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Chronic Unemployment Bulletin, 2009

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[Dec 28, 2009] 22% Unemployment Including Long-Term Discouraged Workers by David Goldman

December 8th, 2009 | Inner Workings

One of the comments in response to my Sunday post on BLS data referred to the Shadow Government Statistics website ( John Williams adds long-term discouraged workers to the BLS broadest measure of unemployment. This yields a 22% broad unemployment rate.

[Dec 24, 2009] Unemployment and Excess Capacity by Mark Thoma

December 24, 2009


The excess capacity series is defined as 100 - capacity utilization rate.
The unemployment series is the civilian unemployment rate.

The excess capacity series (red line) peaked in June of this year, and has been moving downward ever since. If the pattern in the two most recent recessions holds, those in 1990-91 and 2001, the peak in the unemployment rate will come between 16 and 19 months after the peak in excess capacity, i.e. around a year from today (though prior to 1990 the peaks were coincident).

The most recent data on the unemployment rate showed a downward tick from 10.2 percent to 10.0 percent, so perhaps unemployment has already peaked and the lag will be shorter this time. But perhaps not. As an inspection of the unemployment series in the graph shows, the unemployment rate bounces around even when it is trending upward or downward. So it's hard to tell from one month's data whether the downward tick in the unemployment rate is temporary and unemployment still has a ways to go before peaking (as in the last two recessions), or a sign that a turning point has been reached and things are getting better (which would represent a reversion to the more coincident movement in the two series observed before 1990).

Note, however, that in the 2001 recession, unemployment fell briefly just after excess capacity peaked, but then resumed its upward movement for several more months before reaching a turning point 19 months after the turning point in excess capacity. Thus, while the recent downward tick in the unemployment rate is good news, certainly better than an uptick, we should be prepared for the possibility that the pattern in the last recession might repeat itself and unemployment will head back upward for several more months before it reaches its peak. I hope that doesn't happen, the sooner unemployment returns to normal the better, but we need to be better prepared than we are for the very real possibility that unemployment will continue to trend upward. I'd like to see more done on both the monetary and fiscal policy fronts as a preemptive measure, we can always ease off if things turn our better than expected, but at the very least we need to resist calls from the deficit and inflation hawks to begin pulling back and continue the programs that are already in place.

[Question: What happened from mid 1997 through the beginning of 1999 that caused the two series to move in opposite directions and separate?]

Update: Paul Krugman follows up here.

Selected Comments
Uncle Billy vs. Mont Pelerin:

Divergence... shooting from the hip I'd say we're looking at the effects first of the tech bubble, and then the financial bubble.


does capacity utilization really have much of an impact on employment anymore in a service type economy?

ken melvin:

Transition from a manufacturing to a whateverinthehell economy and we ain't done yet? Suspect some of the excess capacity was idled capacity en route off the books then demolition. Don't think there was a real recovery after 01, i.e., bubbles didn't cure and we're in the same fix only worse.


Put productivity on the chart and when productivity increase is rapid there is separation. The economy is transforming. The 'new' economy went through a boom and bust as the old economy continues to shed jobs.


Something to remember in all these discussion is that the last two business downturns were just barely recessions.

They were much more like the growth recession of 1967 than a traditional recession.

But the key difference has already been noted by bakho, and that is productivity. In those recoveries productivity growth was actually stronger than real GDP growth. It looks like that is a good possibility for 2010. Moreover, it was not that productivity growth was that strong by historic standards. Rather it was that real GDP growth was weak by historic standards.


January 15, 2009

Total Industry Capacity Utilization, 1967-2009


1993 ( 81.5) Clinton
1994 ( 83.5)

1995 ( 84.0)
1996 ( 83.4)
1997 ( 84.2)
1998 ( 83.0)
1999 ( 81.9)

2000 ( 81.7)
2001 ( 76.1) Bush
2002 ( 74.6)
2003 ( 75.8)
2004 ( 77.8)

2005 ( 80.1)
2006 ( 80.9)
2007 ( 80.6)
2008 ( 77.5)


2009 ( 71.3)


I'm with rjs on the divergence question. Capacity is a concept limited to the manufacturing sector; unemployment is wider.



I would believe the use of U6 numerics is still deceptive the same as the use of U3 numerics in the chart. It is still a measurement of a smaller subset of the Civilian Nonistitutional Population. As a result, Unemployment "may have a much steeper slope than what is portrayed by either U3 or U6 numerics.


My comments on the use of U6 were directed at the blogs chart, nothing else.

I believe that the economy is much worse then the numbers are telling us.


[Question: What happened from mid 1997 through the beginning of 1999 that caused the two series to move in opposite directions and separate?]

From the chart, it looks like the decoupling of excess capacity and employment may have occurred as early as 95.

One major factor may be the Internet.

CPU power, bandwidth, and data storage capacity have been growing at about 50% per year since the 80's. Nothing else in history has had these kind of rates of change year after year for decades.

Around the mid-90's, Internet performance and penetration reached a "good enough for business" inflection point. For example, Amazon began selling online in 1995, Dell in 1996.

International voice became cheap, and significant international data movement possible. This made the management of significant outsourcing possible.


The long term trend in capacity util. is clearly downward.

i.e, in terms of percentage.


Krugman from the update:

"But later recessions took place in a low-inflation environment, in which booms died natural deaths from overextended credit and overbuilding. Getting the economy growing fast enough to bring unemployment down after these recessions was therefore much harder, since the usual channel of monetary policy - housing - lacked any pent-up demand."

Sounds Austrian to me.

Bruce Wilder said in reply to Mattyoung...

Austrian would require quite a bit more Puritanical theme music. The Austrians would attribute venereal disease to enjoying sex too much.

Cynthia said in reply to Bruce Wilder...

That's the funniest thing I've heard in a while, Bruce. Thanks for the laugh.:~)



Capacity and unemployment are increasingly unrelated at least in mfg. Automation on the factory floor has for the most part made 'additional hires' unnecessary if not an outright impediment to output increases.

The amount of operational leverage out there now is mind boggling.

Oh - and the office side [both front & back office] are also 'levering up' w/ ERP, CAD, logistics & supply chain support software and much more. It requires fewer and fewer people to produce more and more in the office now... just like automation in the factory enabled plants to pump out more and more with fewer and fewer employees.

I don't see this fixing itself quickly or painlessly. Some tough choices are going to have to be made - like how much unemployment is too much & what do we do with the 'excess'? Or do we just 'let it happen' - whatever 'it' is.

Lyle said in reply to dryfly...

We do have a precedent the Ag sector did just the same thing 120-80 years ago as agriculture became mechanized and industrialized. So the proportion of people needed to grow the food went from 40-50 % to 2% today.

Its clear that for the young a CCC like service is needed as an alternative to jail for minor offenders, the CCC was run like the military, and we are still receiving value from the trails and roads they built.

bakho said in reply to Lyle...

The Ag sector was not fully transformed until after WWII. The excess farm labor was enlisted in the military or its industrial complex. After the war, the GI Bill sent returning soldiers to college and retooled some of the military capacity into domestic capacity.

We need a similar transformation today. We need to reduce the output of gas guzzling transportation vehicles and start building the transit of the future. We need to restructure our communities to reduce transportation energy. We need to construct equipment to produce zero carbon energy. There was a need to do these things earlier this decade. Instead we got a housing bubble and built too much too big houses.

Lyle said in reply to bakho...

Agreed the Ag sector transformation was not complete until after 45. However recall that for most of the 1920s we had a depression in Ag while a boom in manufacturing. (Ag's boom time ended when European farmers came back on line after WWI)


If we were to agree that Government expenditures (of all forms) towards mitigating this 'downturn' have been unprecedented, I would wonder if such expenditures had a positive impact on Cap Ute and, if there was an impact, whether it would persist in the absence of additional expenditures. It seems to me that looking at historical correlation may be only telling part of the story this time around. What would a 'double-dip' in Cap Ute signal?


1994 implementation of a redesigned current population survey had some effects on comparability did it not?
[various articles in Monthly Labor Review].

1997 happened to be the year during which nipa measured corporate profits peaked.


"According to recently revised estimates by the US Bureau of Economic Analysis, after-tax profits for the non-financial corporate business sector of the economy DECLINED BY ABOUT 25%, from around $400 billion in 1997 to around $300 billion in the first quarter of 2001. This 25% decline is already bigger that the 15% decline in profits in the 1990-91 recession and is almost as big as the 30% decline in the 1980-82 recession, the biggest decline of the postwar period.

"And these estimates are for the ABSOLUTE AMOUNT of profit. The SHARE of profit in total income has declined even more, by about one-third, from 12.5% to 8.5%. The share of profit is now about equal to the lowest levels of the postwar period in the 1970s and early 1980s. The limited gains from 1992 to 1997 has been wiped out entirely by the recent sharp decline. The RATE of profit, I would guess, has declined even more, because of the rapid increase of the capital stock during the "investment boom" of the late 90s." [10/25/01]

employment rate/utilization rate gap may be related to both the above.

[Dec 22, 2009] Economist's View Conducting Monetary Policy when Interest Rates Are Near Zero Will it Work

"Our elites do not understand that 10% unemployment is devastating to working people."

This piece again seems to assume that the American economy is a closed system. It consequently assumes that if interest rates are low enough, a sufficient number of adequately profitable opportunities exists in the domestic economy to provide a market for profitable lending. I do live in the rustbelt where things are worse than they are on the coasts, so my observations on the local scene may not be generalizable. In my neighborhood the profitable commercial and industrial opportunities are evaporating.

The largest local multinational industrial employer has notified its production employees that it is planning to move production to Poland over the next two years. R&D remains local for the time being. In a neighboring town an engine plant employing 800 people is closing in 2010.

A couple of thousand prosperous customers for local retailers and professionals will join the ranks of the unemployed, retired, or on reduced wages. New engine plants are probably opening overseas, but our people won't be working at them.

Vacant commercial and industrial space is everywhere hereabouts. No one needs to borrow to build a house, a store, or any kind of C&I property. Our biggest local commercial bank teeters on the brink, reprieved so far by TARP. Productivity improvements are great, but they don't improve employment prospects for the laid off production personnel or the folks who organize and manage the industrial plants.

There is still no credible plan to cease or even to slow the export of American industrial jobs. The low interest rate policy and labor arbitrage opportunites combine to encourage multinationals to borrow here and to employ the loan money to establish plants in the emerging producer countries.


Hola Mrrunangun

"There is still no credible plan to cease or even to slow the export of American industrial jobs. The low interest rate policy and labor arbitrage opportunites combine to encourage multinationals to borrow here and to employ the loan money to establish plants in the emerging producer countries."

And there is no plan. Nor will there be until the American public realizes they've been plundered the past 30 years. Obama needs to quickly learn how to administer public anger. There are plenty of deserving industries available for vilification.

Destroying profit making insurance companies, as an example, doesn't destroy the money involved. It just goes elsewhere. Knowing where it should go is obvious: To a non profit universal health care system, as one example.

Even after all the BS from the Republicans, and the other bought and paid for flacks, 77% of American still understand health insurance reform is necessary.

As FDR replied to a woman who harangued him that he wasn't doing enough "You must force me!"

FDR knew how to kick butt. Obama needs to review his technique and hone his own skills in this area.


Quantitative easing, or more simply, artificially low rates of interest, is not a cure, but only a palliative, or an anesthetic, that facilitates the real work of rebalancing and reforming the things in the system that created the crisis in the first place.

Applies quantitative easing without the reform is like providing narcotic drugs to a severely ill patient, making them feel better for a time, but in the end making their condition worse.

bob mcmanus:

"Quantitative easing is only a way to increase reserves."

I am interested in how and when and why "increasing money supply and velocity" became completely and exclusively "give it to the banks." Boehm-Boewerk?

bakho :

Does it depend on the objective? If the objective is only to return to positive GDP, it has probably worked pretty well. If the goal is to return to close the gap between the current 10% and full employment (4%) more rapidly, then a more substantial labor policy is required. The Fed has never been known to allow GDP to expand fast enough to make a large dent in this level of unemployment in a short period of time.

In less severe recessions, waiting for GDP expansion to create jobs was more tolerable because 6% unemployment is more tolerable than 10%.

Our elites do not understand that 10% unemployment is devastating to working people.

[Dec 22, 2009] The Mystique of 'Free-Market Guy' Obama by Jeff Cohen

No matter what the facts are, some liberal activists and leaders persist in seeing President Obama as a principled progressive reformer who lives and breathes the campaign rhetoric about "change you can believe in."

When he compromises, it's not Obama's fault - it's the opposition. Retreat is never a sell-out but a shrewd tactic, part of some secret long-range strategy for triumphant reform.

He's been in the White House eight months. It's time for activists take a harder look at Obama. And a more assertive posture toward him.

Because if Obama believes it's okay to pass healthcare "reform" that subsidizes insurance firms without a robust public option and he dispatches still more troops to Afghanistan, it could demobilize progressive activists while emboldening the Teabag & Beck crowd to bring the GOP back from the dead in low-turnout congressional elections next year. That would be a rerun of the 1994 rightwing triumph brought on by President Clinton's weakness (e.g. healthcare reform) and corporatism (e.g. the business-friendly NAFTA).

[Dec 21, 2009] John Ross Loose in Obamalandia

Yes, Baracko, the economy is booming again for Chinese-made mechanical hamsters but homelessness is the real growth industry. 2010 is expected to be a peak year for foreclosures - business is percolating for the Flint Michigan sign maker in Michael Moore's "Capitalism - A Love Story" who has landed a contract from local banks to churn out "Foreclosure" signs.

As evictions soar, the homeless overrun the shelters. Perhaps the cruelest twist of the holiday season was the 90-day jail sentence meted to an elderly rancher in San Luis Obispo California for housing a score of homeless clean-and-sober vagrants on his property.

The mood of the country as the Yuletide season heaves into view is decked with dark resentment. One AP story reports that food stamp eligibility workers in Detroit fear for their safety. Irritated applicants herded into long lines that snake into the street throw chunks of concrete through the windows. The cops are called to control unruly clients.

The rule of thumb posits that hard times drive the underclass together. Class distinctions become viscerally clear and solidarity flows. But given American exceptionalism, this is not a likely trend in Obamalandia.

This is a nation where the Great Unwashed have been coerced by vulture consumerism that puts them at each other's throats over mechanical hamsters. American workers have become independent contractors battling with their neighbors over scraps. Most of us do not even know who lives on the other side of the sheetrock. Racism has raised the walls even more precipitously in this post-racialist year. Hate crimes are on a roll - how about the thug who butchered a Florida Greek Orthodox priest because he thought he was a Muslim? President Obama is said to have spiked at nearly 400 death threats a day.

Recent revelations by those who purportedly speak for the Left have not been helpful. Moore's "Capitalism" seriously soft soaps criminal capitalism. The 1950s and'60s were hardly the working class paradise the filmmaker portrays - strikers were beaten, workers were red baited and blacklisted, black people dangled from poplar trees, fieldworkers were poisoned by the Agribiz kings. The bosses may have seemed like so many benevolent Scrooge McDucks to Moore when he was a lad growing up in a Catholic Caucasian industrial elite household but he is indeed spreading a white lie.

Michael Moore's egregious absolution of Barack Obama for his complicity in beefing up the fat cats while the rest of us grovel for carfare is "Capitalism's" most painful flaw. MM affirms that the Obamanator's candidacy so discombobulated the rulers that they threw gobs of money at him out of fear of what he represented and abracadabra he became the first Afro American president of these United States. We see Obama surrounded by jubilant throngs. We do not see the money. We see nothing about how the first Afro American president feathered the nests of the Wall Street vultures. Nothing about the sleazy White House backroom deals with pharmaceutical industry creep Billy Tauzin to greenlight the steepest rise in prescription drug prices in 20 years as a prelude to Obamacare. Nothing about dishing up the whole enchilada to the insurance vampires so they can more commodiously gouge the aged and infirm.

[Dec 20, 2009] Updating The Misery Index (Global Version)

The Big Picture

The original Misery Index was much simpler: Developed by Arthur Okun, an economist and adviser to President Lyndon Johnson in the 1960's. Okun merely added the unemployment rate to the inflation rate. The theory was that any combination of rising inflation and increasing unemployment reflected a nation's worsening economic performance.

Not coincidentally, the reporting of both Employment and Inflation have slowly been altered since the Misery Index was created. The gradual erosion of data accuracy, the softening of various metrics, and - WTF let's just say it - the systematic under-reporting of both Employment and Inflation is the net result.

Hence, if you cannot make the economy less miserable, you can at least make the components appear less miserable.

Anyway, here's a look at the new global version (Chart courtesy of NYT These Days, Countries in Misery Have Lots of Company by FLOYD NORRIS):

[Dec 20, 2009] Bah, humbug and labor statistics by Spengler

Dec 8, 2009 | Asia Times

...the labor force participation rate continues to plunge, as prospective workers leave the workforce. ...Between October and November, nearly 300,000 Americans disappeared from the labor force...

...Goods-producing industries lost 69,000 jobs by the BLS count, about equally divided between manufacturing and construction - yet the "recovery" supposedly is led by manufacturing.

...the discrepancy between the BLS number of 11,000 jobs lost in November versus the ADP number of 169,000 jobs lost lies at the extreme range of error for the two series.

[Dec 19, 2009] Feldstein- House Prices to Fall Further

If house prices fall further construction jobs, banking and real estate jobs will be affected. AAs for how much they can fell find the median income in your area. Multiply by 3. There's your target median price.

...the Obama administration's effort to revive the housing market is a failure and home prices will continue to decline.

"It was just not well enough designed," Feldstein said. "They ended up failing." That suggests the housing slump will "continue to push down house prices," he said.

"We saw a little pause in home-price declines in the summer but I think that was because of the first-time home buyers program," Feldstein said. "We're not going to get that boost."


Cinco-X wrote:

Actually, it was not well enough "conceived". There is a difference.

actually it assumes that any set of policy prescriptions could have kept them up. That he (Feldstein) assumes it can be done pretty much sums up how economic policy is being viewed these days. We have gone from the idea that government can run the economy to one that assumes that government can maintain asset prices irrespective of their economic worth.


Feldstein said: "It was just not well enough designed," Feldstein said. "They ended up failing." That suggests the housing slump will "continue to push down house prices," he said.

"We saw a little pause in home-price declines in the summer but I think that was because of the first-time home buyers program," Feldstein said. "We're not going to get that boost."

I'm really hate the sniping of guys like this.

We had a recession that lasted 1 1/2 years. Unemployment is up around 10%, and probably won't start dropping persistently until sometime next year at the earliest. What "better design" would have helped housing in an environment like that?

Angry Saver:

Feldstein is another over-rated eCONomist. He had a big hand in creating this mess as one of Reagan's chief debt pushers. Deficit hawk my @ss.

Here's some little known dirt on Marty. Feldstein was on the Board of Directors of AIG FP. You know, the part of AIG that played a huge part in the near collapse of the global financial system.

Feldstein is another eCONomist dingbat that believes that senseless credit creation is wealth creation. The man is a sham.


Nova, I agree ... but the point I was making was that in large parts of the country the projected price drops are largely theoretical, as ordinary people go on living in their ordinary homes and paying their ordinary mortgage payment. A 20% drop out in that Midwest Worker Home is a total drop of only $10,000. Not worth stopping your $350 mortgage payment. The guy living there can make $350/month without becoming a male prostitute or holding up liquor stores, even if his job is only part-time or is generally not much fun.

If the majority of homes in the Midwest go to "negative value," then it is Mad Max time! You would need to see unemployment up over 50% for this to happen, with roving bands of meth-freaks kicking in doors. We got lots of problems headed our way, but the Midwest is not going to turn into no-man's-land over a $350/month payment.

The bubble states are going to go through a painful readjustment, but the "floor" for housing are the Midwest prices. Yes, a handful of elite can continue to overpay for waterfront, but most people are going to have to give up the notion that things costing 10 or 12 times more in California or Florida is "normal." A little price premium, maybe, but things got very out of whack.

[Dec 17, 2009] Weekly Initial Unemployment Claims

The Obama administration's effort to revive the housing market is a failure and home prices will continue to decline. Morgan Stanley walking away from five San Francisco office buildings. The lender is Blackstone Group. This is a start of strategic defaults in CRE: they are current on thier loan. Over 24 million people have lost their job this year alone. Think about that. That's more then 23M Clinton created . 6500 people applied for 120 jobs @ Applebee's in the Bronx. Yesterday Ben said unemployment was abating. Man of the year, you know...
12/17/2009 | CalculatedRisk
In the week ending Dec. 12, the advance figure for seasonally adjusted initial claims was 480,000, an increase of 7,000 from the previous week's revised figure of 473,000. The 4-week moving average was 467,500, a decrease of 5,250 from the previous week's revised average of 472,750.

The advance number for seasonally adjusted insured unemployment during the week ending Dec. 5 was 5,186,000, an increase of 5,000 from the preceding week's revised level of 5,181,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims decreased this week by 5,250 to 467,500. This is the lowest level since September 2008.

Although falling, the level of the 4 week average is still high, suggesting continuing job losses.

Juvenal Delinquent:

I tend to doubt all recent Big Gov statistics as wholly without merit, but let's take this one on faith... If we use their numbers, over 24 million people have lost their job this year alone. Think about that~

Black Star Ranch:

.....this is the start of the second set of company closings. The ones that have held out till now, hoping Christmas shoppers would save them. It's realized now, that that was a pipe-dream.

Wholesale purchases for Christmas stock inventory was non-existent, most already knew it.


Why make risky loans when you can exploit the Fed-Treasury interest rate spread ?


Over the weekend, President Barack Obama went on the offensive against Wall Street for not lending more to Main Street. On CBS's "60 Minutes," the president declared, "I did not run for office to be helping out a bunch of fat cat bankers on Wall Street." He was joined on the Sunday morning circuit by his chief economic adviser, Lawrence Summers, who echoed the message of intimidation.

Wall Street fat cats are always a convenient political target, but bankers are responding to the incentives generated by the economic policies of the Treasury and the Federal Reserve. First and foremost is the Fed's policy of near-zero interest rates.

What this means is that banks can raise short-term money at very low interest rates and buy safe, 10-year Treasury bonds at around 3.5%. The Bernanke Fed has promised to maintain its policy for "an extended period." That translates into an extended opportunity for banks to engage in this interest-rate arbitrage.

Why would a banker take on traditional loans, which even in good times come with some risk of loss? In today's troubled times, only the best credits will be bankable. Meanwhile, financial institutions are happy to service their new, best customer: the U.S. Treasury. That play on the yield curve is open to banks of all sizes.



I also think there will be some trimming of jobs at the state and local level of employees as state budgets are strained.

I read that too. Agree, most reports I have seen are projecting layoffs for cities, states, counties etc.

crazyv :


quoting O'Driscoll

What this means is that banks can raise short-term money at very low interest rates and buy safe, 10-year Treasury bonds at around 3.5%. The Bernanke Fed has promised to maintain its policy for "an extended period." That translates into an extended opportunity for banks to engage in this interest-rate arbitrage.

Why would a banker take on traditional loans, which even in good times come with some risk of loss? In today's troubled times, only the best credits will be bankable. Meanwhile, financial institutions are happy to service their new, best customer: the U.S. Treasury. That play on the yield curve is open to banks of all sizes.

Doesn't anybody remember the the 91-92. This is not news this is exactly what the Fed did back then to recapitalize the banking system and is exactly what they are doing again this time.


Initial unemployment claims means little in this environment. A weekly series even less so.

Continuing claims, and average unemployment duration, are what matters.

The former is still running at 5.3-5.4 million - up more than a million in the past year alone - and the latter continues to set all-time highs. And remember, the former number does not include those on the various UI program extensions ... just those in the first 26 weeks of unemployment.

If, according to Time's Man of the Year, the economy turned the corner several months ago, why haven't we seen sharp decreases in these numbers by now?


Black Star Ranch wrote:

Now we AREN'T including 1099 folks again, correct? Nor the "discouraged unemployed", nor the UNDER-employed, nor the "mentally handicapped" whose goodwill positions have been taken over by a PHd needing the 12-hours a week cutting french fries?

while all of those are valid concerns- they are not germane to the initial claims report. The only point I was making is that even in a strong economy 16 million lose their jobs and thus to quote 24 million as losing their jobs without that context is hyperbole . As CR has shown in previous charts- actual job losses are up a bit but the big change is that people are not hiring- i.e. the economy is not creating new jobs. This distinction is crucial with regard to the economic policies that are followed. Europeans by and large have directed policy to prevent job losses we have adopted policies that increase job creation.

dum luk:

Nanoo wrote:

I also think there will be some trimming of jobs at the state and local level of employees as state budgets are strained. I've been trying to find the report I read earlier about NY transit authority trimming their workforce and reducing services.

Nightmare scenarios haunt states

[Dec 16, 2009] A poll on the toll taken by unemployment

December 15, 2009 | The Mess That Greenspan Made

The New York Times reports on the hardships being imposed on the nation's unemployed in a new poll that includes a number of startling statistics.

More than half of the nation's unemployed workers have borrowed money from friends or relatives since losing their jobs. An equal number have cut back on doctor visits or medical treatments because they are out of work.

Almost half have suffered from depression or anxiety. About 4 in 10 parents have noticed behavioral changes in their children that they attribute to their difficulties in finding work.

