
It is a massive wealth re-distribution scheme with frightening consequences.
Obama can’t win less than 40-45% of the vote. When you add up all the welfare queens and food stamp recipients and people on their 90th month of unemployment, most of these will vote to re-elect Obama to keep the gravy train flowing. I would be shocked if Obama gets less than 45% of the electoral vote.
But more than 50% of the nation works, pays taxes and is in mortal fear of everything from job loss, to 401k’s being raided, to falling house values, to rising gas prices. Obama is going to lose but it will be close. Those on the gravy train are well over 40% so there is no way he wins less than 45% of the vote.
I still think he loses because of the economy.
“When you add up all the welfare queens and food stamp recipients and people on their 90th month of unemployment, most of these will vote to re-elect Obama to keep the gravy train flowing.”
People who have already run out of unemployment will be the first to show up to vote against Obama; those that are approaching the end will be right behind them.
“But more than 50% of the nation works, pays taxes and is in mortal fear of everything from job loss, to 401k’s being raided, to falling house values, to rising gas prices.”
The falling house prices and rising prices for everything else are shared by many of the unemployed; even people on fixed incomes (retirement, unemployment, disability) are getting creamed at the cash register.
“Obama can’t win less than 40-45% of the vote.”
I’d love to see how he intends to win more than 25% of the popular vote. “His” losses in 2009 (in states that he carried a year earlier - NJ, MA, VA), followed by his beat-down in the midterms, tell me a lot more than any BS poll released by Obama’s media. When I see him reaching out to college students and blacks (both of which, like everyone else except government workers, are worse off than 4 years ago), I take that as a sign that he knows he has lost the middle class and swing voters. When things are this bad, there is no more “swing vote”.
Great links, thanks.
Well then the reduced labor participation can’t be due to a flood of senior citizen retirements.
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