Joblessness has wreaked financial and emotional havoc on the lives of many of those out of work, according to a New York Times/CBS News poll of unemployed adults, causing major life changes, mental health issues and trouble maintaining even basic necessities.
The top number in the graphic shouldn't be surprising since, after all, one of the reasons that you save money is to have funds available for situations like this - if you lose your job.

The bottom number, however, is a bit surprising if for no other reason that it is nearly as large as the top one. While you can't really tell how much overlap there is, that would be an interesting data point as well since you would think that nearly all of the people in the lower group exhausted whatever savings they had (however small) and would be counted in the 60 percent group.

If you make the assumption that all of the 53 percent are in the 60 percent, then that's a surprisingly small percentage that were able to simply rely on their own savings to get them through.

Anyway, back to the article where the human interest stories abound:
"I lost my job in March, and from there on, everything went downhill," said Vicky Newton, 38, of Mount Pleasant, Mich., a single mother who had been a customer-service representative in an insurance agency.

"After struggling and struggling and not being able to pay my house payments or my other bills, I finally sucked up my pride," she said in an interview after the poll was conducted. "I got food stamps just to help feed my daughter."

Over the summer, she abandoned her home in Flint, Mich., after she started receiving foreclosure notices. She now lives 90 minutes away, in a rental house owned by her father.

With unemployment driving foreclosures nationwide, a quarter of those polled said they had either lost their home or been threatened with foreclosure or eviction for not paying their mortgage or rent. About a quarter, like Ms. Newton, have received food stamps.
A quarter of those who experienced anxiety or depression said they had gone to see a mental health professional. Women were significantly more likely than men to acknowledge emotional issues.
If you're in the mood for reading this sort of thing today, there's plenty more in this report along with videos of about ten of the interview subjects.

[Dec 8, 2009] Mish Nov. Jobs Report Looked Fabricated, Expect Harder Times in 2010

Dec 08, 2009 | Tech Ticker, Yahoo! Finance

From President Obama on down, Americans are hoping Friday's stronger-than-expected November jobs report marked the beginning of the end of our national unemployment nightmare.

Don't get your hopes up, says Mike "Mish" Shedlock, author of Mish's Global Economic Trend Analysis.

The November report was an "outlier" and "almost looked fabricated," according to Shedlock, an investment advisor at SitkaPacific Capital Management

Looking beyond the November jobs data, Shedlock says the odds of the unemployment rate coming down anytime soon are remote.

Even based on generous assumptions of 150,000 new jobs per month, no double-dip recession and a declining participation rate as Baby Boomers retire, "the best I can do is suggest the unemployment rate will be over 10% all the way through 2015 and never dip below 8% all the way out through the end of 2020," Mish says. (You can see the detailed analysis here on Mish's blog and find a downloadable spreadsheet to make your own assumptions and predictions here.)

As confident as he is about the grim outlook for jobs, Shedlock was very reticent to make market predictions in the accompanying video, taped Friday evening at Minyanville's annual Holiday Festivus in New York City.

"I think the best trade [of 2010] is for those that are nimble and able to roll with the punches whatever they come up with," he said. "I don't think realistically anyone knows what it's going to be."

In a subsequent email, Shedlock was more willing to take a position, as is more typical of the opinionated blogger:

"In the absence of a war outbreak in the Middle East or Pakistan -- and/or Congress going completely insane with more stimulus efforts -- I think oil prices are likely to drop, the dollar will strengthen or at least hold its own, and the best opportunities are likely to be on the short side," he writes. "2010 is highly likely to retrace most if not all of the 'reflation' efforts of 2009. If things play out as I suspect, 2010 will be the year of the great retrace as the economic recovery disappoints."

Earlier:"It's a Good Thing Banks Aren't Lending," Says Mike 'Mish' Shedlock

[Dec 8, 2009] Those unbelievable US payrolls by Tracy Alloway

Dec 07 | FT Alphaville

Just how amazing were the US payroll numbers released on Friday?

So amazing they're verging on the (perish the thought) unbelievable, according to some analysts.

The consensus forecast among analysts for the November job loss had been -130,000, with even the relatively optimistic and sometime-clairvoyant economists at Goldman Sachs forecasting -100,000. The official data showed a fall of just 11,000 - about 90 per cent fewer than the consensus estimate.

Thus, perhaps, ING's Rob Carnell pouring some cold water on the numbers on Monday:
In our view, the only potential fly in the ointment of this labour report is how believable it is. Payrolls has been making very, very slow progress in recent months, and such a dramatic turnaround will raise eyebrows, and may not be taken at face value by many. An improvement in the payrolls series always looked on the cards from last month. But most of the labour market data in the run up to this release had been consistent only with a very small step forward, so we may need to see this backed up again next month before concern about the labour market can really be filed away as 'last year's worries'.

Further support for the turnaround in the employment sector came from hours worked - which gained 0.2 hours on the month, helping to push weekly earnings higher. Hourly earnings continued to decline and now stand at only 2.2% YoY. But they lag employment growth by up to two years, so it would be a bit early to expect much improvement here.

In contrast to the weak November non-manufacturing ISM survey's employment index yesterday, which registered only a small increase from very low levels, the service sector apparently generated 58K jobs in November. Strong gains in temporary help jobs (usually a retail sector phenomenon) were a big factor here, so anecdotal reports of relatively soft retail sales in November may see some of these jobs rapidly removed after the end of the year, once sales have finished (if demand does not improve).

We are also slightly curious about the apparent surge in government jobs, which on revision have risen by more than 50K in the last two months. When state and local finances are in such a deep mess, even the Obama fiscal package is unlikely to have generated this rapid turnaround in the public sector. More believably, goods producing, construction and manufacturing jobs all saw continued large falls.


[Dec 07, 2009] Employment and Real GDP

Dec 06, 2009 Calculated Risk
The following table summarizes several growth scenarios. The unemployment rate is from the household survey and depends on the number of people in the work force - so it cannot be calculated directly. The table uses a range of unemployment rates based on 1.6 to 2.1 million people entering the workforce over the next 12 months (a combination of population growth and discouraged workers reentering the work force).
Real GDP Growth Percent Payroll Growth Annual Payroll Growth (000s) Monthly Payroll Growth (000s) Approximate Unemployment Rate in One Year
6.0% 3.5% 4,563 380 8.0% to 8.3%
5.0% 2.8% 3,684 307 8.6% to 8.9%
4.0% 2.1% 2,806 234 9.1% to 9.4%
3.0% 1.5% 1,928 161 9.7% to 10.0%
2.0% 0.8% 1,049 87 10.3% to 10.6%
1.0% 0.1% 171 14 10.8% to 11.1%

I expect a sluggish recovery in 2010, and I think the unemployment rate will stay near 10% for the next year. Those expecting a sharp drop in the unemployment rate are clearly expecting real GDP growth of 5% or more.

Obviously higher growth rates would mean an even quicker decline in the unemployment rate, and a decline in real GDP would mean much higher unemployment rates.

Spaceman Spiff:

Sorry, but I'm not buying it. 3rd qtr GDP was mainly from C4C and stimulus, doubtful to be repeated in 4th qtr, definitely not 1st Q10. UE numbers don't count birth/death fantasy numbers and can't be trusted. I'm not big on govt conspiracies mainly due to complete lack of faith in the competence of said govt, but I think BLS was tasked with making the numbers look good for political purposes, thus the graph matching. In fact, the match is a little too good considering the nature and causes of this latest depression (oops, recession!).


Someone posted a link to a paper that argued essentially that world gdp is tied to energy input.

Based on that, and leaning on some ideas from Dmitry Orlov, we could have the following scenarios:

Personally, I think we'll recover a bit, then get killed by $100+ oil, again.

The Orlov 'brick-wall' slide really hit home with me. We can only produce a certain amount, and if the price goes up, it seems likely this lowers the efficiency of the world economy, leading again to recession.

Comrade Misean is Dope:

"I expect a sluggish recovery in 2010,"

Based on the solid fundementals of massive Feral Reserve purchases of debt, massive backstopping, Feral Gov't deficits of unprecedented levels, a population in most G7 nations saturated with debt, and the traditionally wealthiest segment of the population (inhabited by baby boomers now) so upside down financially that they practice greeting people in the mirror every morning, no doubt.


CR, we're in substantial agreement here.

My numbers are suggesting that nonfarm payrolls are bottoming now, but we won't see an upturn until sometime around the end of the first quarter. Of course, that's a long way from recovering the jobs that have been lost.

Also, I'd suggest that manufacturers are targeting ratios, not levels, and there's some indication that the current inventory build is slowing substantially, hence a much smaller "bounce" in historical terms.

I guess we've got computers to thank for that.

[Dec 7, 2009] Are You Unemployed?

Here is a cute video to help you assess if you are unemployed or not.

Yes, that is the way it really works, on the off chance you did not know already.

Table A-12

Table A-12 on the Bureau of Labor Statistics (BLS) Employment Report. is where one can find a better approximation of what the unemployment rate really is.

click on chart for sharper image

Grim Statistics

The official unemployment rate is 10.0%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

It reflects how unemployment feels to the average Joe on the street. U-6 is 17.2%. Both U-6 and U-3 (the so called "official" unemployment number) are poised to rise further although most likely at a slower pace than earlier this year.

Mike "Mish" Shedlock


There's 534 members of Congress that stand around all day long figuring out how to squeeze every nickel out of anybody who has one.

They all need jobs because the work they do is killing the entire system. I guess that's what useful idiots do...


Is the root of the problem overpopulation? In an overpopulated world the value of each individual of 99.9% of the population tends to zero. Or is it overproduction by automated means? Then maybe we need to redefine work.


People don't like to hear this, but another factor is illegal aliens. They take up millions of jobs, and consume $Billions of welfare according to estimates.

It is also very hard on youth and minorities who need entry-level jobs to get established and build their skills.

Of course, the illegals are not an issue for /generalization/ right wing business owners who relish exploitable workers and bleeding heart liberals who rationalize getting cheap housecleaners and landscapers without the hassle of paying into Social Security and complying with other laws /end-generalization/. No, for them, illegals are an issue on which to bash the "intolerant" nativists, yada yada yada. :)


@Jim. I don't think it's just illegal aliens. They want as many aliens (be they legal or illegal) as possible. The last 3 manufacturing jobs I've worked at (yes here in the good ole USA) have been dominated by recent arrival immigrants. This is the trend in manufacturing. It's some kind of deal between company CEO's and the U.S. government. Companies don't want workers born in the USA because recent arrival foreigners are so much easier to manipulate.


mpower, I think that's a pretty good idea. I/T has to be one of the most brutal fields to be in right now. A friend of mine here in Ft. Worth was an old COBOL programmer that got laid off a few years ago. He just couldn't get a job in IT, and he eventually wound up working on ATM machines--going around and filling them up with money, etc. He was unemployed for well over a year. The family stayed with relatives, the church helped them out some, and the family also stayed with another family for about 6 months. He considered moving back up north where he was from. I mean they really went through a lot of pain. He says the ATM job is alright, and in this economy just about any job is better than none I guess.

I had a 2nd friend that worked in IT, and when he lost his job he also had a tough time finding work. He eventually wound up working for the city of Ft. Worth as a buyer. I'm not exactly sure what he does. I wouldn't go to law school just for financial reasons. Is it something you have a passion for? There are a lot of burned out lawyers out there doing their jobs, but they hate it. Maybe you could take a few night courses just to get a feel for it to see if you really want to do it or not. Could you make it through law school without racking up big debt? Have you followed the discussions on here that student loans are not discharageable in a bankruptcy?

Your situation is tough, but there is a solution even if you don't see it now. You might be amazed at how different things are one year from now.


Jobs, schmobs. Its about purchasing power. Capitalism doesn't give a damn about jobs. Socialism worships jobs. Both are extreme economic ideologies. If you want freedom go with an economic system that gives you purchasing power and doesn't have to BS you one way or another about jobs. Of course jobs are essential, no one is saying they are not, but if you have 10-20% unemployment until forever and on top of that most of the jobs are not providing you with sufficient purchasing power to be middle class, or we have no unemployment and insufficient purchasing power....its time to rethink the economic and monetary systems. Fuck the religification of economics, both right and left. Do something that actually changes the system....and consequently the crisis.



Mish is correct about the deflationary trend on assets including paper /debt and physical assets. However, spikes of price increases will continue for commodity items: food and utilities health care etc. There now … I did not call it inflation. Pick your own words. I like "coprolite" which is fossilized dinosaur shit. Wickyourpedia says:

America is in denial Politically about the state of the economy. The truth does not get votes or win re elections which is the objective of a politician. Politics is the game of trying to fool most of the people most of the time. There are a lot of fools out there in the good old US of A.

Globalization changed the rules of the game. Technology continues to reduce labor content. For too many graduates colleges are not an AMEX black card to the future. The vast majority of "professors" can only survive in ACADEMIA. There are not many good professors that do not morph to private industry because of the "education union" that provides good pay and benefits. Government employees are overpaid over benefited and their economic value is questionable in far too many cases. We can not have 50% of the work force supporting the other 50% of the "unemployed" (includes government workers) and continue with a middle class life style of the late 90's and early 2000's. The numbers do not work. After the recession in 2000 with 9-11 being a trigger many people still had line of credit expansion through credit cards or the home ATM to support the "middle class" lifestyle (of the rich and famous) or the lifestyle in Dallas of the $35K per year millionaire.

What did I do today that helped my company/enterprise produce a profit?

If you can not answer this you need to change your expectations.

[Dec 6, 2009] Mish's Global Economic Trend Analysis Geithner Disses Transaction Tax, Questions Tax Credits For Jobs

"those "not in the labor force" rose by 291,000 constituting nearly all of the decline in unemployment. That drop in the labor force is not normal to say the least. It should have risen by 100,000 minimum."

In regards to the economy, the jobs picture presented on Friday was a mirage. One even has to wonder if the BLS is purposely playing games knowing full well a massive revision in the January numbers (coming out in February), will subtract 80,000 jobs a month for a full year.

I doubt the unemployment rate is under 10% a year from now, or even two years from now, unless the BLS numbers show large declines in the labor force (as they did in the November Employment Report on Friday).

Table A

Explaining The Drop In Unemployment Rate

Table A explains the drop in the unemployment rate nicely.

Unemployment dropped by .2% even though 11,000 jobs were lost and it should take at least 100,000 jobs just to keep up with demographics. Instead note the drop in the civilian labor force by 98,000.

Moreover, those "not in the labor force" rose by 291,000 constituting nearly all of the decline in unemployment.

That drop in the labor force is not normal to say the least. It should have risen by 100,000 minimum.

[Dec 5, 2009] An Alternative Read on Today's 'Bullish' Jobs Data

December 04, 2009 | Financial Armageddon

Economists and stock bulls cheered this morning's better-than-expected November employment report. But was the data as good as it seemed? Consider the following:

Temporary jobs

Could the nine-month rally in share prices and the positive spin pouring out of Wall Street and Washington have encouraged some owners and managers, who are seeing little direct evidence of a rebound in the economy, to acquire what might be described as a labor call option -- that is, temporary staff (a key factor in the overall increase)?

Otherwise, temporary employees accounted for 52,400 of the hefty 86,000 jump in the professional and business services category. Might this reflect the fact that firms are temporarily taking on accountants, lawyers, and others who can help them further reduce costs (e.g., labor), restructure operations, and maybe even prepare for bankruptcy?

Long-term unemployed

Today's employment report revealed that the labor force participation rate dropped to 65%, it's lowest level in more than two decades; the number of Americans who are unemployed over 26 weeks fell to a record 3.8% of the civilian workforce; and, the "underemployment" ratio improved only marginally, to 17.2%.

Could this set of statistics be interpreted as a sign that employers don't see enough good opportunities to justify taking risks as far as hiring is concerned? In other words, are they are sticking with the safe option -- the job market's "known quantities" (e.g., those who are currently employed or who haven't been out of work too long)?

Category trends

While much of the focus was on the overall number, the breakdown by category was less reassuring. Those areas of the economy that would naturally be associated with a sustainable rebound in activity, including manufacturing, trade, transportation and utilities, and construction, are still hemorrhaging jobs.

Moreover, recent developments suggest that two categories which did see respectable gains, education and health care, face major headwinds in the period ahead. With municipal budgets under growing strain, school budgets -- and education-related hiring -- have nowhere to go but down. And with all eyes now focused on the rising cost of health care, the pressure to reign in spending will only increase.

[Dec 5, 2009] Unemployment Drops Amazingly To 10%, NFP Down 11.000 Much Higher Than Consensus, 17.2% U-6 Unemployment zero hedge

See Table A-12. Alternative measures of labor underutilization
Bearish Spirits

Check out the "not seasonally adjusted" number--October: 16.3%, November: 16.4%. Interesting!

Edit: Just saw your post further down, Mayhem.


WRONG. 1.4 million is an overshoot by 200-300,000, but who's counting anyway. and if you think a million temps making 10 bucks an hour is going to affect overall consumer confidence during the 6 months post-holiday when everyone is crying over their newly run-up credit card bills, well....not going to happen.

So whatever (artificial) boost this may provide, it will not suffice to offset seasonal layoffs and the coming clusterfuck of foreclosures and bankruptcy auctions. Net positive, no way after December numbers. sorry

[Dec 5, 2009] If the Economy lost Jobs, why did the Unemployment Rate decline?

Temp jobs distorted the picture ?
Dec 04 | CalculatedRisk

In August, when it was reported that the July unemployment rate dipped slightly to 9.4% from 9.5% in June, I pointed out that the dip in unemployment was just monthly noise: Jobs and the Unemployment Rate FAQ: How can the unemployment rate fall if the economy is losing net jobs, especially since...(more)

[Dec 5, 2009] Unemployment: Record number Unemployed over 26 Weeks, Diffusion Index

Dec 04 | CalculatedRisk

Two more graphs ...Unemployed over 26 WeeksBack in September, David Leonhardt wrote on the job churn rate in the NY Times: Try thinking of it this way: All of the unemployed people in the country are gathered in a huge gymnasium that's been turned into a job search center. The fact that this...(more)

[Dec 5, 2009] Seasonal Retail Hiring, Employment-Population Ratio, Part Time Workers

Dec 04 | CalculatedRisk

Here are a few more graphs based on the employment report ...Seasonal Retail HiringRetailers are hiring seasonal workers at slightly above the pace of last year ... Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph...(more)

[Dec 5, 2009] Employment Report: 11K Jobs Lost, 10% Unemployment Rate

Dec 04 | CalculatedRisk

From the BLS: The unemployment rate edged down to 10.0 percent in November, and nonfarm payroll employment was essentially unchanged (-11,000), the U.S. Bureau of Labor Statistics reported today. Click on graph for larger image.This graph shows the unemployment rate and the year over year change in...(more)

[Dec 5, 2009] Employment Report Forecasts

Dec 04 | CalculatedRisk

Just a few forecasts ...From CNBC: Look Ahead: Jobs Report Has Markets on EdgeEconomists expect November's decline in non farm payrolls to come in at about 125,000, and unemployment is expected to hold steady at 10.2 percent. ... Bill Stone, chief investment strategist at PNC Wealth Management ......(more)

[Dec 5, 2009] Mish's Global Economic Trend Analysis Mish Unemployment Projections Through 2020 - It Looks Grim

Mapping Unemployment

To map unemployment projections year-by-year from now through 2020 there are a huge number of variables to take into consideration.

Factors Affecting Unemployment Projections

Let's start our analysis with a look at monthly job growth trends from 1999 through 2009. John Mauldin posted the following chart, I filled in averages and outlined in blue previous recession periods.

Monthly Job Growth 1999-2009

Chart courtesy of BLS. Annotations by me, numbers are in thousands.

The areas in deep blue mark recessions. The last recession ended in November, 2001. The economy shed jobs for the next 21 months. Is there any reason for it to be different this time?

Neither the housing boom, nor the commercial real estate boom is coming back. Nor is there going to be another internet revolution. If anything, outsourcing of internet jobs to Asia is likely to remain intense.

Finally, consider all the financial engineering jobs, banking jobs etc, that are not coming back.

No Genuine Driver For Jobs.

What about manufacturing? As an imperfect proxy for manufacturing, let's take a look at light vehicle sales and employment.

[Dec 3, 2009] Worrisome Thoughts on the Way to the Jobs Summit, by Robert Reich

Most ideas for creating more jobs assume jobs will return when the economy recovers. So the immediate goal is to accelerate the process. ...
But here's the real worry. The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.
Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They've discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad.
This means many Americans won't be rehired unless they're willing to settle for much lower wages and benefits. Today's official unemployment numbers hide the extent to which Americans are already on this path. Among those with jobs, a large and growing number have had to accept lower pay... Or they've lost higher-paying jobs and are now in a new ones that pays less.


[Nov 30, 2009] Gambling on Luck-Based Benefits by Joe Robinson

Structural changes in workplace environment couse by Intennet, computer and outsourcing are equivalent to stealth erosion of standard of living.
March 20, 2005 |

Even if you can't make it to the local craps tables or you've spent your budget for Lotto tickets this week, chances are you're still doing your part for the new Roulette Economy, thanks to an in-cubicle gaming program sweeping the American workplace.

It's called the paid time-off bank, or PTO, and it's symptomatic of a workplace - not to mention society - that increasingly resembles a casino.

Paid time-off banks combine sick leave and vacation days, creating what at first looks like a jackpot - extra vacation days and more flexibility. But the winnings are subject to the vagaries of chance - your health - and corporate sleight of hand. Once your sick days are used up, further absences not covered by short-term disability come out of your holiday hide.

After her company switched to a paid time-off bank, Sherri Landrum, a medical assistant in Denver, discovered the exciting world of luck-based benefits. Last January, the single mother of nine had to have emergency foot surgery. The procedure and prolonged recovery quickly burned through her sick days, wiped out her vacation time and finally hammered her pocketbook. "Half the time I was off, I didn't get paid for," she said. "I couldn't pay my bills, and I'm still not caught up a year later."

Like Landrum, more and more American workers who have used up their puny sick-day allotment will have to decide whether to stumble to work sick or stay home and burn up vacation days. Or worry that if they roll the dice and take time off, it could jeopardize a paycheck if a health emergency hits. It adds another layer of guilt to gobs already there in taking a vacation, making it seem selfish to squander days that might be needed if you or a family member get sick.

All-in-one-leave banks have stormed through offices like rhinoviruses. The number of companies offering them swelled from 20% in 2000 to 67% today, according to CCH Inc., a human resources firm in Chicago. The epidemic comes as the number of sick-leave days continues to decline or vanish. Just three years ago, the average sick leave provided by companies with sick-leave policies for employees was 9.3 days. Now it's 6.9 days, plunging to 5 for most paid time-off sick-leave plans.

Those statistics are a shrinking fig leaf on a thornier issue: Nearly half of U.S. workers don't get any paid sick leave - for low-wage earners, it's 75%. Unlike 139 other nations, the U.S. doesn't guarantee paid sick leave. Let the pneumonias and hernias fall where they may.

Slashed sick leave is part of a broad assault on labor - roundly ignored in the last election - across a downsized workplace as the burden of risk shifts from employers to employees, who, if anyone's listening out there, are livid about it, whether Republican or Democrat or independent. Companies are cutting or eliminating vacation leave (nearly a third of American women don't get any; a quarter of men), pensions, health insurance and ergonomics rules. Meanwhile, the Economist reports that corporate profits in the U.S. are higher than they've been in 75 years as benefits - including sick leave - shrink.

Only one segment of wage earners has not had benefits slashed. "Professionals, managers and CEOs have great benefits," said Robert Drago, a Penn State economist and work-life expert. "For some reason, they no longer believe they have to treat employees on the front lines with dignity and benefits."

Employers say that merging sick- and vacation-leave policies increases attendance and efficiency. "It certainly reduces unplanned absenteeism," said Rich Chaifetz, chief executive of human resource firm ComPsych. "Sick days are typically unplanned, which results in significant burdens to corporations when individuals don't show up for work unexpectedly."

"We have found a positive impact on last-minute absenteeism," said Anne Ballentine, a vice president at...don't seem to be doing what their champions believe. Unscheduled absences not only haven't fallen, they rose to a five-year high in 2004, according to CCH Inc. That could be because the odds are long on the basic premise of the system: that you can plan absences and book viruses, car accidents and sick kids on the calendar months in advance with your boss.

PTO advocates are fond of saying that it doesn't matter what we call the time off anymore - sick, vacation, personal time - it's all the same. The blurring helps obscure the nature of a policy that holds very different leave purposes hostage to one another.

All-in-one time-off banks stack the deck toward younger, healthier and single employees. Those who stay healthy can, in theory, take vacations, and employees with health problems - or children or parents with health problems - often end up with scraps.

Like any good wager, paid-time-off banks dangle a few prospects for coming out ahead. They offer, for instance, a measure of flexibility to parents, many of whom can currently be fired for staying home with a sick child. Under these plans, they don't have to give a reason for an absence - so long as they schedule a child's bout with measles well in advance. Meanwhile, as the time bank gets drained, the incentive is for anyone not confined to a full body cast to hobble into the office.

In this Vicks VapoRub derby, it can't be surprising that 40% of companies are reporting a growing problem with "presenteeism" - employees who show up sick but are too ill to get anything done. A Cornell University study found that the cost of presenteeism is higher than the combined total of the cost of absenteeism and medical and disability benefits, as people spread bugs around and make themselves sicker.

It makes zero sense for businesses to keep the wounded on the front lines. It's even more myopic for our elected officials - who have primo benefit security - to ignore the toll on families of our Cro-Magnon policies and pretend tens of millions of caregivers haven't entered the workforce over the last 30 years.

"The overall health and well-being of families is affected, and there are costs to the public health system when you think about sending kids to school sick," said Debra Ness, president of the National Partnership for Women and Families, an advocate for women and healthcare in the workplace. As if that's not sickening enough, Ness notes that a large number of child care and food service workers don't have any sick leave, placing our kids and salads in the hands of contagion.

Not having any leave, of course, is even worse than the paid-time pool. "I can't afford to miss a single day," said Ramona Puentes, a Milwaukee laborer who is the sole provider for five children and lives paycheck to paycheck. She says that the lack of paid leave has cost her two jobs, once when she had to take care of her dying mother.

"It's a huge cost to the public when someone who doesn't have paid sick days loses a job and has to go on public assistance," said Linda Meric, director of 9 to 5, National Assn. of Working Women. "People are being forced to choose between being good employees and good family members. That's not a choice anyone should have to make."

A small first step toward curing the disease that's undercutting families and spreading bugs and medical bills in the workplace would come with passage of the Healthy Families Act, scheduled to be introduced in Congress this year by Sen. Edward M. Kennedy (D-Mass.) and Rep. Rosa L. DeLauro (D-Conn.). It would guarantee employees seven paid sick-leave days a year to take care of themselves or a family member.

In the meantime, American workers have to hone their gambling instincts in the Roulette Economy, which requires a knack for betting the house, car, liver and spleen to get what the ci>

The claims number cannot be dismissed out of hand despite the help from some aggressive seasonal factors. For the week ending October 24, they were at 532,000; on October 31, they were 514,000; on November 7, they were 505,000; on November 14, they were 501,000; and as of November 21, they had declined to 466,000. So the trend is clearly down - falling now for four weeks in a row. This is the lowest level on claims since the week of September 13, 2008 and this figure has not been below 500,000 since the opening week of 2009; and as an exclamation mark, the four-week moving average also dipped to 496,500 from 513,000 - first time below the 500,000 mark in a year.

The Conference Board's Consumer Confidence Survey data did show yesterday that in November people were having a tougher time finding a new job than at any other time in the past 26 years, so keep in mind that the claims numbers reflect firings, not hirings.

The firings have now abated, but it remains to be seen how the job market evolves with a record 9.3 million Americans working part-time who would rather have a full-time job (double the norm) and with the workweek at a record low of 33 hours. All companies have to do is take the workweek back up to where it was when the recession began and right there it would create the equivalent of two million new jobs (but without actually adding headcount); or take the number of people that were furloughed into part-time back onto full-time, which would also be equivalent to de facto job creation of two million jobs.

If we see confirmation of this 466,000 number in next week's data, it would be a pretty safe bet to say that claims have finally gravitated into a 450,000-475,000 range, which in the past was consistent with very modest job growth, but growth nonetheless. Economists have had trouble this cycle because of the nature of the recession being a credit contraction and asset deflation phase as opposed to a garden-variety inflation/excess inventory downturn, so relying on the past has been tricky and faulty. Be that as it may, look for upward revisions now for the December 4th release of Street estimates for nonfarm payrolls (the consensus is currently at -120,000, which that could now come down to -100,000 or lower) and talk will soon grow of a positive-print as early as the December or January Nonfarm payroll reports. Considering that the equity market has already risen at a pace that would in the past have been associated with two million jobs being created, it will be interesting to see how equities "trade" off of the "fact".

The firings have now abated, but it will be interesting how the job market evolves with a record 9.3 million Americans working part-time and the workweek at a record low of 33 hours

[Nov 15, 2009] Who's Afraid Of A Falling Dollar

The Baseline Scenario

Things like this seem to just talk about the same old facade of bloodless numbers completely abstracted from the real economy and real people, albeit perhaps of great interest to the parasite class.

The baseline for any real policy has to tive, and offensive, even if it does make for more nicely "balanced" exchange rates. (Of course I have no idea how oil fiend America, utterly committed to consuming at a level where it has to import two thirds of its supply, is supposed to fix its trade deficit on any fundamental level, but that's too concrete a matter for most establishment commentary).

As the evidence of the last several decades proves, financialization and globalization have only destroyed real jobs, security, and quality of life in America, and have generated only the purely malevolent pathology of extreme wealth concentration.

From any human point of view the failure is absolute. Everything finance capitalism ever claimed has been proven to be a lie.

So when the G20 focus only on "how will this help balance the exchange rate and the trade deficit?", with all of it defined only in terms of money sloshing around among governments and big financial entities, none of it having anything to do whatsoever with the well-being of actual people anywhere, whose position will only continue to erode, we see the absolute moral failure and bad faith of this "leadership" as well.

So whenever we hear talk of pulling back on fiscal stimulus, we should see it in the real world context.

The one thing and the only thing the American government should now be doing is using stimulus, vastly more of it than the meager amount so far, with whatever backstop was needed to strengthen community banks, credit unions and such, to rebuild a real economy in America.

Every cent should always have gone to that, and not one cent to Wall Street bailouts, loan facilities, quantitative easing, and all the other different names they have for purely vandalistic looting.

[Nov 15, 2009] Krugman on the Need for Jobs Policies

Paul Krugman has a good op-ed tonight on how Germany has fared versus the US in the global financial crisis. Recall that there was much hectoring of Germany early on, for its failure to enact stimulus programs. German readers were puzzled, since Germany has a lot of social safety nets that serve as automatic counter-cyclical programs. As an aside I visited a few cities in Germany on the Rhine and Danube in June (unfortunately in heavy book writing mode, and so did not get to see as much as I would have liked) and it was remarkable how there were no evident signs of the downturn: no shuttered retail stores, no signs of deterioration in public services, stores and restaurants looked reasonably busy (although I had no idea of what norms there might be).

Krugman holds Germany up as an example of the merits of employment oriented policies (which had been the norm in America prior to the shift to "markets know best" posture (and more aggressive anti-union policies) inaugurated by Reagan:

Consider, for a moment, a tale of two countries. Both have suffered a severe recession and lost jobs as a result - but not on the same scale. In Country A, employment has fallen more than 5 percent, and the unemployment rate has more than doubled. In Country B, employment has fallen only half a percent, and unemployment is only slightly higher than it was before the crisis.

Don't you think Country A might have something to learn from Country B?

This story isn't hypothetical. Country A is the United States, where stocks are up, G.D.P. is rising, but the terrible employment situation just keeps getting worse. Country B is Germany, which took a hit to its G.D.P. when world trade collapsed, but has been remarkably successful at avoiding mass job losses. Germany's jobs miracle hasn't received much attention in this country - but it's real, it's striking, and it raises serious questions about whether the U.S. government is doing the right things to fight unemployment….

Germany came into the Great Recession with strong employment protection legislation. This has been supplemented with a "short-time work scheme," which provides subsidies to employers who reduce workers' hours rather than laying them off. These measures didn't prevent a nasty recession, but Germany got through the recession with remarkably few job losses.

Should America be trying anything along these lines? In a recent interview, Lawrence Summers, the Obama administration's highest-ranking economist, was dismissive: "It may be desirable to have a given amount of work shared among more people. But that's not as desirable as expanding the total amount of work." True. But we are not, in fact, expanding the total amount of work - and Congress doesn't seem willing to spend enough on stimulus to change that unfortunate fact. So shouldn't we be considering other measures, if only as a stopgap?

Now, the usual objection to European-style employment policies is that they're bad for long-run growth - that protecting jobs and encouraging work-sharing makes companies in expanding sectors less likely to hire and reduces the incentives for workers to move to more productive occupations. And in normal times there's something to be said for American-style "free to lose" labor markets, in which employers can fire workers at will but also face few barriers to new hiring.

Yves here. Krugman does Germany an injustice by failing to contest US prejudices about European (particularly German) labor practices. If German labor practices are so terrible, then how was Germany an export powerhouse, able to punch above its weight versus Japan and China, while the US, with our supposedly great advantage of more flexible (and therefore cheaper) labor, has run chronic and large current account deficits? And why is Germany a hotbed of successful entrepreneurial companies, its famed Mittelstand? If Germany was such a terrible place to do business, wouldn't they have hollowed out manufacturing just as the US has done? Might it be that there are unrecognized pluses of not being able to fire workers at will, that the company and the employees recognize that they are in the same boat, and the company has more reason to invest in its employees (ignore the US nonsense "employees are our asset," another line from the corporate Ministry of Truth).

A different example. A US colleague was sent to Paris to turn around a medical database business (spanning 11 timezones). She succeeded. Now American managers don't know how to turn around businesses without firing people, which was not an option for her. I submit that no one is willing to consider that the vaunted US labor market flexibility has produced lower skilled managers, one who resort to the simple expedient of expanding or contracting the workforce (which is actually pretty disruptive and results in the loss of skills and know-how) rather than learning how to manage a business with more foresight and in a more organic fashion because the business is defined to a large degree around its employees.

Selected Comments:

Captain Teeb:

This post is interesting because I've lived the last 10 years in Europe, with 9 of those near the small city of Trier, Germany. I can say that, while there are headlines about job losses or difficulties for jobless youth, there is no glaring evidence of a downturn, either in southwest Germany or the nearby parts of Belgium, France, or the Netherlands. There don't seem to be any more residential 'for sale' signs than normal, and only slightly more in the small commercial spaces on the ground floors of apartment buildings.

I'm an IT indian, not a chief, and so am not qualified to address the manager question. But I can say that the average tenure at a job is longer here, so that one has more of a stake in the quality of one's work (if you mess up the system, you'll be the one to have to fix it).

Regarding restrictive firing rules that make it difficult to shed employees on a whim or in a panic, I'm reminded of the essay you hosted by Richard Kline a couple of years ago in which he discusses how barriers which reduce efficiency in easy times (e.g, firing restrictions, capital controls) serve to slow down systemic contagion when it's bouncing around. Perhaps that essay is relevant to this discussion.

Richard Kline:

Oh say hey there, Cap'n, it's interesting to see that someone both read and broadly remembers what I wrote in May 08. Now, I did not actually use the example of dismissal restrictions as a systemic buffer, but your observation of potential relevence is cogent, to me as well. A cascade of firings crashes demand; we've certainly seen that in the US, and I think comparing such action to an over-connected, under-buffered system is fair, certainly in the 'net of similar nodes' hypothetical example I extended in that essay.

There is a potential downside to such restrictions at the nodal (employer) level: if you're restricted from firing employees in the face of demand for your product/service, the system (economy) may be saved but _you_ may go broke in the process. Germany seems to have thought this through as well as one can in that employers are _subsidised_ by the government for part of their costs in retaining the employee, with more of the costs potentially recapturable indirectly by not having to train replacements once business recovers into a normal range. To me, that is good systemic thinking, as well as healthy community cooperation. There is the further, non-systemic benefit, potentially, in that employees who are kept on in bad times are going to be around long-term, as you say, and have some incentive to help things run well as opposed to just picking up a paycheck. Employee goodwill and committment is something US employers have thrown out the window, too.

Remember all those (Anglo) doomsayers a year ago who were screaming how rotten, sick, and incipient things were 'in
Europe' and how terrible German banks were, and how the ECB had it all wrong and Germany was goint to [something]. Idjits. Or more accurately anti-Eu ideologues. Germany, the government, has lost a great deal of money propping up its banks, and no one should think all of this thing is over. The idea that Europe, the economy, was going to do worse than the US-UK was patent nonsense, and now we begin to have facts on the ground to validate that.

Suppose that you, coporate owner/universal master CEO aquire a position of resposibility running an existing enterprise and judge that it is desirable to increase your profits over whatever they were previously. One method is to improve your business; build new products, refine production, develop new markets, acquire a genuinely useful strategic partner, find another investor to grow your shop. Yah know, Commercial Practice. All of those methods have risks of failure. Few of those methods are guaranteed to yield increased new profits. Another method is to fire 10% of your employees, bullyrag the rest into taking up the slack in production, and pocketing the labor cost difference as profits from 'productivity gains.' Just like it looks, Robber Baronage. This method is guaranteed to yield money for the firm if executed successfully _regardless_ of the actual state of the business or its products or its markets or its supports. Since everyone likes guaranteed profit gains, and the latter method is legal in the US because, frankly, American citizens are in the main idiots, we have had thirty years of just such Baronage. Now, having run the country into the ground, said barons, or a faction amongst them, has set themselves up to loot the Treasury of the country and leave the bill with the populace as a whole. Yah know, a Ruling Class. This is an historical analogy, not a systemic one, and a few comparables come to mind: France, Austria, Russia, China, could name a bunch more but that's enough. I think most of us would prefer Germany of 2009 to what the US has set itself up for, but here's one thing to remember: Germany, too, tried almost every possible alternative before settling upon democratic socialism by the default of exahustion _and_ under foreign occupation. I can't say what exigency will be required to effect changes of similar nature and scale in the US, but we may be sure the experience is likely to be . . . painful. Pity.


The US has, up until now, had a hybrid economic model, based partly on conquest and plunder (geographic expansion and then empire) and partly on internal production. But the empire part has seen its better days.

It's been quite a while, however, since Germany has had imperial pretensions. So maybe Germany is just a little farther along on the learning curve of knowing how to make an economy operate on domestic production alone, without the plunder part.

Jefferson wrote about a difference that existed between Europe and the US during his lifetime. And what was happening then in Europe seems to be what is happening in the US now. "Under the pretense of governing," he declared in describing the European nations, "they have divided their nations into two classes, the wolves and the sheep. I can apply no milder term to the governments of Europe and to the general prey of the rich upon the poor."

Jefferson marked the difference between Europe and the US up to the superior American social life. And ever since, we have variously attributed American prosperity to our superior diligence, our greater skill or (more recently) to our more fervent devotion to the ideals of freedom. But perhaps our abundance had more to do with providence-the almost unlimited natural resources that lay before the young nation-than it did to how good we were.

But it all seems to be catching up with us now. As Reinhold Niebuhr predicted several decades ago in The Irony of American History:

When the frontier ceased to provide for the expansion of opportunities, our superior technology created ever new frontiers for the ambitious and adventurous. In one sense the opulence of American life has served to perpetuate Jeffersonian illusions about human nature. For we have thus far sought to solve all our problems by the expansion of our economy. This expansion cannot go on forever and ultimately we must face some vexatious issues of social justice in terms which will not differ too greatly from those which the wisest nations of Europe have been forced to use.


I also have first-hand experience with the differences alluded to in this article. In my experience working in a high-tech company in Germany, I was amazed at the level of cooperation among employees, compared to what I was used to in North America.

Everyone on the team ate a sit-down lunch together, almost every day. People who sat at their desk with a sandwich or whatever were considered 'anti-social' and looked upon somewhat suspiciously.

And because they socialized at lunch so consistently, goofing off between 9-12 and 1-5 was also not common. Everyone left at 5 to catch trains and such, but work got done. They also helped each other rather than looking upon each other as competitors, and this is what made them highly productive.

Now contrast that with your typical high-tech company in California. Tech people arrive at 10 or later, goof off till 12 or so, grab lunch at Baja Fresh at 130, stay at the office till 8-9pm to avoid traffic and actually get some work done. Having a life? Nah, you have to work "hard" so those 20 of 200m available stock options you will vest in 4y from now make you rich!


I also spend nearly 10 years in Europe, working in Vienna for a large European electronics company and agree completely with your assessment of the differences between European and North American workplaces. They were more cooperative, efficient and democratic, partly because managers were unable to terrorize employees with the fear of immediate and arbitrary job-loss. People worked hard, when there was a lot of work to do and took time off (ah those many weeks of vacation) to recharge their batteries regularly versus the unending rat-trap of working here.

One other thing that I have always felt Europe does better on the job front is the practice of double paying salaries twice a year (just before Christmas and the summer holidays) which goes a long way towards smoothing out the consumer spending cycle. Everyone has money (vs. credit) to make sure that there are presents under the tree and a family vacation without incurring debt. When you add to that effective health insurance (in the case of Austria, large, semi-private health insurance companies that cannot pick and choose who the cover) you end up with a more stable workforce who can live a reasonably secure and comfortable life without ending up neck-high in debt. Slower growth perhaps, but less bubbles as well.

Patrick Neid:

Here's a better description of what Krug alluded to.

Bill Spence:

Of course US labor mobility is not all its cracked up to be. The lack of universal health care inhibits a lot of job moves, including leaving to start a new business. Its pretty dangerous to leave a job with health care to a position where you have none or have to pay insane premiums.

Then again look where America has lost its jobs. Most losses were in construction and manufacturing. The construction jobs were always going to go because unlike Germany the US overbuilt.


"Krugman does Germany an injustice by failing to contest US prejudices about European (particularly German) labor practices. If German labor practices are so terrible, then how was Germany an export powerhouse, able to punch above its weight versus Japan and China, while the US, with our supposedly great advantage of more flexible (and therefore cheaper) labor, has run chronic and large current account deficits?"

There is an essay by J.Schmitt called "Inequality as Policy" available for download here at CEPR:

Though primarily a discussion of inequality, it is also relevant to what Yves Smith calls "…our supposedly great advantage of more flexible (and therefore cheaper) labor…", and where that comes from and what that means. Might be challenging for some, but not because of technicalities. These things have got to be faced.

Personally I've been puzzled for a long time about why the EPI's "Agenda for Shared Prosperity" has received so little attention on the WWW. It's been out for a long time now – well over a year, I think – and I would have thought that even if it was full of bad ideas there would have been discussion and criticism. But the silence has been deafening, particularly since so much work obviously went into it. Maybe readers of this blog can shed some light.

Toby :

Germany itself is a tale of two countries. The problems of having absorbed the old East Germany have not been solved, particularly if you compare unemployment in the country's two regions. I just quickly tried to find some figures with Google and couldn't, but remember between 16 and 17% for the East, and 5-8% for the West. Unemployment problems in the East are very stubborn; this week Germany celebrated 20 years since the fall of the Wall.

Also, a perusal of the 2009 ILO Yearbook with data going back to 1998 shows a pattern of higher unemployment in Europe than in the US. My reading of this is that western European governments tend to accept unemployment as an inevitability, but, being somehow less offended by it, cushion its negative effects on the economy at large by giving the unemployed enough money to spend. High taxes forcing trickle-down, so to speak. One way or another you have to keep purchasing power out there strong. People have to keep consuming. Growth is all.

Philosophically you can have a problem with people getting something for nothing, and I think, crudely speaking, this is how America feels about state handouts. There is nothing wrong with this analysis in and of itself, but whichever way you choose to go, there are costs, of course. America pays for its preferred method with wilder swings and more suffering, Germany (and others) pay with a large army of people who become totally dependent on the State. Pick your poison.

And now I mention yet again what the mainstream does not want to address, technological unemployment. While it is true that the amount of work to be done in an economy is not fixed (I refer to the Lump of Labor fallacy), the amount of work that need be done by human hand or mind has limits, in that our technologies are getting better and better, slowly, at replicating what humans can do, typically vastly improving on it. Rifkin, for example, quotes a figure of 2% global workforce on the factory floor by 2020. All those calling for bringing manufacturing back to the US need to address this. Utlimately, therefore, it does not matter whether you go the way of Europe or the US; technology will increasingly undermine people's ability to find work, while forcing greater proportions of the working population into services.

I know full well this is an old theory, over 100 years old in fact, and has had many advocates, almost all of whom have been proven wrong no doubt. I think only their timing was off, plus their knowledge of how hard it is to replace human soft skills. But hard does not mean impossible. The other factor slowing technological unemployment down is that work is essential to any economy, regardless of hue. All possible efforts are therefore made to create work, by hook or by crook. But it's getting harder and harder.

On top of this is the carrying capacity of the planet. If we keep insisting that ever increasing consumption is a must, with population growth slowing and predicted to peak in 2050, we are going to run into a very hard wall indeed. Not only are infinite wants impossible, insisting that demand is infinite gears our economics in the wrong way, and forces us to ignore the ecosystem upon which it depends. I have said so before, and will say so again; we need a new economics. The only one I am aware of is resource-based, but will listen to other ideas. This is something we have to start discussing as a matter of urgency, and not just economists and bloggers, but physicists, architects, zoologists, genetecists, educationalists etc. We urgently need an apolitical, cross-discipline debate to expose the nature of the problems we face as a species on a planet, and which are the strongest ideas are for dealing with them.

i on the ball patriot:

Toby you have it right. Technological unemployment and carrying capacity of the planet are key factors. Factors that the ruling elite are well aware of and so constantly deflecting the public's eyes away from.

As for an apolitical solution there is no such animal as all of life is politics. The best one can hope for is people to get out of their system assigned boxes and wake up to the course we are on with the present deceptive politics of life where we soon will have a two tier ruler and ruled world. Recognition of that fact coupled with the realization that the ruled class will be extremely small is what is needed.

Unfortunately the marks are being conditioned to believe that any minute they will be; the next millionaire, the next rock star, the next movie hero, the next fortune five hundred CEO, the next lottery winner, etc., and so they believe that they will be included in that small ruling elite. Nothing could be further from the truth. Added to that is that there is always an out of balance application of past solutions applied to this totally new and very unique situation.

Krugman is a deceptive system tool.

Perception is the key to change.

Deception is the strongest political force on the planet.


Thanks iotbp.

By apolitical I mean a(party)polical, that is; as non-tribal as possible. I have yet to come up with a decent definition of politics, but am aware that it is part of human society, almost by definition.

And yes, deception is a very powerful tool, not least because there is no such thing as "the truth," and yes, we are each of us tasked with a long and difficult process of self- re-education. We have to pull our heads out of the trough, detox, and look around. The chance that we won't make it, as a species, should spur us on the more.

And thanks too Mickey, although the idea I have aligned myself with would render monetary profit redundant, but that's a whole other story. If, on the other hand, by profit you mean something like "safe production surplus" I would agree.

Mickey, Akron, Ohio:


But somewhere somehow we have to get from here to there… Profit of the monetary kind will still be with US for a while.

Mickey, Akron, Ohio:


On the mark…as usual. It's simple as ESP: EQUITABLE SUSTAINABLE PROFITABLE. All three must be in balance.

Swedish Lex:

Further to Toby's comment. Article 2 of the new EU Treaty (Lisbon). These principles and objectives should be reflected in all actions of the EU and of its Member States:

1. The Union's aim is to promote peace, its values and the well-being of its peoples.

2. The Union shall offer its citizens an area of freedom, security and justice without internal frontiers, in which the free movement of persons is ensured in conjunction with appropriate measures with respect to external border controls, asylum, immigration and the prevention and combating of crime.

3. The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.

It shall combat social exclusion and discrimination, and shall promote social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the child.

It shall promote economic, social and territorial cohesion, and solidarity among Member States.

It shall respect its rich cultural and linguistic diversity, and shall ensure that Europe's cultural heritage is safeguarded and enhanced.

4. The Union shall establish an economic and monetary union whose currency is the euro.

5. In its relations with the wider world, the Union shall uphold and promote its values and interests and contribute to the protection of its citizens. It shall contribute to peace, security, the sustainable development of the Earth, solidarity and mutual respect among peoples, free and fair trade, eradication of poverty and the protection of human rights, in particular the rights of the child, as well as to the strict observance and the development of international law, including respect for the principles of the United Nations Charter.

6. The Union shall pursue its objectives by appropriate means commensurate with the competences which are conferred upon it in the Treaties.

Vinny G.:

The new EU treaty sounds great on paper. Yet, there is still a long road ahead until it becomes reality. The main obstacles, as I see it, are, nationalism and discrimination. However, not all EU nations are equally evolved. While much of Germany and most Nordic nations have evolved an EU-compatible postmodern mindset, I am afraid much of Southern European and British populace remains rather 19-th centurish.

Nonetheless, I truly hope this treaty will become reality, if not in my lifetime, then at least in my children's. As a dual national, US-EU, who spends about half of every year in America and the other half in Europe, I am dismayed by what the US has become lately, by the current health care debate, the blatant hate US businesses show toward their employees, and the breakdown of the most fundamental elements of the social fabric of the United States. As a parent, I am beginning to see Europe as the much better option for my family. I realize that my career will never be as successful in Europe (if money is our unit of measure), but at the end of the day, to those of my background, family is primary.

Swedish Lex:

To Vinny G.

I have many friends who are U.S. citizens, sent to the old continent for professional reasons (private sector, UN, etc.), who have decided to spend their future and that of their childrens' youth in this living museum of ours, pretty much for the same reasons you mention. They say that the U.S. has changed profoundly for the worse over the years and they see no end to it, really. Some of them have deviced their stays in Europe so that they can apply for citizenship quickly in a EU state (e.g. the UK) thusly becoming EU citizens and enjoying all freedoms to move around etc. granted by the EU Treaties.


Krugman last December: "…the German problem. At a time when expansionary policies are desperately needed, the leaders of Europe's largest economy seem to have their heads in the sand."

So, when Krugman asks "Don't you think Country A might have something to learn from Country B?", it would seem that part of the lesson might, in fact, be that expansionary policies are less than they're cracked up to be. Just saying…

Richard Kline:

A good observation and accurate so far as it goes, a. Of course at the time of Krug's prior comment (and still at present), the US had no such matrix of supports to fall back on as he mentions now, and so falling back upon them wasn't an option. Stimulus was our fallback position when speculation, peculation, and fakery ceased to suffice.

The situation says nothing about the _effectiveness_ of stimulatory policies, only that having an alternative to having to resort to them in place might be desirable. Which seems to be Krugman's present point. That's to say unfettered crony capitalism isn't all it's cracked up to be.


Why does the situation say nothing about the effectiveness of stimulatory policies?

Krugman presents two countries: "Consider, for a moment, a tale of two countries. Both have suffered a severe recession and lost jobs as a result - but not on the same scale. In Country A, employment has fallen more than 5 percent, and the unemployment rate has more than doubled. In Country B, employment has fallen only half a percent, and unemployment is only slightly higher than it was before the crisis."

And he asks, "Don't you think Country A might have something to learn from Country B?"

Logically, the only thing one can conclude is that, taken as a whole, what country B is doing is better than, taken as a whole, what country A is doing. But Krugman thinks he's entitled to look at one aspect of what country A does (the part that he approves), and leave out every other aspect (including the parts that he doesn't). Krugman is not trying to build a logical argument, he's just being a polemicist, concluding what he's assuming to begin with, although not, of course, writing it that way.

Incidentally, I agree that the German and continental European attitutde to work makes much more sense than the American. But Germany's attitude to stimulus, interest rates set by central banks, money, and loads of other things, is also far superior to American and Anglo-Saxon attitudes (and that includes Krugman's).


In general, I'd say that the manufactured goods I have from Germany–from bicycle panniers to camera lenses–were more expensive than goods from other places, but of top quality. Quality control and skilled labor are still valued there, and it shows in the output.

Vinny G.


Krugman was a fierce critic of german policy back in december as reader a has mentioned. At that time he was probably somewhat unfamiliar with the german social system that he failed to see the inherent stimulus character of these laws.
It may be argued that this kind of inherent stimulus is not in itself efficient by means of bang for the buck. But that is only one side of the coin. The other is that the system as a whole creates a great deal of confidence among the populace that can hardly be expressed in numbers, let alone currency numbers.
And there is another driving factor: Germany has experienced a decade of lagging growth and high unemployment. People were rather frustrated and believed germans were the losers. But then that changed, partly due to some reforms and partly due to technological advance. german growth came out ahead of most west european countries. That restored a feeling of "we can do it" (eager to avoid this 'yes, we can' :=). Still that mood hasn't lost its thrust.


The order books for the Ms are still running pretty low. It's ok for some of the companies – a rather large number Ms are fully equity financed, in fact some of them can boast that "they had no debt for last 30 years", and build up large cussion in good times.

That still leaves quite a few of them who do use debt financing, and the banks in Europe are tightening the screws considerably. If the trade doesn't pick up considerably (which it doesn't seem, especially with EUR pretty high), they will have to start laying staff off and even go bust.

Basically, the German system is pretty good for dealing with relatively short-term problems, but can cause huge disaster when the problems with longer-then expected periods of trouble – and can't deal quickly with paradigm shift. My metaphor is leveraged super senior CDO tranche – when it works, it works fine, when it breaks, you're dead. Infinite gamma :) . Question of course is, whether once-in-four-genrations problem is really worth catering for at the expense of making the life of people in between considerable better.

One thing that I'd put as a huge plus for Germany in general though is that they still produce a large number of capable engineers etc. instead of relying on brain imports, because all the americans with brains became lawayers/doctors/business consultants.

Peripheral Visionary:

This echoes my own views. "Counter-cyclical" policies work well when the economy is on its down cycle; they do not work when the economy is actually shifting into lower gear, as there is not a pending up cycle where the negative effects (debt, etc.) can be unwound.

Regarding "infinite gamma", that may be an apt description of the variability of employment in an economy with heavy pro-labor regulations. I worked previously for a German company with operations around the world. In our very large division, they were hiring heavily in India, only occasionally in the U.S., and doing everything in their power to not add a single person to to payroll in Europe. Employment in their European group may not have been going down, but it certainly was not going up. The only way that their employment situation in Europe would have changed significantly would have been if the company had gone bankrupt, at which point employment would have fallen off a cliff.

Dan Duncan:

An employment "miracle"?

Interesting that this same newspaper of Krugman's wrote this about Germany, just 3 days ago:

"It has come to this: Germany will almost certainly have a bigger budget deficit next year than Italy will. Traditionally, Germany is the Continent's keeper of fiscal rectitude, perpetually fretting that the Italians and other free-spending Southern Europeans are about to undermine the euro and rekindle inflation by not reducing their red ink.

"The German shift underscores just how profoundly the economic and political situation has changed in Berlin, as well as how desperate Chancellor Angela Merkel is to restore growth in Europe's largest economy as she begins her second term.

"'Given the enormous rise in public deficits and the strain this will put on future budgets, the fiscal exit strategy will have to kick in as soon as the recovery has firmed up, which means no later than 2011,' he said.

"'Among ordinary Germans, the desire for fiscal discipline still runs deep as well, setting the stage for further tensions down the road if the economy lags.'"

But borrowing and spending has nothing to do with it. Instead, this is a Miracle!

Cue the Angelic Choir…"Hosana in the highest glory!"

On your knees…prostrate before the Weimar!

Francois T:

Where is it posted here or on Prof. Krugman's site that German policies toward preserving employment would come without any side effects?

They merely made a choice: people over money, workers over Das Kapital….mein Kaiser!

It is rather obvious on which side you tilt. Like so many neoconservatards, you love America but hate ordinary Americans.

Talk about cognitive dissonance!


As has become par for the course for you, Dan, your comment makes no sense whatsoever.

Germany has a large fiscal deficit and a relatively benign employment situation.

The US has a large fiscal deficit and the worst employment situation since the Great Depression.

Now given the option between the two, which one would anyone, other than some Ayn Rand sycophant, choose?

Dan Duncan:

I hear what you're saying DownSouth…

My point is, however, Germany's employment stasis is not really miraculous…or the result of "Special Employment Programs". Rather, the employment stability results from the pedestrian Borrowing and Spending.

One can argue that this is exactly what Germany SHOULD be doing…OK, fine.

But Krugman and Yves appear to be attributing all of the German employment stability to these special programs. I don't think there's anything magic or special (and certainly not "miraculous") in the state borrowing and spending to keep people employed. It's been Germany's healthy balance sheet that has allowed them to increase borrowing during a time of need that's allowed its workers to escape unscathed…not some special, miraculous edict by the government.

As for me being an "Ayn Rand sycophant"…

The barb would be more effective if you used the big word- "sycophant" in its proper context. Being a sycophant has to do the attempt to curry favor with a person of influence via excessive flattering or being obsequious (another big word, sorry).

Seein' that Ms. Rand is dead…well, I'll just let you connect the dots. Maybe it'll enhance your self-esteem.

Perhaps you meant that I am an Ayn Rand "acolyte"?

I guess it's the "Y as a vowel" thing that threw you off…

"Acolyte or Sycophant? Hmmm…Both use the letter 'Y' between consonants, so I guess they're interchangeable."

"I am DownSouth…and I remain…Hooked on Phonics".

i on the ball patriot:

Setting aside the petty and hurtful - not cool at all - bickering … the story behind the stories …

The New York Slimes - one of the ultimate system tools - is playing an asymmetrical good cop bad cop game and thereby steering and controlling the debate for energy dissipation purposes. The first bad cop article cited by Dan does an in depth of, "how desperate Chancellor Angela Merkel is to restore growth", through stimulus spending of course (read enslavement to the bankers). The article is a half truth - it omits the enslavement to the bankers details - and is presented to gain credibility for the New York Slimes.

The second, the good cop article, by Krugman, glosses over that lightly and diverts from the stimulus spending (enslavement to the bankers), and focuses instead on (read: deflects to), the comparatively trivial employment structures of each country, and as a result everyone dissipates their energy on that side show decoy and not the enslavement to the bankers in both countries which trumps all. And, the article of course scores, "He's just like us." brownie points for sell out Krugman.

The harsh reality here is that when you are enslaved you do not get to choose how you will be exploited. This is bye bye middle class time globally. The more equitable socialist model of employment in europe is now also a target - just like the scamerican middle class - for decimation by that enslavement to the bankers. Focusing on, and eliminating, those who enslave you and are now reducing your crumb supply is what is important.

Looking at employment structures and governments in germany (and japan), it is important to consider; who set up those entities directly after WW II, and; the migration of talent and thinking, especially from germany, to scamerica. Nation states are constructs of the ruling elite.

Krugman is a deceptive system tool.

Deception is the strongest political force on the planet.

Raging Debate:

Your comment was the best of the entire bunch so far although I did enjoy many of them. What we need is global collaboration among global citizens and feel free to email me if you agree and want to discuss. I warn those that do, I really am into lengthy contrarian debates.

What we are seeing is a global feudal empire. Feudalism failed at the local level, city-state level, national level and soon to be the global level all for the same reason:

When people cannot afford to live they destroy the entire establishment in an attempt to free themselves of tyranny. Sadly, good leadership at the time it occurs perishes with the perpetrators of the true crimes.

The oldest debate must surely be whom has the right to another individual fruits of labor. People respond best with the opportunity to benefit. That is Sales 101 by the way.

Fear of loss works for limited amounts of time (don't work, you die type policies). That is why Communism as a government type has a 40 year fatality sequence while Democracy lasts 200 years.

As a Democracy (or substitute your own flavor of representative government if you choose) slides into Fascism and Communism the rate of looting from treasury increases.

Then the Democracy typically has a Despot for a short time as anarchy reigns. Communism is a continuation of looting the people's wealth.

As an American, I cannot say I am especially proud of our fall from grace and moving away from the practice of the concepts of truth and justice.

But in analyzing these government types throughout history, a Republic is still the best form of government.

Certainly, the current global monetary lending model is due for evolutionary restoration. Perhaps the Federal Reserve and its behavior was the evolutionary catalyst that killed the king. If that is the case, than long live the king! Peer-to-Peer banking in my opinion is the way to go after the world completely decentralizes (be it economic, war or likely combination of both).

I do apologize for socioeconomic commenting on a financial blog. At a later time I will drop back in and be happy to discuss the drier portions of economic analysis.

To Yves, great blog site. I know a thing or two about social networks and will provide the tech for you if you are getting sick of the games of Google and Wordpress. Also, at your recent Treasury meeting in the USA, you were probably the most talented in terms of economic understanding and fundamental understanding of labor markets. I wish I could have had a couple of my friends also attend such as Karl Denninger, John Lounsbury and a couple of others. Take care and thank your for stellar educational service to the public at large!


OK, let's take it from the top and go back to what Krugman actually said in regards to the "miracle," which is this:

Germany's jobs miracle hasn't received much attention in this country - but it's real, it's striking, and it raises serious questions about whether the U.S. government is doing the right things to fight unemployment….

This carries us right back to something Gordon said yesterday about "opportunity cost." "The real question about stimulus/job creation," he said, "is how best to spend money, given that there are lots of alternatives."

Now back to Krugman:

Germany came into the Great Recession with strong employment protection legislation. This has been supplemented with a "short-time work scheme," which provides subsidies to employers who reduce workers' hours rather than laying them off. These measures didn't prevent a nasty recession, but Germany got through the recession with remarkably few job losses.

So Germany spent money.

The US spent money.

Germany took care of its workers by spending money on workers.

The US "took care of its workers" by spending money on bankers.

Is the difference between those two really that difficult to see? And the difference in the employment situation between Germany and the US is rather stark. So to reiterate, your original comment makes no sense whatsoever. All you did was to assert that Germany spent money. But who ever said it didn't? Krugman and Yves are talking about how money was spent, not whether money was spent.

Now, as to the word "sycophant," my Webster's New Collegiate Dictionary gives the following definition:

a servile self-seeking flatterer: PARASITE

In my book, "Ayn Rand parasite" describes Lawrence Summers, who is the only person Krugman calls out by name, pretty darned well. And it fits those TBTF banks that Summers carries water for pretty well too, talking about obsequiousness.

Swedish Lex:

"Europe's recession officially ends as Britain lags behind":


Paul "Shifty" Krugman … Late to the party and already drunk …

Krugman's latest is yet another too little too late missives that pass for foresight …

Does anybody remember " Magneto Trouble" as our economy was imploding?

Anybody that wants to come close to solving the unemployment problem had better come with more than the milquetoast Krugman offers up in this column …

See Mish's column today: Mish Unemployment Projections Through 2020 – It Looks Grim

What is needed is to make employees cheaper to employ. Single Payer, USG funded an expanded unemployment ins, Employee funded retirement, SSI … a 30 hour workweek.

Then there are tariffs that need to be implemented, say on the order of 20% … Just about every other country in the world runs a mercantilist trade policy while we "free trade" our economy away …

And how do we get real dough into the economy? A carbon tax distributed per capita would solve two problems. Getting money into every nook and cranny of the system while pushing people away from energy usage …

We need bold new answers and Krugman hasn't any as of yet …

Allen C:

There are likely too many variable to draw any meaningful conclusions.

Many can agree on some basics -

Government is not the source of real jobs
CEOs expertise at mature companies tends to be political vs. entrepreneurial.
Real jobs are created when someone develops a new idea into a durable business.
Politicians, bankers, and cash cow CEOs tend to garner far more credit than they deserve.


Maybe Germany outperforms the US because its economy is more flexible.

"What?" you say. "America has the most flexible economy in the world!"

No. Labor unions are only one piece of the puzzle.

What about the tax code? The IMF has ranked the U.S. 75th in tax prep simplicity - lower than nearly all other industrial countries. Almost nowhere else does every entity have to prepare TWO tax returns - one for state, one for federal.

For example, at my own company, tax preparation - not the tax, but just the preparation of the various returns for all the myriad taxing agencies - costs 3% of the entire after-tax income of all employees.

As another example, in California, every corporation or LLC pays $800 per year, minimum, just for existing - a huge regressive tax on new business formation.

What about debt? High debt levels are the very definition of economic inflexibility. In a downturn, a business cannot do any long-term thinking, such as preserving brand - it just have to keep selling, regardless of the long-term consequences. When you walk the malls these days, and see perennial sales running in every shop, you see the consequences of high debt. Everyone knows that these sales do not increase long-term income, they just teach consumers to time their purchases. It's ruinous. If everyone knows that, why do it? Debt. They need the cash now, regardless of the consequences.

Germany may have trouble with unions, but we have a few problems of our own to work on.


All that we call "civilization" is based on deception and lies. It really boils down to "whom" (in any particular era) hijacks the most loot from the top of the pyramid scheme of "we, us"; doing so undetected.

Is it true that 227 families control 47% of the world's wealth?

Hoi Polloi:

America Incorporated is a typically Quarter company. Only the next Financial Quarter is important if we d9 alright there then all's dandy.

The typical lifespan of a CEO is 3, max. 4 years, of which most is spent networking for the next job.

I've never met a bunch of managers with such a limited vision as in the US.

The opposite is the fact in the EU where long term vision is more important.


As many have noted Germany is a two part story …

West Germany is doing fine … East Germany is a mess …

Yet Paul "Shifty" Krugman offers up this as an example of ideas that need to be considered …

The fact is Germany runs a mercantilist economy. We, on the other hand, run a financialist economy where our productive assets are mortgaged, re-mortgaged and then sent overseas producing LBO fees, trading profits while killing wages and tax receipts.

Killing wages increases profits while killing tax receipts produces public infrastructure to privatize and tax free muni bonds to enrich the already rich.


The comparison between the "German" model and the American way of doing business should conisder the following :

1. Methodology : Unemployment levels should consider a larger period, since it´s impossible to compare two systems by sampling few monthes or even quarters.

2. American GDP per Capita is higher than German figure for a long time

3. Germany enjoyed since WWII an American military umbrella with almost no pay. As a matter of fact the German miracle including a generous welfare state and a relative advantage thanks ( among other factors) the American Bayonets ( 700 Billion per year) spread around the world which defends also fortress Europe cheap and secure oil etc.

Yves Smith:

American GDP figures are wildly distorted, this has never gotten the press it deserves. The US is the ONLY economy that uses hedonic adjustments to GDP. That means it increases GDP to allow for the fact that computers have become more productive over time (this is completely different than the hedonic adjustments for inflation, BTW).

A modern desktop computer is about as powerful as a mainframe as of late 1980s. So I kid you not, these adjustments started in 1987, and they count you desktop in GDP as the same value what the equivalent big iron computer would have cost in 1987. Mish managed to get the BEA to send him a spreadsheet in 2005, and it showed the cumulative impact was 22% of GDP. This is far and away the most dubious of the official statistical adjustments, and gets far and away the least commentary.

The Bundesbank has also complained a few years ago that if German calculated GDP the way the US did, it's growth rate would be a half a percent higher. If you take the Bundesbank figure instead, and calculate GDP growth over 22 years, using 2.5% versus 3.0% growth, you get an 11% cumulative difference.


Thanks, Yves. That's why I'm a fan of John Williams' "Shadow Government Statistics" website, where he puts up the correct numbers as far as he can calculate them. Even if you don't always agree with the ways he makes his corrections, he's always transparent about what he's doing. His graphs would make your hair stand on end.

No, we're not related or in business. This is an unsolicited testimonial!


There are quite a few great comments already – let me add another angle: In Germany, the financial sector is a LOT less relevant in many ways than in the US. As vlade mentioned, many of the mid-size businesses are family owned and not very reliant on debt.

The status of the financial sector in Germany however has other implications as well:

I would agree that Germany may still run into trouble medium term. Bank balance sheets don't look very good at all in many cases, 'Kurzarbeit' is designed to help overcome a somewhat short term employment problem but cannot help with longer term economic downturn, and the willingness to address problems with anything but short-term fixes is arguably no greater in German politics than in US politics.


Let me draw a less peachy picture of Germany.

Note: I have lived most of my life in Germany, but left in 1996 to finally get my first good job (in Switzerland). So while I have no first hand experience, I still have lots of friends there.

As Ambrose Evans-Pritchard correctly observed, German workers have been constant slowly squeezed for more then 10 years now, which resulted in increased competitiveness and ever greater exports until recently. So salaries have risen below official inflation rate, but rising energy costs and fees (less visible than taxes) have contributed to purchasing power decrease and most Germans are realizing the effects.

Unemployment has been around 10% since the reunification.
At least there was no German housing bubble.

The German mercantilism approach (exports) has covered up the demographic problems for more then a decade, but this is coming to an end: Since 1970 the German birthrate has been below 1.4 so in other words the populace shrinks by a third per generation. I believe that starting around 2020 (boomer retirement) the German social security system is going to implode.

Membership in labor unions has been dropping as fast as in churches or political parties, as all are painting unrealistic pictures and people know it.

While I agree with Moopheus that German manufactured goods are usually more expensive than goods from other places, but of top quality, it was discomforting to see the majority of German shoppers turning to cheap products over the years, disregarding quality concerns – but maybe that was just the knee jerk reaction to dropping purchasing power?

A friend of mine started his own heating/plumbing company 10 years ago, and is doing quality work, mostly for retired home owners (as the retired are still the most wealthy fraction due to guaranteed rents). But he cannot hire anybody, as the costs are too high to allow him to get across the usual seasonal slump in February/March. So he has grown a bit by making 2 friends become partners in the company (they needed to put €20,000 down each, work hard, and have no guaranteed income).

Overall I prefer the US model, even if it leads to "cascade of firings". However people here should become aware again that this means they need larger savings for rainy days!
I am.


(as the retired are still the most wealthy fraction due to guaranteed PENSIONS)

Peter T:

> If German labor practices are so terrible,

Even Germany gives the employer some leeway to get rid of employees: Germany gives employees protection, AFTER they have survived a six-month "probation period", during which most of the workers are employed at will. Six month is long enough to see if a worker fits into a group. After that, the worker can only be laid off if the employer proves the economic need to do so to survive itself. Firing a worker is limited to cases of the worker committing a crime against the employer, showing gross negligence or something similar.


As a German, I would like to add that German job protection is limited to companies with more than 10 employees. Besides, you can hire employees temporarily for up to 2 years in order to avoid job protection (even for 4 years in a startup company).

Mario Sanchez:

A couple of comments..

1. Krugman and Yves and most commenters praise Germany's relatively small decline in unemployment levels without recognizing that unemployment levels in Germany have been in the 8%-10% range for a couple of decades, and underemployment levels cosistently 8-10 points above that during that time. Is the really what we're praising?

2. Yves' question that "If German labor practices are so terrible, then… [why has the US] … run chronic and large current account deficits… and hollowed out manufacturing?" Current account deficits are more about the post Bretton Woods arrangement than anything else – the US agreeing to be a net importer of goods & investments, and a net exporter of primarily Federal Reserve Notes.


This is true, but mainly because of the unfortunately very high unemployment rate in Eastern Germany. In the Western part, the rate is only about 7%. On the other hand, the current real German unemployment rate might be higher now as it looks like, because of some changes in the statistical method made in 2009.

Besides, what Germany almost doesn't know is the phenomenon of working poor (5% of US workforce, as far as I know) or high poverty in general. But I admint that it is mainly an ethical question whether you want that or not.

Doug Terpstra:

Also most European countries measure unemployment more accurately (and honestly) than we do in the US. There, if you are not working but looking, you are counted as unemployed. Here you are counted as unemployed only if you are not receiving benefits, a big difference (no benefits then you're employed whether you have a job or not). By their measure, our unemployment rate is closer to 17%. Our stats like our accounting standards are mostly fraud.

Europeans can weather economic storm better than the US because they have a healthier and wealthier middle class through greater commonwealth investment, progressive tax policy, and democratic (not corporate) government. Laissez faire, disaster capitalism here has nearly cooked the middle class goose, so it can no longer lay the golden eggs to which the plutocrats have grown so accustomed.


Nobody is mentioning that the restrictive "job protection" regime in Germany allows a significant percentage of German employees as large companies to be flatly insubordinate and/or do nothing for 29 years after spending one year working hard. Anyone who's actually held a senior management post in a large German company knows this is the truth.

As one commenter mentioned the place is good because its filled with Germans. That I agree with. Even with a free ticket once employed at a big company most Germans do opt to work. What is amazing is that Germany is as rich as it is despite such an insane approach to labour policy.

The slavish worship of government power and the desire to have edicts dictated to all by krugman-like elites has really turned this site into an echo-chamber

Doug Terpstra:

Where Krugman keeps it clinical, Ives vital human insight clarifies the true strength of Germany's economy versus ours. Long term, there is incalculable productive value in the moral, social commonwealth foundation so pooh-poohed as inefficient by "free" market Darwinists. The creative dynamism of America's vibrant, educated middle class and has been squandered, its productive capacity hollowed out, and its critical self-confidence beaten down in less than a generation. Parasitic capitalists have cannibalized their own legs and now seem genuinely mystified in not being able to get up and run.

She wirtes: "If Germany was such a terrible place to do business, wouldn't they have hollowed out manufacturing just as the US has done? Might it be that there are unrecognized pluses of not being able to fire workers at will, that the company and the employees recognize that they are in the same boat, and the company has more reason to invest in its employees (ignore the US nonsense "employees are our asset," another line from the corporate Ministry of Truth)."

I love that. In a tough economy, the Ministries of Truth and Peace are working overtime.



In Europe, people are sometimes wondering why Americans can apparently only be "motivated" by millions of dollars in salary (probably this isn't the case even in the US, but in public discussion, it sometimes seems so). I think industriousness might have social reasons, too: If in Germany you're lunching with your colleagues, and they believe that you work much less than they do, then you probably won't feel very comfortable. And of course, if you want to be promoted, you need to struggle in Germany, too.

Mary Margaret Flynn:

It is not only the banks that are TBTF-it is the multinational corporations that are TBTF-heck they love the undocumented and even hire people to bring them in–cheap labor. I've never benefited from corporate profit motives.

I daily benefit from government run institutions. I'm one of the unheard citizens who likes my post office, national parks, state capitals, national science foundation, firefighters-and you know AL Gore was right in a weird way--he did invent the computer. Actually it was my tax dollars that allowed supported the education, and institutions in which the innovation orientated.

Oh and I will forever love TR-not an inch of the national parks would exist with out the national government.

Actually I call the current situation corporatism-our gov't now represents only corporate power-we need to bust them up after we finish with the banks. Let them pay the same percent that comes out automatically with the withholding accounts as they do from my pay checks these last 45 years. (the state of CA is withholding an additional 10% right now)

Why didn't this administration stop the Bush tax cuts. Oh I give up. I have always enjoyed paying taxes because I have benefited as a citizen from the dream the USA almost realizes. This blog is so complicated for me. But I am learning a lot. Just wish we could get money to jobs especially building our green infrastructure up rather than into the pockets of the upper 1%.

Some one said "where there is great wealth there is great crime" I believe it.

Vinny G.:

One aspect I did not see mentioned in this great discussion is that Germany is a very pragmatic nation, while the United States is becoming increasingly paralyzed by ideology.

[Nov 12, 2009] The 'Real' Unemployment Rate by Paul Vigna

November 12, 2009 | Market Talk

Psst, Harry! It's worse than you think.

In the wake of last week's October jobs report, it seemed to me that one piece of data the Bureau of Labor Statistics reports was getting more attention than it usually does. This is the U-6, the broadest measure of unemployment, which hit 17.5% in October. (By comparison, the "official" rate, the U-3, sat at 10.2%.) I even started writing a post to that effect, but shelved it because I thought, well, maybe it's just me.

I've been writing about the U-6 for some time; I don't remember exactly when I became aware of it, but it was some years ago. It measures not only the unemployed, but "marginally" attached workers, and part-timers who can't find full time work. Basically, everybody who wants to work full-time but isn't. But apart from some bloggers like Barry Ritholtz, nobody paid it much mind.

You can file this under anecdotal evidence, but I think that might be starting to change, because the opinion out in the street may be overwhelming the opinion engineering out of Capitol City.

It seemed to me on Friday that, certainly in the newsroom, there was more banter about the U-6, even if nobody calls it that. I'm pretty sure I heard some of the folks on CNBC and Fox Business talking about (we have to four flat-screen TVs overhead that are tuned to those two stations.) But what really raised my awareness of the growing awareness of this other measure was the front page article in the New York Times on Saturday that blurted it out: "Broader Measure of Unemployment Stands at 17.5%."

Say what you want about the Times, it's still a major newspaper and a major influence; if they're putting that on the front page, it's putting that number, 17.5%, on a lot of people's radar. Wall Street loves to dismiss the jobless rate, because it's supposedly a "lagging indicator," but it's not lagging on Main Street. It's a leading indicator on Main Street.

And it's not just old-world media properties that are accepting that number as a better representation than the official rate. Newswires reporter Ben Charny filed this snippet yesterday for the wires version of Market Talk:

Unemployment is actually higher than the commonly reported 10%, Manpower (MAN) CEO Jeff Joerres says at an Ernst & Young conference. Referring to the government's broadest measure of unemployment, Joerres says there's "a whole bunch of discouraged workers not looking for work," and other factors, he said. "Lets call it what it is: 17.5%." That figure is the "U-6," the widest measure of unemployment reported by the BLS. The "official" rate, the U-3, is 10.2%. But Joerres was also optimistic. The US economy appears "on the bottom," and is "sawtoothing its way up."

Manpower is a big temp firm; for the CEO to hold that view is telling.

All of these measures, remember, are estimates. Even the widely reported 25% unemployment rate from the Great Depression is an estimate. The government didn't measure unemployment using current methods until the 1940s, professor Richard Sutch at the University of California told me back in 2008. The Depression numbers were extrapolated by historians after the fact.

(Professor Sutch's opinion, incidentally, was that the U-5, which includes "discouraged" workers but excludes part-timers, was the closest to the Depression measurements. The U-5 currently sits at 11.6%.)

While the BLS reports the U-6, it certainly doesn't publicize it; it pushes the U-3, the "official" rate. So why do people feel the broader measure is a better measure? Maybe because for a lot of people, the situation does feel worse than the picture being "officially" painted. It's hard for me to say. I know only a few people who have directly lost their jobs through this recession, thankfully (if any of you have, I'd like to hear from you, email me.)

But whatever the number is, 10.2%, 11.6%, 17.5%, unemployment is still the major issue as the government tries to recast the virtuous circle of demand, sales, jobs, wages, profits, expansion, more jobs, higher wages, greater demand, better sales, higher profits.

Without jobs, the recovery is just so much government and Fed engineering.

[ Nov 11, 2009] Rosenberg U.S. unemployment rate headed for 12.0-13.0% by Edward Harrison

"There are serious structural issues undermining the U.S. labour market as companies continue to adjust their order books, production schedules and staffing requirements to a semi-permanently impaired credit backdrop. "
November 11, 2009 | Credit Writedowns

David Rosenberg thinks the unemployment rate is headed much higher than anyone anticipates. If you recall, back in January when the stimulus package was crafted, the Obama Administration felt that passing the bill would mean an unemployment rate which would top out at 8.0%. As the situation deteriorated, the President recognized that 10.0% was more likely – a number we just got last week. But Rosenberg is the only one (except Meredith Whitney) who is talking about 12-13%.

As an aside, it was interesting to hear Whitney at about 3:15 into the third video in the link above from July. Right before she gives us the dreaded 13% number, she admits to lowballing her house price decline estimates in order not to be dismissed as wildly out of step with consensus. That pressure is something I discussed here.

Here's what Rosenberg says:

There are serious structural issues undermining the U.S. labour market as companies continue to adjust their order books, production schedules and staffing requirements to a semi-permanently impaired credit backdrop. The bottom line is that the level of credit per unit of GDP is going to be much, much lower in the future than has been the case in the last two decades. While we may be getting close to a bottom in terms of employment, the jobless rate is very likely going to be climbing much further in the future due to the secular dynamics within the labour market.

But in a nutshell, to be calling for a 12.0-13.0% unemployment rate is meaningless except that it is very likely going to be a headline grabber. The most inclusive definition of them all, the U6 measure of the unemployment rate, which includes all forms of unemployed and underemployed, is already at 17.5%. The posted U3 jobless rate that everyone focuses on is at 10.2% (though if it weren't for the drop in the labour force participation rate, to 65.1% from 66.0% a year ago, the unemployment rate would be testing the post-WWII high of 10.8% right now). The gap between the U6 and the official U3 rate is at a record 7.3 percentage points. Normally this spread is between 3-4 percentage points and ultimately we will see a reversion to the mean, to some unhappy middle where the U6 may be closer to 15.0-16.0% and the posted jobless rate closer to 12%. This will undoubtedly be a major political issue, especially in the context of a mid-term elections and the GOP starting to gain some electoral ground.

As I indicated when the employment numbers came out last week, we should expect the labor force participation rate to increase during recovery as discouraged workers come back into the labor force. The fact that the opposite is still happening means the unemployment rate will move higher (although 13% is sure to induce a double dip and I am not seeing this as a base case at this time).

Rosenberg's political calculus also seems accurate. In my post, "the politics of economics" I said that President Obama needs to take more blunt measures to deal with the unemployment situation head on. Indirect measures are not going to be effective enough to prevent Democratic losses in 2010.

Moreover, a recent poll released by Gallup today says that Republicans have now edged ahead of Democrats for 2010. If we see 12 or 13% unemployment, it will be much, much worse than that for the Democrats – and if Obama thinks getting his agenda through now is difficult, wait until 2011 when he may have to contend with more Republicans in Congress.

More of Rosenberg at the link below.


Breakfast with Dave, 11 Nov 2009 (pdf) – David Rosenberg, Gluskin Sheff (free requires registration)

[Nov 8, 2009] Frank Veneroso: Employment Losses Probably Continue at a 300,000 a Month Rate

naked capitalism

From Veneroso Associates' US Economy October Employment Report, " Huge Discrepancy Between the Payroll and Household Surveys:

Executive Summary

1. According to BLS, payrolls fell at a 188,000 a month rate over the last three months. But their own household survey says employment fell at a 589,000 a month rate.

2. Why the discrepancy?

3. Chris Manning of the BLS told us last month that payrolls were overestimated in the twelve months ending March by 824,000. The source of this error was the birth/death model. BLS used "plug" numbers for the number of births and deaths. These "plug" numbers were wrong. They led to estimated positive contributions to employment that were too high. Most of the error (675,000 out of a total 824,000 jobs) occurred in the first quarter of this year. The birth/death model was adding significantly to payrolls when all other payrolls were falling. In reality the contribution from net births and deaths was in fact negative.

4. Manning told us that the faulty birth/death model was still being used for the months after March of this year. The implication was that the faulty birth/death model would continue to overstate payrolls and understate the payroll job losses in the months since March.

5. And, in fact, the BLS is doing just that. For the last three months they are assuming net birth/deaths have added 18,000 jobs a week. Last year over the same period they assumed it added 17,000 a week, the year before 18,000 a week, and the year before smack in the middle of the economic boom 18,000 a week.

6. It is obvious what BLS is doing. They are simply plugging in an extrapolated figure with zero adjustment for the most severe labor market contraction in three generations. And, worse yet, they know the birth/death number they are using is pure baloney.

7. NUTS!

8. Therefore, reality probably lies somewhere between the payroll survey monthly rate of job loss of 188,000 and the noisy household survey rate of job loss of almost 589,000. A best guess would be that jobs continue to be lost at a rate of 300,000 a month or more.

Payrolls were down 190,000. A slightly larger decline than the consensus. But prior payrolls were revised to show a lesser decline in August and September combined of 91,000. Payrolls with revisions declined only 99,000.

From a payroll survey perspective employment conditions are improving significantly. Not so from a household survey perspective.

The unemployment rate rose by .4%. I expected a rise, but only because I expected the sharp drop in the labor force in recent months to be partly reversed. In fact the labor force fell further by 31,000. The increase in the unemployment rate came entirely from another huge decline in the household measure of employment of 589,000. This followed declines of 785,000 in September and 292,000 in August. That is an average monthly rate of decline in employment of 589,000. That is as bad as it has been for the entire recession adjusted for population discontinuities.

The household survey of employment is a very noisy series. I was absolutely certain that, after the huge declines of August and September, we would see a much lesser decline in household survey employment in October. I thought that a decline of 200,000-300,000 would still signal serious employment weakness because of the huge declines in the prior two months.

No matter how noisy we think the household survey is, we have to take these household survey employment declines seriously. The three month decline may not be close to 1.8 million; it may be half that. It does not matter. A 300,000 a month rate of employment decline is very serious.

How can there be such a huge divergence between the household survey which now shows almost 600,000 job losses a month and the payroll survey which now shows average job losses of under 200,000 a month? Part of it, of course, is data noise. But part of it must be a continued overestimation of net positive job creation arising from the notorious birth/death model….

Therefore, reality probably lies somewhere between the payroll survey monthly rate of job loss of 188,000 and the noisy household survey rate of job loss of almost 589,000. A best guess would be that jobs continue to be lost at a rate of 300,000 a month or more.

Is this consistent with anything else? Yes. Though the manufacturing ISM showed a huge increased in its employment index, the non-manufacturing ISM showed a significant decrease to a low level. The vast majority of employment is in the non-manufacturing sector.

Also, if the rate of job loss was seriously contracting the work week should be rising. A move to a longer work week is often the first move by employers when labor conditions start to improve. The payroll survey shows a decline in the work week over the last three months and no improvement in the last month.

The latest initial and continuing claims suggest that there is some recent abatement in job losses. But they have probably continued at a significant rate and income destruction probably continues at a rapid pace….

As for the markets, they are so clueless at reading the fundamentals I have no idea how they will react to this data.


"As for the markets, they are so clueless at reading the fundamentals I have no idea how they will react to this data."

I don't think the major market participant are clueless; they're again back to their old games and hoping that when everyone realizes that this emperor is stark naked, they'll be able to get out first


Here's a link to BLS re this topic:

The first table and Chart 1 are esp interesting. (I assume that both household surveys use the birth-death adjustment and therefore are currently underestimating unemployment.)

My understanding is that the establishment survey unemp # Mr. Veneroso provided was AFTER subtracting the useless birth-death adjustment (86,000 alleged new unmeasured jobs added to the establishment in October). This subtraction may have a bit of complexity to it, so it may not be as simple as one thinks. But doing simple addition, adding 86,000 to 190,000 almost gets you to Mr. Veneroso's 300 K "average".

In any case, it's unclear why he is averaging two different numbers to obtain a "best guess" number. If you mix a cherry pie with an apple pie you have a mess.

Perhaps it also would have been helpful had he done a bit more than simply asserting that the household survey is "noisy". How volatile is it? (Chart 1 on the BLS link above doesn't make it look bad.) Census on behalf of BLS surveys about 60,000 households per month. Sounds statistically signif to me.


Another post on the discrepancy between payroll data and household data can be found at Jesse's Cafe

It has a very nice chart of the birth/death model as well as a humorous cartoon showing Obama in a sombrero snarling "Jobs, you don't need no sinking jobs! You need a loan!" with Gentle Ben (the enforcer) looking on in the background.

To the former (the chart) what is apparent is not only the suspect uniformity of data from this model (as discussed here), but the abrupt adjustments in January and July downward in the in the number of employed persons represented by the model, times at which such correctional downturns least affects perceptions. The article also notes some people suggesting the Bush Dynasty (Georges I and II) deliberately underestimated the Census population to "synchronize" household and payroll data; yet another manipulation of the "facts" to profit a more favorable result.

Related to this topic, I read an article yesterday on the unemployment situation (which I can't unfortunately find again) which details characteristics of unemployment, not by trade or region, but by ability to find work. Seems as though those that have work are less affected by economic woes (loss of income) then those who have no job and are looking for work; in other words it is harder to find employers hiring even though the numbers of persons being – ah relieved – of employment is relatively low. This trend would indicate caution by firms, particularly in light of evidence an increasing portion of those new hires are temps; not a ringing vote of confidence that the new economic miracle of the past few months has long term focus. What else this suggests, I don't know, but maybe someone else has thoughts on it.


Both the jobs model and the household survey have problems. With the survey, the data sample is so small that the confidence interval is huge. This is the noise I think that gets referred to. The two are also not based on the same population: non-farm jobs vs. those over 16 with a job (or not). The other thing to keep in mind is that both of these float in a background of what's happening in the wider economy. And let's face it we are in uncharted waters. These measures are increasingly dubious. What I do is compare and contrast and add in other measures. The U-3 at 10.2% represents 15.7 million people. This is a much different number than the U-6 which measures everyone who would like a fulltime job but can't get one. That number is 17.5% and represents a whopping 27 million Americans. And even this last figure doesn't capture Americans who have permanently left the pool of the working population.

There tends to be a conflation of the U-3 and jobs numbers. I think this is deliberate. The U-3 is twice as large as the jobs number and U-6 number is 70% higher than the U-3. But the U-3 is a percentage (like the U-6) so by reporting the jobs number along with the U-3 the mistaken impression is left that the employment problem is smaller than it really is. However when you look at the numbers behind these measures you begin to see how utterly meaningless the Obama Administration's job efforts really are.


Methinks the decision to recommend 300k as the right number for jobs lost in October is little more than the "fallacy of the middle ground". When faced with divergent positions, one simply decides the right answer must be "somewhere in between". As others have rightly observed, the confidence interval around these figures is wide, even when we are confident in them. For the payroll figure, isn't the 95% confidence interval something like 180k either way? If we decide that the plug has messed up the payroll survey, we still haven't figure out how much. Taking out the jobs the plug puts in is no more than a guess at the right adjustment for births and deaths. We might reasonably want to take away a lot of jobs, not just go to zero.

Tossing out 300k is one of those "I'm an expert" bits of nonsense. The right answer is that, if we don't trust the data, we really don't know how many jobs were lost.

Now, our confidence should grow over a period of months, because randomization takes over. The margin of error gets smaller. Sadly, over a 3 month period, the relationship between household and payroll job tallies is the same as in October – households reporting 3 times as many jobs lost as does the payroll survey. We can guess that whatever is generating the error is persistent, but we haven't identified anything that accounts for that sized error. So again, the right answer is "we don't know", not "300k).


[Oct 21, 2009] "The Growing Case for a Jobless Recovery"

Jobless recovery means stock market only recovery. It's unclear which industry could create jobs in the current environment...
Economist's View
Each year, Tim Duy organizes the Oregon Economic Forum, and this year he invited David Altig of the Atlanta Fed to talk about monetary policy. I'll be discussing fiscal policy, and one of the questions I'll address is whether more stimulus is needed. The poor condition of job markets will be a key part of that discussion, and this post of David's at macroblog provides additional evidence that the odds of a jobless recovery are increasing:

The growing case for a jobless recovery, by David Altig: The Wall Street Journal repeats the unhappy news:

"Companies across the economy are holding off on hiring even as the profit outlook improves, amid economic uncertainty and their own success at raising productivity in rough waters.

"Hiring always lags behind in economic recoveries, but the outlook this time is worse, many economists say. Most forecasters now expect a prolonged period of high unemployment, even though the government is expected to report next week that the economy grew in the third quarter, after four quarters of contraction."

I'd like to be able to contradict what most forecasters expect, but we at the Atlanta Fed have been building the case for a similar outcome on macroblog. Here are few salient points from previous posts.

Job opportunities are scarce. (Oct. 14, 2009)

"At the end of August there were estimated to be fewer than 2.4 million job openings, equal to only 1.8 percent of the total filled and unfilled positions-a new record low."

This development could, of course, turn around as business activity picks up, but there is more than a little evidence that some structural impediments are afoot.

Job losses have been disproportionately concentrated in small businesses. (Oct. 6, 2009)

As Melinda Pitts pointed out a few weeks back, businesses with fewer than 50 employees account for about one third of net employment gains in expansions. They have accounted for about 45 percent of job losses since the beginning of this recession. Given that these are the types of businesses most likely to be dependent on bank lending-and given that bank lending does not appear poised for a rapid return to being robust-the prognosis for an employment recovery in these businesses is a question mark.

The share of workers reporting that they have been involuntarily cut back to part-time is at a recorded high. (Aug. 14, 2009)

"… the increase in people reporting that they are involuntarily working part-time rather than full-time is considerably higher in this recession than in past recessions. Although the increase in these workers has moderated some since the spring of this year, the number of people in the category of working part-time for economic reasons remains at 8.8 million, well above the level of past contractions in both absolute and relative terms."

One potential implication of this fact is that firms probably have the capacity to expand production without hiring new workers (or increasing worker productivity). All these firms have to do is give more hours to existing workers, who have indicated they would be plenty eager to have them. Good for them-and good for GDP growth-but not much help on the employment front.

Here is one additional concern that we have not previously emphasized.

The percentage of employee separations labeled permanent is at a recorded high.

Underneath the usual total unemployment numbers are the reasons an individual is unemployed: You are on temporary layoff; you quit your job; you have reentered the labor market and have yet to find a job; or you are entering the job market for the first time and have yet to find a job. Or, finally, you have been permanently separated from your previous employer, who has no expectation of hiring you back.

The last category is the dominant reason for unemployment at this time. That might not seem surprising, but it actually is. Never, in the six recessions preceding the latest one, did permanent separations account for more than 45 percent of the unemployed. The current percentage stands at 56 percent as of September and appears to be still climbing:


Of course, none of this is proof positive that we are in for a "jobless recovery," but, to me, the odds appear to be increasing.

I wish I would have had the last graph when I made up the slides (pdf) for the presentation.


This trend on permanent job loss reflects a structural change in the business cycle.

In the old days cyclical unemployment was dominated by heavy industry where the physical plant still existed and the typical steel or auto worker realistically expected to soon return to their old job.

But in today's environment the "laid-off" employee frequently is the result of a corporate decision to get out of some line of business. Moreover, that line of business is not capital intensive like the old heavy manufacturing.
rather it is "knowledge intensive" and once the firm disperses the employees with that knowledge the capacity to revive that line of business disappears.

One place where this change shows up in the data is in the stock market reported earnings versus operating earnings.
Although the concept is obliviously abused operating earnings is earnings for the on-going business that excludes the old line of business that was shut down.
A good example is Home Depot closing the Expo chain of upscale household furnishings stores. Home Depot's operating earnings are just the home depot earnings with the impact of Expo backed out.

But this new development calls into question the entire concept of Potential GDP and our concept of how much excess capacity exist in the system. In the old days Ford or US Steel would call the old employee back and the capacity to produce cars or steel was not destroyed. But Home depot will not call back the laid-off Expo employees. So for example, the Expo buyer who knew how to procure thousands of $1,000 kitchen sink faucets will not get another job buying this line of merchandise. So that human capital or knowledge is lost and with it the capacity to produce the old reported GDP.

That buyer may eventually get a job with another type of retailer as a buyer, but they will have to relearn the other retailers particular line of business.


During 10 days on the seminar circuit I talked to managers from all 50 states and a couple of territories.

Grim, very grim.

Health care, which was supposed to be the new, new jobs mecca, is seeing layoffs and wage cuts (some Medicaid driven, others by generally saggy business and revenue trends, others by general uncertainty).

Obama must get resolution on health care, energy and taxes. Until then the decisions models are rife with uncertainty, forcing cautious decisions.

Patricia Shannon:

If a "jobless recovery" is possible, something is wrong with the definition of the word "recovery".

It reminds me of "Alice in Wonderland", where someone (?the red queen) said a word meant what she meant it to mean.


i think it will be like the last 'recovery'. a mirage if it happens like it did the last time. which it looks like it shaping up to be


The problem is not with the definition "recovery" but rather with measures of economic progress:

"GDP has increasingly become used as a measure of societal well-being and changes in the structure of the economy and our society have made it increasingly poor one,"

"Assessing government's contribution to economic output, which ranges from 39 percent in the U.S. to 48 percent in France, is one of the shortcomings of the GDP model, as is its difficulty in estimating improvements in quality of products such as cars instead of just quantity, Stiglitz said. Similarly, increased household debt may drive up output numbers, whereas that doesn't amount to a real increase in wealth, he added."

Fora TV -- Joseph Stiglitz - Problems with GDP as an Economic Barometer


The only way we can successfully redistribute our way out of the current problem is to tax the production of foreign labor, since that is the source of the problem, and invest rhe proceeds in enhancing domestic productive capacity. Taxing the domestic rich will only work as for long as it takes them to determine how to manipulate the political system so as to obtain relief. Evidnece so far indicates that they have already figured that one out. They can just keep cutting the politicians in on their gains. Unless of course we can start to get honest people to run for office and the people to elect them.

The so-called recovery has been a recovery for Wall Street financial firms, but not for Main Street firms. Pre-recession, c.40% of S&P earnings were of financial firms, so recovery of those profits can perhaps yield a recovery as defined in terms of GDP. The earnings of a single managing director at GS can easily equal the combined earnings of 40-50 doctors, accountants, and lawyers or of 300-400 skilled nurses, tradesmen, and factorymen. Not the same in terms of social utility though. The MDs at GS are back in clover, but the Main Street folks are not.

Winslow R.:

The key to understanding the economy is to understand how fiscal and monetary policy impact the economy.

The government spent some $3.5 trillion in 2008/9 and GDP was some $14 trillion. There is a direct connection from fiscal policy to GDP and a direct connection from monetary policy.

Fiscal policy

The easiest way to make money in America is to find Government contracts with 6% or greater return, then leverage by employing labor. With a 6% return it is a pretty simple process to become a millionaire in less than 20 years with as little as 10 employees.

Government contracts don't need higher returns to attract entrepreneurs willing to put people to work.

Monetary policy

Larry Summers et. al., believed the monetary channel was the only channel through which GDP should be driven. Why? Because driving current monetary policy (future fiscal policy) makes banks very profitable with returns in the 20% range. So there was a large incentive by friends of bankers to push money from the fiscal to monetary channel.

The balance of profits between the fiscal and monetary channels needs to be restored to an across the board 6% and then let the fair fight for talent between the financial sector and the real economy begin on a level playing field.

[Oct 13, 2009] Thoughts on the Economy- Problems and Solutions

Mauldin: Unemployment is likely to continue to rise and last longer than ever before. We have to take care of the basic needs of those who want work but can't find it. Unemployment insurance should be extended to those who are still looking for work past the time for benefits to expire, and some program of local volunteer service should be instituted as the price for getting continued benefits after the primary benefits time period runs out. Not only will this help the community, but it will get the person out into the world where he is more likely to meet someone who can give him a job. But the costs of this program should be revenue-neutral. Something else has to be cut.

Mish: Can we deal with 15 million volunteers? Somehow I doubt it.

Mauldin: We have to re-think our military costs (I can't believe I am writing this!). We now spend almost 50% of the world's total military budget. Maybe we need to understand that we can't fight two wars and support hundreds of bases around the world. If we kill the goose, our ability to fight even one medium-sized war will be diminished. The harsh reality is that everything has to be re-evaluated. As an example, do we really need to be in Korea? If so, why can't Korea pay for much of the cost? They are now a rich nation. There are budgetary fiscal limits to being the policeman for the world.

Mish: Bingo. We can easily slash our military budget by 70% and still be the most powerful nation in the world. Moreover, it is time to declare the war in Iraq and Afghanistan over, pack our bags and leave. Gradually, over the next 5-8 years we should bring home all our troops from literally every county they are stationed.

This chart shows the absurdity of our spending.

Chart courtesy of Global Issues - World Military Spending.

By the way that chart does not include the latest increase in the US military budget. Please consider US lawmakers pass 680-billion-dollar defense budget bill

The US House of Representatives passed a 680-billion-dollar defense authorization bill on Thursday that includes funds to train Afghan security forces and more mine-resistant troop carriers.

Lawmakers defied President Barack Obama's veto threat and approved 560 million dollars to continue work on an alternative engine for the F-35 fighter jet built by General Electric and British manufacturer Rolls-Royce.

The compromise legislation would also raise military pay by 3.4 percent -- half a percentage point higher than Pentagon recommendations -- and assign 6.7 billion dollars for mine-resistant armored vehicles known as MRAPs, which is 1.2 billion dollars more than the administration had proposed.

Nearly $700 billion dollars of "defense" spending. The amount needed for actual defense is 20% of that at most, and more likely 5%. Balancing the budget is easy if you start here.

Mauldin: Glass-Steagall, or some form of it, should be brought back. Banks, which are subject to taxpayer bailouts, should not be in the investment banking and derivatives-creating business. Derivatives, especially credit default swaps, should be on an exchange, and too big to fail must go. Banks have enough risk just making loans. Leverage should be dialed down, and hedge funds selling what amounts to naked call options in any form, derivative or otherwise, should be regulated.

Mish: What we need to do is get rid of the Fed, FDIC, and fractional reserve lending. Regulation has failed every step of the way. Regulation created Fannie Mae, Freddie Mac, and the Fed. Regulation by the SEC anointed Moodys, Fitch, and the S&P as debt rating companies. We do not need more regulation, we need less regulation, a sound currency, and no Fed. Regulation is clearly the problem, yet the cries for still more regulation come from nearly every corner save the Austrian economists.

Mauldin: Let me see, is there any group I have not offended yet? But something like I am suggesting is going to have to be done at some point. There is no way we can continue forever on the current path. At some point, we will hit the wall. The fight between the bug and the windshield always ends in favor of the windshield. The bond market is going to have to see a credible effort to get back to a reasonable deficit, or we risk a very difficult economic environment. The longer we wait, the worse it will be.

Mish: "Is there any group I have not offended yet?" Yes. You failed to offend those on public pension plans. Not to fear, I did that myself in Five Major Pension Problems - One Simple Solution.

Unsolvable Problems

There is a solution of course, it's just not one that anyone wants to hear: The correct plan is to kill all unnecessary services, fire all the government workers and privatize everything remaining.

Mike "Mish" Shedlock

Early Job Cuts Worse Than First Thought, as More Companies Go Belly Up By Kelly Evans


The loss of 263,000 jobs last month brings the total drop in U.S. employment to 7.6 million since the recession began - and revisions suggest the losses could turn out to be even steeper.

Total U.S. nonfarm employment as of March was probably lower by 824,000 than previously thought, or about six-tenths of a percent, the Bureau of Labor Statistics said Friday, reflecting the unusual severity of job losses during the first quarter.

"Most of the additional job loss… appears to be due to in part to an increase in the number of business closings," said BLS Commissioner Keith Hall in a statement.

The findings come from preliminary benchmark revisions released Friday along with the monthly employment report, which will be finalized and published on Feb. 5 of next year. The annual revisions, based on unemployment insurance tax reports, give a more accurate view of the labor market than the government's monthly surveys.

The benchmark revisions are typically small, raising or lowering employment levels by around two-tenths of a percent. But not this time.

The BLS's birth/death model underestimated just how many businesses were folding - particularly during the January through March quarter - as the recession worsened.

Economists had been bracing for a downward revision, but not necessarily one of this magnitude, which means the U.S. has likely shed more than 8 million jobs since December 2007. For example, in a note Thursday, Goldman Sachs economist Ed McKelvey said he expected the revision to be "on the order of -150,000 to -200,000."

"It's a huge number, much more than usual," said Nigel Gault, chief U.S. economist at IHS Global Insight. The government's models "tend to assume dying firms get replaced, but that didn't happen."

Mr. Gault said the revisions suggest the economy was doing even worse in the first quarter than previously assumed, and cast doubts on the recovery.

One temporary silver lining: it could be good news for corporate profits in the just-finished third-quarter, since firms saw increased sales while continuing to cut back on wages and salaries, he said. "But then, where's the future demand coming from?"

"Today tells us employment's going down, hours worked are down, incomes are falling - so how can we sustain robust growth in consumer spending in that environment? The consumer doesn't have to lead the expansion," he said, "but the consumer has got to be part of it."

[Oct 6, 2009] Dean's Big Idea (once again) By the Sandwichman

Maybe when Dean Baker first floated this idea (back in January) it was too soon and people weren't worried enough yet about unemployment. Dean was ahead of the curve. Now that everyone is wringing their hands about the jobs crisis, one of the hand wringers will take notice enough to at least say why not. Sandwichman is not holding his breath, though:

There are many ways that the federal government can boost demand, with more aid to state and local government probably topping the list in terms of priorities. However, to get large numbers of workers back to work quickly, the best route is a tax credit to shorten normal working time.

The basic logic is very simple; the tax credit effectively pays employers to hire more workers, with each worker putting in fewer hours. If we used the tax credit to pay employers of 100 million workers to work 5 percent fewer hours, while keeping their take-home pay unchanged, then in principle they should want to hire 5 percent more workers, or five million workers. This can be done quickly and will involve more employment in the private sector, not make work public sector jobs. That should make the conservatives happy.

There undoubtedly will be some gaming of such a tax credit, but there is some waste/fraud in everything we do. The prospect of having 15 million people unemployed for much of the next two years is unacceptable. Having used trillions of dollars in loans to bail out the richest people in the country, it is time that the government take some bold steps to help everyone else.

Robert Reich The Truth About Jobs That No One Wants to Tell You

Unemployment will almost certainly hit double-digits next year -- and may remain there for some time. And for every person who shows up as unemployed in the Bureau of Labor Statistics' household survey, you can bet there's another either too discouraged to look for work, or working part-time who'd rather have a full-time job or else taking home less pay than before (I'm in the last category, now that the University of California has instituted pay cuts). And there's yet another person who's more fearful that he or she will be next to lose a job.

In other words, ten percent unemployment really means twenty percent underemployment or anxious employment. All of which translates directly into late payments on mortgages, credit cards, auto and student loans, and loss of health insurance. It also means sleeplessness for tens of millions of Americans. And, of course, fewer purchases (more on this in a moment).

Unemployment of this magnitude and duration also translates into ugly politics, because fear and anxiety are fertile grounds for demagogues weilding the politics of resentment against immigrants, blacks, the poor, government leaders, business leaders, Jews, and other easy targets. It's already started. Next year is a mid-term election. Be prepared for worse.

So why is unemployment and underemployment so high, and why is it likely to remain high for some time? Because, as noted, people who are worried about their jobs or have no jobs, and who are also trying to get out from under a pile of debt, are not going do a lot of shopping. And businesses that don't have customers aren't going do a lot of new investing. And foreign nations also suffering high unemployment aren't going to buy a lot of our goods and services.

And without customers, companies won't hire. They'll cut payrolls instead.

Which brings us to the obvious question: Who's going to buy the stuff we make or the services we provide, and therefore bring jobs back? There's only one buyer left: The government.

Let me say this as clearly and forcefully as I can: The federal government should be spending even more than it already is on roads and bridges and schools and parks and everything else we need. It should make up for cutbacks at the state level, and then some. This is the only way to put Americans back to work. We did it during the Depression. It was called the WPA.

Yes, I know. Our government is already deep in debt. But let me tell you something: When one out of six Americans is unemployed or underemployed, this is no time to worry about the debt.

When I was a small boy my father told me that I and my kids and my grand-kids would be paying down the debt created by Franklin D. Roosevelt during the Depression and World War II. I didn't even know what a debt was, but it kept me up at night.

My father was right about a lot of things, but he was wrong about this. America paid down FDR's debt in the 1950s, when Americans went back to work, when the economy was growing again, and when our incomes grew, too. We paid taxes, and in a few years that FDR debt had shrunk to almost nothing.

You see? The most important thing right now is getting the jobs back, and getting the economy growing again.

People who now obsess about government debt have it backwards. The problem isn't the debt. The problem is just the opposite. It's that at a time like this, when consumers and businesses and exports can't do it, government has to spend more to get Americans back to work and recharge the economy. Then -- after people are working and the economy is growing -- we can pay down that debt.

But if government doesn't spend more right now and get Americans back to work, we could be out of work for years. And the debt will be with us even longer. And politics could get much uglier.

Addendum: This morning's job numbers are bad enough -- 263,000 more jobs lost in September, and unemployment now at 9.8 percent -- but look behind them and the news is even grimmer. The only reason the numbers don't look worse is that 571,000 workers dropped out of the labor force. Remember, too, that the economy needs about 125,000 new jobs every month just to keep up with a growing population. So we're even further behind.

The numbers would be even worse but for the stimulus package. According to an analysis by the Economic Policy Institute, the stimulus is saving or creating between 200,000 and 250,000 jobs a month. Without it, job losses in September would have been nearly twice what they actually were.

State governments, meanwhile, continue to shed employees. Here's one of the most depressing statistics I've seen (if you need any additional ones): Some 15,600 teachers didn't return to work in September. They were laid off. So our classrooms are bigger, we have fewer teachers, and our students are presumably learning less -- at the very time when they need to be learning more than ever.

Read more at:


[Sep 7, 2009] "The Anguish of Unemployment"

Laura Conaway at NPR Money highlights a new survey by the Rutgers University John J. Heldrich Center for Workforce Development.

... From the report:

Over half of the unemployed have lost their jobs for the first time ... Job loss is hitting more affluent workers and educated professionals hard - a metric of the recession's seismic impact. More than one in four of those who were unemployed for the first time earned $75,000 or more in their previous job; one in four first-time unemployed workers have at least a four-year college degree.


Once again Cali's real jobless rate is 40%

Study: 2 out of 5 working-age Californians jobless

No matter how the MSN trys to spin its simply abysmal


A wise voice from the past:

The basic things expected by our people of their political and economic systems are simple. They are:

  • Equality of opportunity for youth and for others.
  • Jobs for those who can work.
  • Security for those who need it.
  • The ending of special privilege for the few.
  • The preservation of civil liberties for all.
  • The enjoyment -- The enjoyment of the fruits of scientific progress in a wider and constantly rising standard of living.

These are the simple, the basic things that must never be lost sight of in the turmoil and unbelievable complexity of our modern world. The inner and abiding strength of our economic and political systems is dependent upon the degree to which they fulfill these expectations.

Jan. 6, 1941
FDR at Joint Session of Congress


In the past, when the U.S. exported high-paying jobs to low-wage countries, we replaced them with even greater numbers of high-paying jobs in industries whose inception could be traced back to science done decades earlier. The PC, Internet, and cellular industries, born in the 1980s and 1990s, more than offset the loss of high-paying jobs in consumer electronics, steel, and other sectors.

But in recent years, outsourced software and manufacturing jobs have largely been replaced by millions of low-wage service jobs in fast-food, retail, and the like.

There you have it folks....there is no easy out this time around.

America is FUBAR --

[Sep 7, 2009] Profiles in Discouragement Unemployed and Uncounted Hoocoodanode

From Michael Luo at the NY Times: Out of Work, Too Down to Search On, and Uncounted (ht Kai, Ann)

They were left out of the latest unemployment rate, as they are every month: millions of hidden casualties of the Great Recession who are not counted in the rate because they have stopped looking for work.

But that does not mean these discouraged Americans do not want to be employed. As interviews with several of them demonstrate, many desperately long for a job, but their inability to find one has made them perhaps the ultimate embodiment of pessimism as this recession wears on.
The official jobless rate, which garners the bulk of attention from politicians and the public, was reported on Friday to have risen to 9.7 percent in August. But to be included in that measure, which is calculated by the Bureau of Labor Statistics from a monthly nationwide survey, a worker must have actively looked for a job at some point in the preceding four weeks.

For an increasing number of people in this country who would prefer to be working, that is not the case.

Luo provides short stories about four people who have given up looking.

Take a name asswipe:

Now, Pimco portfolio manager Tony Crescenzi is saying the same thing:

Structural rather than cyclical influences on unemployment are running well above normal during the current recession, as is highlighted by the percentage of the unemployed that are "not on temporary layoff."

Data from the Bureau of Labor Statistics show that 53.9% of the unemployed were not on temporary layoff in August, up from 39.1% a year earlier and well above the 30-year average of about 34%. The current level is well above the peak of previous cycles, which tended to move above 40% and was as high as 44.9% in May 1992. Many job losses are occurring in industries with broken business models and jobs won't return quickly. This will put downward pressure on wages ...

In terms of numbers of people, data from the BLS show that 8.1 million people were characterized as "not on temporary layoff" in August, up from 7.880 million in July and 3.72 million a year earlier. The not-seasonally-adjusted figure for "Permanent" job losers totaled 6.406 million, up from 3.609 million. These figures represent a very large proportion of the roughly 7 million decline in nonfarm payrolls (the tally on payrolls is produced via a survey of business; the figures on unemployment and both the "not on temporary layoff" and "permanent" job losers categories are derived from the survey of households).

[Sep 7, 2009] Will America's Besieged Middle Class Snap

June 26, 2009| naked capitalism

A paradox arises to the extent that it is true that the market is dependent on normative underpinning (to provide the pre-contractural foundations such as trust, cooperation, and honesty) which all contractural relations require: The more people accept the neoclasical paradigm as a guide for their behavior, the more the ability to sustain a market economy is undermined. This holds for all those who engage in transactions without ever-present inspectors, auditors, lawyers, and police: if they do not limit themselves to legitimate (i.e. normative) means of competition out of internlized values, the system will collapse, because the transaction costs of a fully or even highly "policed" system are prohibitive. This holds even more so for the regulators that every market requires. If those whose duty it is to set and to enforce the rules of the game are out to maximize their own profits, a-la-Public Choice, there is no hope for the system

Amitai Etzioni, The Moral Dimension: Toward a New Economics

I've been amazed at the complacency of Americans in the face of rape and pillage by the moneyed classes. Of course, I underestimate the impact of overwork and media brainwashing. If you are a member of the dwindling middle class, you are probably devoting all your energies to hanging on to your job and trying to be a decent partner and for those with families, parent. Any kind of sustained political action (unless you grew up with it in a serious way) is unlikely to rate as high as a tertiary concern. In our total information society, protesting has high odds of getting one's mug in a video that could come back to haunt you. An arrest would show up in a background check. What a great way to keep the peasantry in line.

Civil disobedience went out of fashion with Thoreau, if not before then. Bourgeois sensibilities and taking to the barricades do not mix. Oh yes, we may admire Gandhi and Mandela, but they were oppressed and had little to lose in bucking the authoriites (well take that back, Mandela did give that great speech at his trial about being willing to die). In the US, with the exception of the 1960s, protests have been mainly working class affairs We have our mortgages and our social standing to consider.

But times may be a changin'. Angry investors tortured a savings-destoying money manager in Germany. Who knows what would have become of Bernie Madoff if his victims had gotten near him. And in an interesting bit of synchronicity, Leo's post tonight is about the nouveau pauvre.

If the green shooters are proven correct, the odds of upheaval are close to nil. However, if things get worse, the US may reach a tipping point. But Americans like gore only on the big screen, and we don't have a tradition of general strikes a more civilized way of registering serious discontent.

Marshall Auerback, at the end of a very good piece "Major Social Upheaval Likely if Bank Bonanza Continues," suggests another angle, that of payment revolt:

By contrast, the current bonanza for banks is neither economically efficient, nor politically sustainable. What is driving the change in portfolio preference shifts is not only a misguided paradigm, but also an inability for the Obama administration to make a sensible, coherent case in what they are doing and why they are doing it. Their actions, in fact, seem to suggest that everything is ad hoc and that they are operating out of their depth, in effect continuing the same policies of the Bush/Paulson period, but on a much greater scale.

Ironically, this ultimately will also prove highly inimical to the interests of finance itself. When most of the home owning voters cannot pay their major debt or have no incentive to pay their mortgage debt, there will either be a debtors revolt that society will sanction or there will be a bailout of such a magnitude that mega moral hazard will affect private lending forever. Once these things happen, you will no longer have the social rules for private risk based lending. In other words, financial markets will be unlike anything ever seen before in private economies. Is this really what Wall Street wants, let alone American society as a whole?

Both FDR and JFK had a brain trust that could help forge public opinion. Obama has his halo, Geithner, and Summers. We've known from the start that was a misstep.

In the meantime, beyond automatic stabilizers, the door appears to be shutting to further active fiscal ease. I wonder if the stage is already being set for tax hikes, as rumors of a federal VAT (value added tax) have been floating around of late. Add this to rising commodity prices and interest rates, and the profile of any recovery may become increasingly in question, a la 1937-8. Add to that additional bank write-offs, further credit contraction and a minimalist welfare system which leaves nothing in the way of social cohesion, and the prospects for major social upheaval look dangerously likely. What is missing is a vision of a new growth path for the US. If a public backlash is to be marshalled to something more than retribution, that needs to come to the fore. Once you get beyond the pothole and school patching, what industries can be pushed forward through public seed capital or public private partnerships?

The economist Hy Minsky pointed out a better way to solve both the liquidity and the income problem, while also providing full employment: by channeling government expenditure through an employer-of-last-resort program.

The current crisis could have been mitigated if increased household consumption had been financed through wage increases and if financial institutions had used their earnings to augment bank capital rather than employee bonuses.

The current system has failed because it was built on an incentive system that did just the opposite.

Auerback also points out earlier in the piece that the Great Depression government-created jobs were anything but makework:
As Adam Cohen in his new book, NOTHING TO FEAR ,
[WPA] workers constructed or repaired more than 125,000 buildings, including 83,000 schools; 800 airports; 950 sewage plants; and 650,000 miles of roads. They built or improved 78,000 bridges and 25,000 playgrounds; terraced 271,000 acres of eroded land; and taught two million people to read.

They also ran a famous Federal Art Project, which hired destitute artists to create murals for public buildings, posters, and paintings. The WPA produced a highly regarded series of state guidebooks and an acclaimed collection of interviews with former slaves, and it played a major role in building the San Antonio Zoo, New York City's LaGuardia and Washington's Reagan airports, and the presidential retreat at Camp David. In 1965, on the program's thirtieth anniversary, The New York Times quoted a dispossessed North Carolina tenant farmer living in an abandoned gas station, who had been rescued by a WPA job. 'I'm proud of our United States, and everyting I hear The Star Spangled Banner I feel a lump in my throat,' he said. 'There ain't no other nation in the world that would have had the sense enough to think of WPA."

One of the towns I lived in had a very large WPA-created park, and it looked as if it must have taken quite a bit of manpower. It is still the best feature of a largely blue collar town. But our Darwinist model of capitlism seems to deem it wiser to blame lack of work on individuals' refusal to accept low enough wages, than consider that in a high-skill society with narrowly defined jobs, that labor is no longer all that fungible and people really can be unemployed through no fault of their own.

But in our current paradign, enforcing market principles takes precedence over human dignity. And it looks like that paradigm will hold until it shatters under its own contradictions.

bob :
Thanks for saying it and saying it well. Either changes will be made by the people in charge, or they will be made by the all was so avoidable. But greed and stupidity have consequences. I have little interest in the fates of the Lloyd Blankfeins, John Macks, and Jamie Dimons but their actions and those of Bush, Paulson, Bernanke, Obama, Summers, and Geithner will warp the lives of a hundred million or more of us. It is that disconnect between them and us that is the spark of revolutions.

Tao Jones:


My only difficulty in accepting your thesis in its entirety is your seeming insistence on holding all of the players equally to blame and for all of the same reasons.

Is that what you are trying to do?

I think Bush, Paulson, Geithner and Summers have been playing the game long enough to become cynical opportunists.

Bernanke and Obama? I don't know.

Bernanke was an academic. What did he really understand about the rough and tumble?

Obama has never really played on a national stage. Yes, he is playing by the same playbook that has been in place since the Reagan era, but that is more likely because he doesn't know better (or has been told that this what he has to do to get along) than he is a Stepford wife.

Yes, there is something fundamentally wrong here. Yes, both major politicabama seems to be signing on to this clusterfuck. But let's not forget the humanity of any of these people as we try to create meaningful change. Every one of them is making decisions based on where each of them is, not based upon a hypothetical middle class person. They're not evil. They're not even misguided (assuming they're all guided by their own self-interest). They're just wrong.

Bottom line: we should be attacking the ideas, not the people who spew them. That's your fastest path to meaningful change.

VG Chicago:

Excellent post, Yves!

One issue that is not mentioned here is the race factor. Up until this point, much of America was conveniently divided along racial lines. This kept the anger diffuse and focused on the wrong culprits. However, now, with an African-American president it is not as easy to divide along racial lines. It is no longer the whites vs. the blacks (or other races), and vice-versa. Right now it is becoming the haves vs. the haves not. Finally, now everybody knows who the enemy is: AIG, Citibank, BoA, Chase, AmEx, Wall Street.

What I write here comes largely from my own observation. As a clinician working with many minority clients, I noticed a clear shift in blame and anger since Obama became president. Obama's presidency may have been initially thought/planned to delay a revolution, but instead it may very well turn out to be the catalyst that focuses the revolution properly.

Vinny G.


Firstly I have to admit that I am a raging socialist, but I am also a moderately successful fund manager and ex-banker, so while I am anti-capitalist I have made decent career as a house servant to capital.

The first stage of the revolution has already begun. The marxists predicted that ultimately capitalism would invert itself. Its apparent virtures of free markets, free speach, competition would be replaced by cartel, monopoly and censorship.

Well now the process is underway. The economy is being progressively "nationalised" and being supported by system of tithes paid to an increasingly parasitic ruling class. While in the short-term this looks like a set back it lays the foundation for the eventual socialisation of the economy.

The democratic socialist revolution is closer than you think


"Bob" above: well said. Everybody, no matter his/her ilk or ideology, has to admit his own failings and play a constructive role, or the whole thing goes.

As for the players at the top, it is a kind of "harmonic convergence" with the wrong people in the wrong places. Obama may well be bright and have a good idea or two (particularly his attempt to rebuild America's political standing in the world), but in the realm of finance he is not only a fool, but indicative of why we are where we are. Note his own pre-book release finances---massive use of HE loans, excess consumption, and zero savings. He wouldn't know if Geithner, Summers et al were doing something stupid. He's outsourced the role of money.

Bernanke is an academic suffering from the hubris of intellect, similar to what Myron Scholes, Dave Modest and the Nobel/Professor crowd suffered at LTCM. He can't seem to fathom why his QE and aggressive asset buying is only leading to massive bank reserves at the Fed and doing nothing to stem the collapse of asset prices.

Then there are the mercenaries on Wall Street (of which I am a reformed member). Most either do not know they might get Ceaucescu'd in a not-so-distant future, or else are arrogant enough to believe they can escape unscathed. Many will stay a day too long, and the anger of the mob will be directed toward those in Greenwich and the Hamptons and Park Avenue. They had better keep the G550 gassed up.

I have considered every possible permutation of what comes next, and sadly, I cannot find one that is anything less than horrible, at least with any degree of confidence. Popular delusions and the madness of crowds will take on a wholly different meaning, I fear. I think about what used to be Yugoslavia, a beautiful country I had the pleasure to visit long before it re-Balkanized. I never could have imagined what was in their future. Now, though, I can well imagine what might be in ours.

Richard Kline:

Joseph: "The marxists predicted that ultimately capitalism would invert itself. Its apparent virtures of free markets, free speach, competition would be replaced by cartel, monopoly and censorship."

Actually, this is simply a burgeois-industrial restatement of the Anacyclosis of Polybius. The question of whether there are inherent organizational circulations in societies is at least 2200 years old and counting.

Ibn Khaldun had a still under-explored and fascinating thesis on organizational dynamics amongst sequential generations. There is much to that issue which Idol-ed America hasn't yet begun to consider.


It seems clear that successfully implementations of stimulus involve tax cuts to the middle class, but with politics flip flopping between do more for the poor and do more for big business the middle class seems to more and more besieged.

I don't see the middle classes snapping in the short term, as the real realisation that the burden of the bailouts will fall on them has not sunk in. I suspect there is a quiet simmering of discontent with financial markets and politicians as a whole and a hope that their voted representatives will with time correct some of the wrongs.

A scenario for more serious discontent might be if the excesses of the past continue to accelerate leading to mass demonstrations. Heavy handedness in dealing with those demonstrations would result in unrest.

The psychological snapping point would not be what happens to the individual but injustices towards neighbours.
I must confess to not being a fan of sedition and see persuasion and argument as better tools, but there does appear to be yawning gap in a number of balances, a lot of riding rough shod over rules which give society its structure and moral hazard galore as people are rewarded for failure. How those imbalances resolve themselves troubles me.

Richard Kline:

While I agree with the broad perspective you raise in your post, Yves, I have something of a different take on the concern you raise here. I would argue that we do not yet even _have_ a 'middle class' crisis in the US. 10% unemployment doesn't get us there. Indeed, the large per centage of those losses are in manufacturing and construction, with a significant share in discretionary service industry (bar servers), and low end retail. Those sectors are the province of the lower-middle class, working class, and working poor. For those portions of society, yes, this is a crisis.

For them, could a re-WPA be any solution? The WPA was a very complex process, and I both love it while taking it as no example of a solution. It's principle function was 'social control,' putting the poor on work so that the Red Devil had too few idle hands. (Seriously.) Whether it was good, bad, or indifferent of effect in its day, it is not a viable solution in this day. Then, the poor and working class were by an large familiar with personal physical labor, and could be deployed to do it for a living wage. Does anyone seriously see those in the present unemployment pool in a position to do the same? Assuredly I do not. There are only so many jobs assembling and disassembly pep rallies for the minimum wage that the government can function without the fradulent farcicality of the exercise being a gross embarassment to all involved.

For the middle class, not yet. Yes many have taken huge paper losses on their homes. Some of those are have even been or will soon be in foreclosure, which will sufficiently impair their credit as to lastingly constrain their quality of life. ---But as long as they are still employed, they are still middle class. Then too, many own their homes free and clear in this country. Asset price drops and retirement account decimation have hurt the discretionary income of many of those two, even left them with signficant debts to repay. As long as they are employed and paying the minimum on their debts, they remain in the middle class. Indeed, if we get universal health care out of the present Administration with some measure of cost control. All of those folks, even those with tens of thousands of dollars in debt, may end up not so hard off. What has changed for most of them was the drunken sailor's spending spree on 'acessorized lifestyles.' That hurts, but that's not a crisis.

And sans crisis, sans revolution. The middle class in this country is _far_ from boiling. If they go to use their ATM card and the bank is shuttered and gone, that's a crisis. If their entire industry is padlocked the next day they arrive for work, that's a crisis. But the powers that be have done much to prevent that state of affairs, for now. I don't mean to make light of the suffering of those who've actually taken a hit in this, but the American middle class is only queasy, and hoping for easy solutions and a few cautionary ass-whuppin's. Which is exactly why the faked outrage inside the Beltway over 'executive compensation.' As you know.

At this point, we are far more likely to get fascism than socialism. Fascism is the popular boil over of the lower middle class when their status is threatened. Everyone reading the news these few years should have this on their mind. It doesn't have to be 'fascism' with a capital letter or formal ideology, either; that's the mistaken appraisal. The powers that be and Big Money on the Take right now are selling the 'back to normalcy' meme. Yah know, the 'green shoots' for breakfast nonsense. When this line bombs in Peoria by late fall, they'll be looking for someone to blame. Security to heighten. And please y'all passing through comments, those 'ammo shortages' and the lot are guff.

The Army is perfectly capable of wiping the cellblock with any Live Free or Die naturists out there. And indeed, all that domestic security infrastructure put in place by the last eight years of 'friendly fascists' could just as easily be deployed against 'domestic terrorists' by the new regime.

I'm not selling conspiracy with all this. The point is that what the middle class wants, in so far as I can tell, is for 'order to be restored' to their way of life. Those promising to do this will get the votes. I mean, that's exactly what happened in the last election; stop and think what I mean.

There are many other reasons why I do not anticipate a revolutionary response from the American middle class under immediately foreseeable circumstances, but I'll save that for another day. As of today, we are much more likely to see 'light weight fascism' applied by a savior of the middle class against the unemployed working class and poor, while bheind a covering screen of teargas the federal state throws its wherewithal behind Big Finance, Big Corporate, and the other apex predators of our economy and society. [Barack Obama, that's your cue.]


Yves havent you seen what happens now when people protest ala the Repug/Demo conventions last year? People are beaten by armed, shelled thugs called police.

I agree that if a city or two burned and several hundred cops were taken out during demonstrations like in Tehran that Washington may take demonstrations and protests more seriously.

American citizens that care and want to do something are in a bind because the top down completely corrupt government will make sure that protesters and all the have are destroyed.

The America I grew up in is gone and has been replaced by a fascist oligarchy. If I could find one 1st world country that I could emigrate to I'd leave tomorrow.

No one that doesn't have howitzers and nuclear weapons can stand up to these government criminals which include the President and CONgress.

walex :

"I've been amazed at the complacency of Americans in the face of rape and pillage by the moneyed classes."

Rather than complacency I would say it is largely admiration and envy. How many of the ruthless usian middle classes would have differently from Mozilo, Fuld, Cayne, Skilling, etc.?

Probably very few would have refused a surefire opportunity to be big time WINNERS for the sake of ridiculous loser concepts like scruples or principles.

The usian middle classes have been fully willing partners in the rape and pillage, only too willing to become moneyed classes themselves via real estate and stock market speculation. As long as their house prices and 401k values went ever up, all was well in the best of possible worlds, they got theirs too.

The usian middle classes have got nothing against getting rich by whatever it takes; they are perhaps getting a bit angrier about finding out that they not been the winners, but the patsies, in the great con game of the past 25 years; and they have only themselves to blame.

Ah of course not: as the moneyed classes have taught them, the rage of the "whatever it takes", "f*ck you, I am fully vested" usian middle classes is directed at what they perceive as the endless mobs of exploitative parasites that "share" (steal) their wealth thanks to the heavy handed intervention of the extreme leftist Obama.

What do many in the middle classes think then?

Mozilo? They would have done the same if they could, and they tried. The poor, the minorities? Thieves who want to steal their remaining wealth.

The big problem with the USA is not the politicians are corrupt, it is that the voters are corrupt, and the oil is running out.

"As of today, we are much more likely to see 'light weight fascism' applied by a savior of the middle class against the unemployed working class and poor, while bheind a covering screen of teargas the federal state throws its wherewithal behind Big Finance, Big Corporate, and the other apex predators of our economy and society."

That plan is called Movement Republicanism, and it is in effect the Contract On America that got Newt Gingrich elected.

Dan Duncan :

Yves writes:

"Civil disobedience went out of fashion with Thoreau, if not before then. Bourgeois sensibilities and taking to the barricades do not mix. Oh yes, we may admire Gandhi and Mandela, but they were oppressed and had little to lose in bucking the authorities (well take that back, Mandela did give that great speech at his trial about being willing to die). In the US, with the exception of the 1960s, protests have been mainly working class affairs We have our mortgages and our social standing to consider."

It's just not accurate. There is no meaningful civil disobedience in the "Middle Class" because The Middle Class has been chopped in half. The Middle Class is two Quarter Classes who happen to share the same tax bracket. The "Middle Class" is a Quarter Class in the Heartland, surrounded by a Quarter Class dispersed around the coasts.

In order to have a real revolt, the two quarters would have to work together...and that's just not going to happen.

For those who blame "the other side" for putting [insert useless Politician here] into office, thereby causing all our might just be correct.

But, you might also be an unwitting co-conspirator. [I know I am.] People on both the Left and Right are getting systematically screwed. The corrupt system that's doing the damage doesn't care if you voted for Obama or McCain. The corrupt system just cares that you hate Bush/McCain voters (or Obama/Pelosi voters) more than you hate the system. And the best way to accomplish this is to convince people that "if 'the Other Side' did not exist, things would be so much better".

I agree with Richard's statement that "At this point we're more likely to get fascism than socialism". I also assert: We're more likely to have a Civil War than a middle class uprising.

Harlem Dad :


What a great post. I often ask myself the same question. So far, the answer I get is NO. But that may change.

It is impossible to over-estimate the power of MSM brainwashing. Most Americans don't know that they're being plundered by Big Money and their own President. Baby boomers grew up with King's "I have a dream" speech. To expect them to admit that their Dream President and Democrat-majority Congress are witless pawns being controlled by Big Money is just too much to ask. It is literally unthinkable.

Everyone I know, neighbors, friends, siblings, views the early repayment of TARP funds as a _good_ thing. When I try to explain to them why it isn't, they put up their hands and shake their heads. They don't want to hear it. And if they've even heard of Elizabeth Warren (most have not), to them she's a Harvard Loon promoting her left-wing agenda.

I'm blue collar from a blue collar family. But for decades I supported the Capitalist system with its excessive pay and bonuses for the privileged few because I believed that _I_ could get ahead, too. I could work hard, save my money, own a nice home, provide a better life for my daughter.

I no longer think this way. It's not merely a change of opinion, but a sea-change of the way I view this country, its politics and institutions. And it took me some 3 to 4 months of reading Leo Kolivakis, Edward Harrison, Yves and others to get it.

In the 1930s the Group Theater produced several broadway plays written by Clifford Odets sharing the theme of working class people losing their jobs, their homes, going hungry, etc. "Waiting for Lefty" was about Taxi drivers deciding whether to go on strike. At the end of the play, Elia Kazan (he would direct Marlon Brando in "On the Waterfront" some 20 years later) raised his fist to the audience and shouted "Strike!" The audience would raise their fists and shout "Strike! Strike! Strike!" along with him.

This was before WWII, well before McCarthism, and some 60 years before Mayor (Generalisimo) Giuliani would use the Police Department to prevent NYC cab drivers even from organizing a strike for better wages.

In the 1930s, there was no discussion about whether the economy was sort of bad, bad, or really, really bad. It was The Great Depression and everyone knew it. Today, most folks just don't know it yet.

On the theme of keeping the peasantry in line, consider this quote from Alexander Solzhenitsyn from his book The Gulag Archipelago.

"And how we burned in the camps later, thinking: What would things have been like if every Security operative, when he went out at night to make an arrest, had been uncertain whether he would return alive and had to say good-bye to his family? Or if, during periods of mass arrests, as for example in Leningrad, when they arrested a quarter of the entire city, people had not simply sat there in their lairs, paling with terror at every bang of the downstairs door and at every step on the staircase, but had understood they had nothing left to lose and had boldly set up in the downstairs hall an ambush of half a dozen people with axes, hammers, pokers, or whatever else was at hand?... The Organs would very quickly have suffered a shortage of officers and transport and, notwithstanding all of Stalin's thirst, the cursed machine would have ground to a halt! If...if...We didn't love freedom enough. And even more-we had no awareness


Perfect Etzioni statement " ...If those whose duty it is to set and to enforce the rules of the game are out to maximize their own profits, a-la-Public Choice, there is no hope for the system."

Corporatists do not care what they are called: left, right, libertarian, democratic or republican, independent. What they do pursue fanatically and proselytize in this zeitgeist is corporate control.

Call it anything but socialism because, in the name distortion game, Republicans have chosen the socialism/socialist as the meme for attacking all liberal political initiatives and reform. Corporatism will be defining what 'socialism' is as they game the system to proselytize privatization.

Confusion, secrecy, law by edict, opaque financial instruments, military aggression all serve the Corporatists' pursuit of control. Confusion of terms impedes flow of information, debate and, even among like-minded friends, discussion.

An example from yesterday's MTA selling rights to change the names of major historical subway stops in New York City to corporations; (Thank you Skippy. I had read it with something akin to despair -glad you noted it for NC).

'"It's always a question of balancing our need for revenue and our stewardship of public space," said Jeremy Soffin, a spokesman for the agency."'

It's my guess Jeremy hasn't a clue to the meaning of 'stewardship' and even if he does is in no position to question or defend it. The article continues:

'"And the Barclays deal has defenders on the authority's governing board.

"It's not like Taco Bell saying it wants Grand Army Plaza or something like that," said John H. Banks III, a board member since 2004. [the guy Jeremy works for]

Would Mr. Banks oppose that idea?

"A year and a half ago? Yeah," he said. "Tomorrow? No."

' ..."Barclays Center, the sports arena planned as the focal point of the Atlantic Yards project, and the developer, Forest City Ratner, has agreed to pay the transportation authority $200,000 a year for the next 20 years to rename one of the oldest and busiest stations in the borough.'

The $200,000 a year Barclay's is willing to pay is probably less than one MTA executive's annual expense account.

In this zeitgeist where the difference between right and wrong is a gray area, Corporatists rule.

Tao Jones

You may be right about Corporatists' indifference to labels (or brands, if you will), but brands do matter to most people, and I firmly believe that the political brand most people will gravitate towards is libertarianism.

One of the glaring blind spots in libertarian doctrine is the failure to distinguish between the individual and the corporation, and thus the failure to see how corporations an unusually large number of total jobs being destroyed.

But...but...but...haven't we been hearing about large numbers of job losses month after month since the recession began? Sort of. We've been hearing about large numbers of net job losses. That is, the number of jobs that have been lost has been a lot more than the number that have been created. And a lot of job losers have ended up collecting unemployment insurance for a long time, sending the figures for continuing claims up to records, instead of getting new jobs. But the gross number of jobs being destroyed has not been unusually large. In fact, relative to the overall level of employment, job destruction was happening at a faster rate during the boom of the late 1990s than it was during the last quarter of 2008.

DISCLOSURE: Through my investment and management role in a Treasury directional pooled investment vehicle and through my role as Chief Economist at Atlantic Asset Management, which generally manages fixed income portfolios for its clients, I have direct or indirect interests in various fixed income instruments, which may be impacted by the issues discussed herein. The views expressed herein are entirely my own opinions and may not represent the views of Atlantic Asset Management.


Fed's Dual Mandate Is Mission Impossible

Mish's Global Economic Trend Analysis

Although the Fed's "Dual Mandate" is complete nonsense, I do agree with Lockhart on one key point: The US economy will suffer with Structurally High Unemployment For A Decade.


I have no offspring, but my brothers and sisters do. Therefore, I would rather have the DJIA at 3,000 than real unemployment at 20% as it is now. In 3 years I will have Medicare. I would like Universal Health Care so that small businesses could create jobs. I abhor Socialism for the rich and poverty for the masses. Yes, I have mine via being prudent. I have no sympathy for flippers or people who bought more house than they could afford. I also have no sympathy for mortgage originators, real estate sales people, nor bank executives.

I have sympathy for auto workers, retail clerks, carpenters, plumbers, programmers, machinists, etc.

People that create wealth are suffering while people that trade wealth are living high on the hog.

black swan:

"The Fed does seem to be controlling the stock market. If it weren't for the Fed backstopping big bank losses and creating money and trading it to those favored banks for their near worthless MBS paper, TPTB behind the Fed, Goldman Sachs and JP Morgan, would not be profitable, would not be able to tap new investors, and they would not be able to run up their stock share prices.

The Fed has enough control over money to funnel present and future taxpayer money into the pockets of the senior big bank execs who control the Fed. What the Fed can not, and will not control is the growth of the Main Street economy.

The Fed can and does, however, drain the Main Street economy of its resources.

black swan:

"I need to know who is controlling the stock market? Who is the wizard behind the wizard?"

Peasant, maybe this from today's NYT will help you understand:

"It may have been written off as a hopeless case less than a year ago, but the stock of the American International Group shot up to $50 on Thursday, capping a fourfold gain in the last two months.

For all the optimism taking hold in the markets these days, it is hard to find a tangible explanation.

"Who would want to buy a stock that's still 80 percent owned by the government?" wondered William T. Fitzpatrick, an equity analyst at Optique Capital. Shares ended the day at $47.84, a gain of 27 percent from the previous close of $37.69.

Roughly $180 billion was marshaled to keep A.I.G. afloat last fall and winter. The entire market value of A.I.G.'s stock is just $6.4 billion, even at the current price.

Also, the stock is concentrated in a few hands, meaning that a small number of investors can cause a big move in the stock price. The number of shares was reduced by a 20-for-1 reverse split in June. The government has the biggest stake in A.I.G., and the biggest common shareholder is Mr. Greenberg and a group of entities he controls."

And there you go, peasant, the "wisard behind the wizard".


"Bear in mind that those excess reserves are a mirage. They do not really exist. Pending writeoffs in foreclosures, bankruptcies, credit cards, and especially commercial real estate will eat up those reserves and then some."

Right, agreed. But in the meantime, banks have the liquidity to play the casino and front-run the consumer in commodities. And what good is a writeoff's when they can delay indefinitely via accounting chicanery?

So in that respect, those inflated reserves are very real right now. They are affecting stock prices and speculation is helping to cause price inflation. I think the Fed could care less if the bank uses them for real loans, it is just to give them more ways to rob us, er, earn their way out.

Going Loco:

"@black swan - I continue to hold Mish in high regard and I owe him a great deal for helping me understand what has been happening but I think that there are three ways in which Mish's adherence to his definition of deflation could cost the investors who follow him very dear. I think Mish's deflation call based on his definition of deflation could continue to be valid but notwithstanding this the following could occur:-
1. Supply interruption (or possibly inventory rebuilding), leading to shortages, leading to higher prices especially for essential goods
2. Market failure in essential services leading to monopolistic pricing - the most likely example being where government regulation causes the market failure
3. A determination on the part of the Federal Reserve Board of the United States of America to avoid a repeat of the 1930s depression; a fierce and uncompromising determination which leads them to implement measures which bypass the sclerotic banking and shadow banking system so that they do indeed put money directly in the hands of the people on terms which encourage them to spend - and such spending occurs in an environment of greatly reduced supply.

I do read Mish very carefully and I do understand his arguments, and I was reading Martenson and Keen before anyone mentioned them on this blog. But I also read Ruffer. I fear that Mish's definition of deflation may be academically correct, and practically correct too at the moment, but I fear we are nearing a time when it will not be helpful to making investment decisions.

Reading the current post by Mish it all makes perfect sense but again I quote Ruffer:- 'Far from worrying about inflation, the consensus is unconvinced that the Fed can do enough to stave off this Irish-style deflation. Our belief is that they absolutely can – because they are in a position to create money faster than the economic downturn can destroy it....' Mish would say that they can create money but they cannot make it do anything - 'The result of all the recent Fed printing is a big yawn, otherwise known as excessive reserves'. Well, yes. But when a man's back is against the wall he may act in unpredictable ways, and can anyone say for sure that Bernanke will accept the current impasse and all the terrible effects of impending credit card and CRE defaults and his place in history as the man who did NOT prevent the "second" Great Depression? Will he really just accept all this, or might the man do something unthinkable to get people spending again?

Structurally High Unemployment For A Decade

Mish's Global Economic Trend Analysis

Harsh Reality From Bernanke

In the Incredible Shrinking Boomer Economy I noted a harsh reality quote of Bernanke:

"It takes GDP growth of about 2.5 percent to keep the jobless rate constant. But the Fed expects growth of only about 1 percent in the last six months of the year. So that's not enough to bring down the unemployment rate."

Pray tell what happens if GDP can't exceed 2.5% for a couple of years? What about a decade (or on and off for a decade)?

If you have come to the conclusion that we are going to have structurally high unemployment for a decade, you have come to the right conclusion. Ask yourself: Is that what the stock market is priced for?

US Payrolls Less Than Meets The Eye

In other words, and we have no intent on raining on anyone's parade, there was about 100,000 non-recurring payrolls in that top-line figure. It may be dangerous to extrapolate today's report into a view that we are about to fully turn the corner on the job market front.

Yes, the income number was also firm; average weekly earnings popped 0.5%, but again, this reflected the bounce in the auto sector as well as the 10.7% increase in the minimum wage to $7.25 an hour. Again, this is a non-recurring item and does not at all reflect an improvement in underlying income fundamentals in the personal sector. We had a similar bounce in the summer of 2008 when the minimum wage was last boosted.

To be sure, the drop in the unemployment rate was a surprise, but it was all due to the slide in the labour force - the employment-to-population ratio gives a more accurate picture of the slack in the labour market and the hidden secret in today's report was that this metric slid to a 25-year low of 59.4% from 59.5% in June and 61.0% at the turn of the year. Of those unemployed, 33.8% of them have been unemployed now for over 27 weeks - a record amount (was at 29.0% in June and was at 17.5% at the start of this recession).

Selected Comments

VegasBob 12:41:19

We live in such a Bizarro world. Corporations exclude one-time items to make their earnings reports look better, while the BLS includes one-time items to make the jobs report look better. What a cruel joke to pull on America's workers...
FoonTheElder 1:00:16
Loss from discontinued operations or loss from one time charges are the CFOs way to keep the stock options in the money. Well, yes we had a loss, but it was from one time items, our continuing operations showed a big profit.

Snow Dog 12:47:09

Have they included the always ambiguous category of Americans who "don't want to work". Corporate America assures us that most of us "don't want" to work, thus the "need" for our bloated alien workforce. Surely their gubmint stooges willfully comply with this by cooking UE numbers however their corporate masters dictate.

Snow Dog 12:53:25

the notion of "retirement"
trade groups
fraternal work associations ...they're all part of The Industrial Revolution, aren't they? Were they around 150 years ago? The IR is over, we're de-industrializing now and ought to de-commission all these ideas right alongside it. Strangely, the tariff has been around for centuries yet we speak of them in such veiled secrecy as though they are The Plague itself. Tariffs are not. They may provoke a "trade war" but are you sure that's not what is needed?
Jim Quinn 12:54:02
The numbers are a fraud.
Vic 1:01:12
I like this bit from theburningplatform site: "Things are SOOO Good out in the real world that 422,000 people decided to drop out of the workforce, according to our government bean counters. I'm sure they are now independently wealthy and no longer need to work. Maybe all 422,000 people hit the lottery in July. Here is the great news in real numbers. June 154,926,000 work force - 140,196,000 employed = 14,730,000 unemployed (14.73/154.926 = 9.5%) July 154,504,000 work force - 140,041,000 employed = 14,463,000 unemployed (14.463/154.504 = 9.4%"
Jim,MtnViewCA,USA 2:08:00
@JimQ: burning platform link
Here's another link explaining how we lost more jobs but miraculously the u/e rate went down.
Marvin 12:54:48
StevieMo wrote on the last thread "where we lie, cheat and steal at the highest levels of the administration, the government, the Congress, the Fed" My thoughts exactly. When I first saw the news this morning, I thought: "What a bunch of crooks". And my next thoughts were, "the administration, Congress and the Fed are showing me the rules to live by". Turbo-tax Timmy is now my example.
threadkilla 12:56:05
"the income number was also firm; average weekly earnings popped 0.5%" who they hell is making more? it appears that here on my planet most are getting hours cut and outright wage reductions?
black swan 1:04:39
If I see an increase in income tax collections, I might start to believe that, for at least one month, there was an improvement in employment. Since I don't expect to see an improvement, and I believe that there are fewer people working, and that those who are working are working for less, I will consider the 9.4% unemployment to be as valid as the face values of the non mark to market, level 2 and 3 assets held by Citigroup.
btraven 11:04:20
@ black_swan - If I see an increase in income tax collections... Word from inside the IRS - massive hiring in Spring 2010. Be prepared for lots of audits next year. They are gonna try to get blood from turnips, and anyone following the lead of the crooks in D.C. can expect to get slammed. It's a great country, ain't it?
fedwatcher 11:35:42
btraven, If you work for GS, JPM, BAC, or the New York, no worries.
If you work for the MSM, no worries.
If you make your living trading against Goldman, in real estate, as a sole proprieter, as a contractor, or as a member of the alternative media, WORRY.
fajensen says:Today, 4:45:55
who they hell is making more? Bank/Wall Street bonuses may well have been obscene enough to pop up in wage statistics! Meanwhile, 10% of the US population goes on food stamps: Somehow, I don't see this as a good thing. But, I am old-fashioned; maybe the food-stampers will reach critical mass, break free and live a different life with better values than earning money for others to spend in the hope of becoming Lords themselves?
FoonTheElder 12:58:01
We need to start putting these lost workers pictures on the side of milk cartons. Do you know Billy Bates, last seen cashing his last unemployment check. If seen, please notify the Bureau of Labor Statistics, Washington DC.
threadkilla 1:07:20
"StevieMo wrote on the last thread "where we lie, cheat and steal at the highest levels of the administration, the government, the Congress, the Fed"
that's why KILLA calls the American economy the "lie cheat steal economy" it's NOT capitalism, socialism or's SWINDELISM!! another killaism
Muffy 1:09:36
Let's see now, the S&P has broken through 1000, a 50+% retracement of the March low, and this board is still looking for more flies in the ointment? How many shirts have been lost due to Mish's relentless whining about the sad state of the American economy? The trend is your friend, fellow posters. Stop betting against it. (Score: -1 by 1 vote)
Marvin 1:19:30
Muffy wrote "ugh 1000, a 50+% retracement of the March low" The trend is wrong at the turning points, basic contrary investment philosophy. My short positions are only a tiny part of my overall portfolio. I'm writing covered calls and moving to cash. Cash, not PMs. The basic reason is that I pay off my debts and taxes in US $, not Au. I also found an interesting article on why the dollar wont crash this fall at FinancialSense:
mugabe 1:53:07
"the trend is wrong at the turning point" how true but how impossible to detect the turning point at themoment it happens. you'll lose more money trying to anticipate the turning point than selling a bit late
Marvin 2:42:27
CharlesHughSmith calls the turning of the trend. At first I thought this was excellent tongue in cheek satire, but as I read on, he looks serious. The Kroika cookie company opens an investment banking business. True or not, its a hilarious anecdote.

Imagine my reaction to the news that Kroika is opening a U.S. commercial and investment bank, with the express intent of becoming a major player in toxic derivatives. It seems that the Kroika execs have been studying Goldman Sachs, Bank of America, Citicorp and other major banking players, and they realized it was impossible to lose: Either you make billions selling toxic complex derivatives and swaps, or you lose huge sums and are immediately bailed out by the U.S. government. You win no matter what. Long wise to the ways of guanxi--it is after all the essential skill one needs in China if you wish to prosper--Kroika has purchased a slew of senators via staggeringly generous campaign contributions (funneled through obscure political action committees like the "Joint U.S and China Cookie Cooperation Forum" and the like) and greasing the sweaty palms of various K Street lobbying bigshots. (Don't call them lobbyists--that sounds tacky. Call them "consultants.") When Kroika execs encountered a bit of resistance, they simply called in their pals at China's central bank who then read the riot act to the U.S. Treasury: either allow Chinese firms to set up banks in the U.S. or we'll bleed $2 trillion dollars into the market and start selling $1 trillion in Treasuries. That smoothed over any questions in the name of China-U.S. "cooperation," heh. Kroika is also deeply interested in front-running, black-box trading and setting up a quant shop staffed with newly minted math wizards from China's top universities. I have a familiar funny feeling that Kroika's entry into front-running black-box millisecond trading marks the top of this bogus global stock market "rally."

black swan 1:32:39
Muffy, you've also posted as Martin, Dave M. and Minnie. What are you, some kind of a transexual troll? A year ago, back when you were "Minnie", you posted: "The stock markets are about to take off in the weeks ahead and those who are short equities and long commodities are going to get severely burned. Plus, a rising stock market will definitely mean the end of the housing bust." Well, David Martin Minnie-Muffy, housing still looks pretty busted to me. Now you write: "How many shirts have been lost due to Mish's relentless whining about the sad state of the American economy?" How ironic that this is coming from the same sexually confused person who wrote: "Mish, I love your take on the world economy. Only a fool would buy into this dead cat bounce. I'm dollar-cost averaging gold and miners knowing full well that I may be disappointed short term but greatly rewarded long term. Keep up the good work, Mish. Those of us who don't swallow the government's phony data know you are right on." It appears that your visions of the market are as confused as your sexual orientation.
jeffinWA 2:07:51
He/she/it may be confused but is never alone; happy to live in a split level head.
Jekyll Island 7 8:01:04
Black Swan, some nice work calling out Minnie, Muffy, whoever s/he is. Anyone here read the latest Elliott Wave Theorist? By there count, a wave 3 down is now in the works with a strengthening dollar.
Cremater 2:18:03
This particular trend is NOT our friend. This is nothing more than trying to sucker people back into the markets so that when reality sets back in and this thing tanks the TPTB can finish the looting of all those people they missed the first time around.
black swan 1:17:55
The US economy can never improve until the Government in captivity puts an end to the transfer of our nation's wealth into fewer and fewer hands, through fraud, tax policies and regulatory capture. Inflated phony numbers will do nothing to end the economic carnage on Main Street. The Fed can tell the world that Bernanke has the face of Brad Pitt, but anyone with eyes can see that the Chairman's face has a greater resemblance to armpit.
mugabe 1:50:01
SRS currently under 11.... re the makets and th real economy, haven't we all learnt by now that short-medium term the markets march to their own beat? I hope so!
slavador 2:38:47
I am very lucky I did not switch horses from IAG to SRS 4 months ago in an attempt to diversify. My chunk of IAG has had a great run since - now at an all time high (can't find any other major equity with these bragging rights). Does the leveraging on SRS make it possible for it to die a horrible death below a certain price or is it a screaming deal?
mugabe 5:09:23
It's not a screaming deal until this rally finishes and shows real signs of gonig down. I think it's very misleading to look at the price of SRS and think, "Hey, it's so low now, it's a great buy". Many, many people have been burned that way, including quite a few on this board (I myself took a hit of 17% a good while back: relatively minor compared to others, but still bad.) I think what you have to do is look at the charts of the major compnonents of SRS (SPG and the like)and think about getting in when trend lines of these stocks are borken are broken. In addition, set a stop loss and never double down. What you should also never do, i think, is buy because you read yet another article about the parlous state of CRE. I will not be dealing in SRS again as the double inverse maths is very screwy, although I will have no problem shorting individual stocks within it ... when the time comes. This advice is worth what you paid for it.
gweedo 1:50:13
These "facts" get in the way of political grandstanding. Why get in the way of people's desire to feel [ad nauseam] that the economy is getting better...
Jail4Bail 1:57:43
Accepting these numbers, and believing in an economic recovery, implies continuing faith in the system. The system is what got us here. The method is unchanged. Wells Fargo is anticipating between $7 and $11 billion in new automotive CDO because of the $3 billion in "cash for clunkers". Hold onto your hat! Here we go again. Fool me twice...(How did George Bush put it?)
slavador 2:49:16
When do you figure the underclass realizes that C4C is aimed directly at them, with $1000 used vehicles with less than 300,000 miles on them eliminated as a product class? This program gives incredible price inflation to those that can afford it the least. Perhaps the rusting 1977 Chrysler New Yorkers that poor people commonly drive will be maintained forever like the museum pieces in Cuba.
Middle 2:04:44
I think the unemployment/underemployment totals are probably closer to 20%. Probably more.
shake 2:08:20
Will Rising Animal Spirits Lead to Economic Ruin? With the decline in the unemployment rate this morning, "animal spirits" improved. We should see improvement in the Michigan Consumer Sentiment Index going forward, although it has slipped a bit recently. There is noise in all economic series. Even with unemployment climbing to about 11 percent over the next year, confidence will improve until the A metric (reference) actually becomes positive in time for the election, barring a currency crisis or other catastrophe in the meanwhile. Confidence is one of the primary drivers of the business cycle. However, given the double-whammy to consumption I noted yesterday from falling wages and salaries and increased saving, and the collapse of investment demand, growth is likely to be very, very slow. This is bad news, in my view, as it affords the opportunity for the fiscal and monetary authorities to continue to pile up debt on the backs of American taxpayers. Bernanke and Geithner will continue to bail out the bad debts of some big banks at taxpayer expense, and Congress will continue to rack up world-war-like deficits. America can not service the debt load it has now. Credit market debt is about 375 percent of GDP, higher than it was in 1929 according to reliable estimates. Consumer and business debt is charging off at high rates likely to get worse. As government crowds out private borrowing, private defaults can be expected to rise even more. Since a lot of bad private debt of Wall Street firms is being converted into "good," "risk-free" U.S. Treasury debt, this amounts to a continuation of the greatest expropriation of the ordinary Americans by the rich interests in American history. Almost none of the high-rolling Wall Street speculators or their institutions have paid any price whatsoever for their trillions of dollars of bad bets. (There was Lehman, but that was personal, Hank Paulson's pet revenge project.) At some point, demand for the dollar will collapse and rising import prices will drive the standard of living of the average American down even further. We are watching an empire self-destruct in slow motion. At the end of this process America will truly be a banana republic, with income and wealth inequality far worse than they are now, a hollowed-out state. As McKinsey notes in a recent study, the human capital of the American labor force is subpar. How will we climb back out? The rich are free to invest their money anywhere in the world. ....
Leo Chen 2:12:52
The UNITED States is being fractured along Fault Lines which are based upon your Net Worth. These Asset Fault Lines run deep and separate those who Lead From their Positions of Wealth and Power from those who must follow from their position of financial weakness, ignorance and fear. The American Dream is no more, Supreme Court Justice Sonia Sotomayor not withstanding. In that sense, the Pursuit of Happiness will be met with Success only if you're rich, cash rich, ['cause credit is hard to come by anymore]. In this day and age, far fewer of us are able to pursue Happiness though you can always buy a lottery ticket and dream about it.
Jack 2:24:34
It's pathetic but keep riding this bull and keep moving those sell stops higher. The sell off will come but only god (and Goldman) know when.
Ulvy 2:51:01
Just as 10% of the U.S. population controls 90% of the wealth that is probably the same case with the stock market. 90% of the stock market is driven by 10% of the investors. The banks had to deleverage this past fall to pay investors as they pulled out cash but now they leveraging their bets again with money from the Government. If I remember the Investment Banks were sometimes leverage 40-1. So a $100 billion in cash from the Government can be leverage into a 4 tillion dollar stock market bet. Well the Government has given the banks a bunch of cash and if they are making risky bets again then $2 to 3 trillion dollars of leveraged money could have entered the market in the past 3 months. Most of the newly unemployed probably did not invest in the stock market or if they did they only made up 1% of the stock market. The unemployed are probably not having any real effect on the stock market.
sequoia 2:51:24
After 19 months of steady job losses is 247000 lost now almost as bad as say 300000 jobs lost earlier in the recession due to less workers in the pool. Also I have lost on average 4 hours a week for the last year how do I know I am being counted in the less than full time category. I mean that is a 10% wage cut paltry by the standards being set but it isn't every week so I doubt I am counted but it still hurts the same. To me the last 10-15% of my income was my ability to save and have vacations. Without it I rarely eat out and a vacation isn't happening. My 201k is worth more than a 1 week trip of me going somewhere and my luggage somewhere else.
mpower 3:04:56
TPTB almost seem embarrassed (terrified?) by the jobs numbers/spin today. One would expect tickertape parades and all sorts of MSM firworks and buffoonery, but it's rather like any other pump day. By manipulating jobs numbers here/now, in august, TPTB have raised expectations for a new bull market and an undeniable V-shaped recovery... after all, if a lagging indicator like unemployment is receding, then we are out of the woods and will soon be running across open ground. TPTB must now follow-up with ever stronger jobs data next month, and the month after that, etc. They are painting themselves into a very tight corner, and they know it. So the smoke/mirrors "recovery" continues - indefinitely - against all logic, or markets are being set-up for a wicked (planned) crash in Q3/Q4. One gets the feeling that if health care reform had be crammed through congress BEFORE the august recess, the engineered market crash would be happening sooner, like now. But common sense opposition has pushed the timeline back to september, at least. So TPTB must fabricate 'green shoots' until their agenda is fulfilled.
grambo 3:24:58
Mitch said:

"TPTB must now follow-up with ever stronger jobs data next month, and the month after that, etc. They are painting themselves into a very tight corner, and they know it." I have no doubt that the next several months will lead to better employment numbers on paper, and worse numbers on the street. The mechanism is already built into the accounting: stop counting, as Mish so simply stated. Millions of previously unemployed people will fall off the rolls over the next several months, and all the sudden the pig's got some nice lipstick and a pretty red dress. As Black Swan mentioned, the tax receipts will tell the real story.

mpower 3:25:42
TPTB agenda (Q3/Q4 '09 version):

Most of the agenda will be complete by mid-september. Look for the retirement/exit strategy among Fed/Treasury/Wall St. power brokers... most will be out of the current positions by january.

Michael 3:34:29
The spike in employment starting in 1975 was due to the Equal rights womens movement which was the cause of the spike in home prices since then. I remember the home my dad bought in 1971 cost $17,000. Fewer people in the work force means 1 income households will continue to drive house prices downward. Looks like employment is making a round trip back to the 75's level.
shake 3:48:01
it'll also mean more foreclosures and inventories being held back by the banks. The banks will likely have to hold up the Obama administration by threatening a stock crash and getting what they want like they did in March.
shake 3:50:12
The most credible theory I've seen for this run up is the expiration of the Bush tax cuts come next year for those at the top...this is their last full year on the gravy train so they will pump up all their assets before a massive dump. I think the dollar is in for some mighty interesting times once bondholders realize the rich are fleeing America.
shake 3:52:02
Congress may extend unemployment benefits

By Andy Sullivan WASHINGTON (Reuters)

The U.S. Congress will consider extending unemployment benefits after it returns in September to help 1.5 million Americans who risk exhausting them, Senate Majority Leader Harry Reid said on Friday. "Soon after Congress returns to Washington we'll need to address this matter," Reid said. "There is an economic case to be made for extending unemployment benefits."

The unemployment rate eased to 9.4 percent in July from 9.5 percent the prior month, according to Labor Department data released on Friday. It was the first time the U.S. jobless rate has fallen since April 2008. But the number of long-term unemployed continues to rise as the country struggles with the longest recession since the Great Depression of the 1930s, and many analysts attributed the dip in July to people giving up the job hunt. Data ranging from home sales to manufacturing have pointed to an economic revival, but the unemployment rate is expected to remain high, which could lead to an anemic recovery. Obama administration officials say they still expect the unemployment rate to reach 10 percent this year. As of July 25, 6.31 million people were collecting long-term unemployment benefits, according to Labor Department data. Some 1.5 million of those people could exhaust those benefits by the end of the end of the year, according to the National Employment Law Project. "We must help those who are suffering as a result of an economic crisis they did not create," Reid said. Congress has already extended unemployment benefits for up to 79 weeks and Obama administration officials and Democratic leaders in the House of Representatives have said they will work to extend them further. But that could widen the already yawning budget deficit, which shot up another $300 billion in July to reach a record $1.3 trillion for the first 10 months of fiscal 2009, according to the Congressional Budget Office. The CBO expects the budget deficit to top $1.8 trillion for the fiscal year which ends September 30, in large measure due to a $787 economic stimulus bill passed by Congress in February. Polls show rising public unease with the record deficit and Republicans have sharply criticized it. "Instead of seeking new ways to expand the government, this Congress needs to get back to the basics of deficit reduction," Republican Senator Judd Gregg said in a statement.

Tin Hat 4:05:44
Oddness at the mall. I went to the mall this afternoon for the first time in over a year. Anyway, empty store fronts are way up but that's not the odd news. A personal monument company has moved in. I have never, ever, in any of my travels seen tomb stones for sale in a shopping mall. Guess the mall association no longer cares what kind of business can pay the rent.... There's something poetic or very funny in this.
CauseAnd Effect 4:30:37
Cant have 1.5M desperate people without any income before the holidays, etc....they tend to get a might unrully.
The Sim 4:32:44
MISH WAS RIGHT "If we left these 637,000 people in the labor force, then the rate of unemployment would have increased from 9.5% to 9.8%." MISH WAS RIGHT
shake 4:35:21
In Last Decade, a Lack of Job Growth in the Private Sector By FLOYD NORRIS
Published: August 7, 2009
For the first time since the Depression, the American economy has added virtually no jobs in the private sector over a 10-year period. The total number of jobs has grown a bit, but that is only because of government hiring. The accompanying charts show the job performance from July 1999, when the economy was booming and companies were complaining about how hard it was to find workers, through July of this year, when the economy was mired in the deepest and longest recession since World War II. For the decade, there was a net gain of 121,000 private sector jobs, according to the survey of employers conducted each month by the Bureau of Labor Statistics. In an economy with 109 million such jobs, that indicated an annual growth rate for the 10 years of 0.01 percent. Until the current downturn, the long-term annual growth rate for private sector jobs had not dipped below 1 percent since the since the early 1960s. Most often, the rate was well above that. ....
shake 4:53:35
if they do end up passing another extension to UE benefits in September, those 637k + any that rollover in August may well come back on the rolls in September. That would push unemployment well over 9.8%. I believe August has another 600k rolling off so it would be closer to 10.2% by then. You would think the states had a mechanism whereby they could keep counting the people that are unemployed even if they are not receiving benefits. That's why TrimTabs method of using tax withholdings is a more accurate measure of where things are at and the turning point.
Social Vandal 5:03:30
Correct. Adloph was NOT elected, he was appointed Chancellor of Germany by Hindenberg on January 31, 1933. BUT in the previous election the National Socialist Arbeiter Parti won 43% of the popular vote. This I recall since it was about the same as Clinton got in one of his elections. Alos, Hitler got the "woman" vote. My point was that after Hitler took over there were no more elections. I believe we might not have another election either, but rather, are being set up for a State of Emergency. Why not? It happened in Germany. It can happen here or are we different?
p35flash 6:00:43
One big difference between the modern U.S. and Wiemar Germany was the fact that most firearms were banned in Wiemar Germany. Here, the country is armed to the teeth.
Social Vandal 6:47:06
The Wiemar Republic (it is not Die Weimarer Republik?) did not ban guns. Hitler did. One of his first acts in 1933 was to ban guns. His comment: "The people (Volk) do not need guns. The government (Reich) will protect them." (Maybe no the exact quote for you purist, but very close)
flyovercountry 6:53:30
A second big difference is the national socialists were right wingnut fascists - more akin to the nuts who've sponsored the inflamed rhetoric leading to a 400% increase in death threats to the US president.
Cremater 5:45:23
"We all know the US economy is in trouble and in need of serious rehabilitation. It will be a painful decade. But unless you know the future of the US Dollar in global trade, this bearish bias won't help much. Load up on PMs, miners and pray?"

The use of the word rehabilitation in this paragraph got me to thinking. You see, I have noticed over the last year alot of stimulus going into the system. But nothing in the way of rehabilitation. Its kind of like being a patient in a hospital that continues to suffer from cardiac arrest. The patients heart is the problem, or more to the point the heart disease that is killing the heart. If all the hospital does for treatment is to hit the patient with the defibillator when his heart stops but offers no treatment for the unerlying disease, that would certainly be stimulating, however eventually completely inneffective in preserving the patients life. Of course the hospital could also offer placebos to treat the underlying disease such as our government does by distorting the figures for unemployment. It may make the patient feel better mentally for a little while, but again its really not changing the reality of the situation. Now, if we consider the economy that heart patient, and we consider the government the hospital tehn we can easily see we are being killed by the hospitals definition of care. Merely shocking the patient back to life for a limited amount of time until it needs to be shocked again. Eventually the difibrillator loses its ability to be effective at even restoring the heart beat. What we used to need was some good medication to fix the economy, real rehabilitation.

ITs beyond that now as they have used the difibrillator a few too many times and caused even more damage than originally existed. What we need now is a complete heart transplant. A brand spankin new one. Unfortunately our hospital only has one tool to save the life of this economy and that is the defibrillator. They do not have the skills or the will to transplant another heart into the patient. So, in that light, we are all dead already, we just havent realized it quite yet.

panicearly says:Today, 1:31:43
Cremater, But as long as the patient is kept alive by the stimulating, we can charge for the service and pocket the money. Welcome To GoldmanSachs General Hospital.
mugabe 5:21:42
interesting today, big dollar rally, big market rally. are the two going to go in tandem now....?
Michael 5:27:54
The BLS has gone too far this time with blatantly manipulating the numbers and outright lying to the public. Tell me the truth, I am an adult and I can handle the truth. I am calling for a Congressional investigation of the BLS right now. I'm sick of their shit constantly lying to me. I want my Congress to look out for me and demand my government publish correct numbers so I can make informed investment decisions. What do we need to do to fix this. Are there any Congressman with the balls out there who will stand up to the BLS manipulation? Glad to see real people are finally getting it now.
Michael 5:36:08
Anti-Government Violence in Hungary After Leader Admits Lying About Economy
"BUDAPEST, Hungary - Protesters clashed with police and stormed the headquarters of state television early Tuesday, responding with violence to a leaked recording that caught Hungary's prime minister admitting the government "lied morning, evening and night" about the economy.",2933,214385,00.html
Do you want this to happen here Mr. President? It Will.
Michael 5:39:32
World economic crisis provokes fall of Hungary's Government
grambo 5:57:07
Americans won't do a damn thing about anything until one of two things happen:
1) favorite television programming is disrupted
2) food and/or gasoline shortages
Until that time, no one will lift a finger (except to change the channel on the remote).
Michael 5:58:54
Like I said, Americans are a bunch of pussies and the rest of the world knows it.
sandorgb 5:59:53
Two articles worth reading about the 800-pound gorilla known as the US Dollar: The Prudent Squirrel and the Golden Jackass have spoken.

shake 6:03:36
I believe the dollar rally was due to overseas investors not believing the employment report and getting out of commodities according to a Reuters report. So we have the dollar, commodities and equities. If they start exiting equities we may see the dollar index get back up the mid 80s.
Social Vandal 6:05:51
A thought. Today, the big topic of the media is that things are getting better since the unemployment numbers are "not as bad". Well, what if every month we add to the unemployment? Forever. Imagine a constant increase in unemployment? Forget about CREATING any jobs, but a horizon of unending job losses. Maybe not big numbers. Maybe not the 500,000 per month job loss, but a slow, steady, grinding water-torture dribble of 25,000 per month job loss? We talk of a new job creating industry. Oh yeah? What makes any of us think any new industry will benefit America? Everthing today can be designed and manufactured oversead CHEAPER. Anything new coming on the scene can be designed and manufactured cheaper over-seas. The world does not need us unless the "world" wants to hire us as the police men. Maybe that is the only job for us. The Media will be overjoyed with these lower recent unemployment numbers. Look how wonderful Obama is!!!! Under Bush we lost 500,000 jobs a month!!!! Obama got it down to 25,000 per month job loss!!! But what if it's every month? Month after month. Year after year for decades? Why do we assume the job loses will end? Why do we assume that if the job losses end, then we begin to see job creation. We are talking 3 different topics here and they are not related and each is a totally different animal and requires different situations to resolve. Job loss
No loss and no gain
Job gain Add to this fear the constant increase in immigration with millions of poor, uneducated, sick, fast-multiplying "undocumented" illegals? If we get 1 million illegals in a year (conservative) do we not need an ADDITIONAL 1 million jobs for them (jobs that we Americans won't do). That is 83,000 new jobs we need every month to "give" to our new neighbors and friends since if we don't have jobs for them.....we are all racists. Don't we need something like 100,000 NEW jobs a month just to run in place, Alice? Can you think of ANYTHING that will create jobs? Even today, we are giving up two types of jobs. First, those that should have never existed (The you-buy-my-house and I'll buy yours). Then the "luxury" jobs that we can not afford. $4 coffee anyone, etc. These jobs existed in a growing wealth-creating country. We are not that. We are a dying nation and we have layers upon layers of luxury/useless/puff jobs that will go away and will never come back. I don't think we are pessimistic enough.
Jim,MtnViewCA,USA 7:06:16
re: job loss. Presumably the plan is for the gov't to step in and provide jobs.
sandorgb 6:08:46
"why do you want to load up on PMs if you think the dollar is about to rally?" mugabe, this comment was tongue-in-cheek characterization of the tinfoil hat investor's strategy for the Greater Depression. Gold is like religion. That being said, I do plan on loading up on PMs after the next dollar rally. In the near-term, perception favors gold. Further out, beyond the decade of rehab, I like platinum because energy catalysis demand will far outstrip supply. Also, Brazil is a great movie and an intriguing market.
slavador 7:44:03
One needs not to reach for religion to justify investing in the gold industry presently.
Gold mining has a story that makes sense presently.
Demand for every ounce that can be produced exists.
Mining costs are going down.
New production is materializing at a snails pace due to past underinvestment.
Can you name any other sector of any other industry where demand outstrips supply but costs are going down? I would love to diversify into something that was in a different part of the economy but have found nothing with a comprehensible and at the same time optimistic outlook for a three years!
Marvin 8:16:43
slavador wrote " would love to diversify into something that was in a different part of the economy but have found nothing with a comprehensible and at the same time optimistic outlook for a three years! " looking at the NY Times chart and the table that went into it, State/Local (at 0.9%) and Federal(1.2%) government categories were consistent winners over the last decade. lets all go to work for the FedGov. We will call it WPA.
Bay of Pigs 6:12:26
The fate of the USD is sealed. The spin, lies and manipulation cannot make it any other way. A longterm chart of the USDX from 2001 tells you all you need to know. The trend is DOWN. The Fed's efforts at blatant monetization is really starting to come into question, as Denninger pointed out so well yesterday. This post on Fannie and Freddie is further evidence of trillions more in losses that are coming. All dollar negative.
sandorgb 6:28:39
"interesting today, big dollar rally, big market rally. are the two going to go in tandem now....?" I am going to hazard a guess and say no in the near term. The predominant risking trends are inverse. At least dollar vs Euro, Pound, Aussie, Canada. However, in a low-risk appetite, turbulent scenario (double-dip recession, financial solvency crisis), we could see the correlations flip back and forth, to where predictable relationships break down. In a Zero Interest Rate Policy, the USD only gains due to flight to safety/extreme pessimism. Any sustained dollar rally spells trouble for the stock market, IMO. I remain fairly bearish on US stocks, bonds and dollar longer-term, but I have been long lately just playing the perception. More than likely, though, we will have waves of several months with dominant correlations, followed by trend reversals, as perception and reality struggle to catch up to one another.
shake 6:33:17
Can you think of ANYTHING that will create jobs? Heck no..the only reason balance sheets look better are because of government bailouts and layoffs. You take those two away and the economy is still in a gigantic state of disrepair. I like the way the John Mauldin put it on Tech Ticker..this is a deleveraging recession and we haven't seen once in 80 years. As I posted with the NY Times article, the only growth in jobs in 10 years has been government jobs. The private sector has produced nothing sustainable in 10 years. It is much worse now because as Mauldin put it, the debt is much worse and thus the deleveraging recession will affect every corner of the private economy.
shake 6:39:32
Why do we assume the job loses will end? Actually for the market to keep running, there have to be more job cuts and more government spending as I posted above. For the second derivative in all statistics to keep going higher, we need more layoffs and more government spending. I believe the pressure to produce profits will only increase from here on out now. That is extremely bearish for private sector jobs.
Social Vandal 7:01:55
Imagine if GM has 120 days of inventory on their lot that have not been bought by the dealers. Now, GM fires EVERYBODY tomorrow and then sells the cars to the dealers....... Imagine the FANTASTIC 3rd Quarter profit margin. WOW, am I a genius or what. DOW hits 20,000 !!!!!
Social Vandal 6:56:40
A Job-Loss Forclosure Bankruptcy Recovery One hell of a recovery, huh.
Social Vandal 7:03:29
Maybe we can call this a "Virtual Recovery"
shake 7:04:27
I'm pretty sure Wall Street is laughing at Main Street about this...
Now hiring: Everywhere you didn't want to work In this job market, even slaughterhouses and sewage plants look good to long-term unemployed
Wawaweewa 7:12:03
What do people expect?
The Feds to admit that everything is horrible? They need to keep the facade up because their survival depends on it.
Meanwhile, permabears get KO after KO.
I don't know whose worse actually. The perma bears or the Feds. (Score: -1 by 1 vote)
shake 7:18:57
What do people expect?
The Feds to admit that everything is horrible? Yes. I actually think that would build more credibility with the unemployed crowd and main street. If your the Feds, those are the people to be worried about anyway. Or do you think the happy talk is all true ? Unlike you, I think the American people can handle the truth.

The problem is its the truth that keeps the powers that be trying to keep this facade because the real truth they are beholden to the bondholders of the country - mainly the saudi and the chinese. TPTB seems to have no problem just passing things on to the next generation. Eventually we will all pay the piper.

Economist's View We Need Jobs

Aug 02, 2009

Following up on some of the issues raised in the post above this one, here's a quote from today's NY Times that summarizes my view on whether we should intervene with policy:

Mark A. Thoma, an economist at the University of Oregon, says the financial crisis would have been worse if the government hadn't rapidly intervened.

"I completely disagree with the idea that letting the markets heal themselves is the best idea," he says. "We tried that in the '30s, and it didn't work out so well."

The second part of the quote doesn't express what I was trying to say very well. Brad DeLong expresses it a bit better:

[W]henever governments largely ... let financial markets work their way out of a panic out by themselves – 1873 and 1929 in the United States come to mind – things turned out badly. But whenever government stepped in or deputized a private investment bank to support the market, things appear to have gone far less badly.

And, since I'm quoting myself, here's one more from yesterday at CNN Money on whether the fiscal stimulus in place already has worked:

The true test of the stimulus package will come in the fall, when the government reports economic activity for the third quarter. The administration is working to get the money out the door quicker, as complaints mount that stimulus is not having its promised effect.

"The third quarter will be a critical time period for assessing the stimulus package," said Mark Thoma, an economics professor at the University of Oregon.

As to whether we need more fiscal stimulus, if we wait until we know for sure it will be too late. I've been worried that employment would lag behind output once the economy recovered, and that the fiscal stimulus package we put in place was not sufficiently devoted to the employment recovery problem for quite awhile now, and I haven't changed my mind. From last June at MarketPlace:

Fiscal policymakers should have recognized that employment has tended to recover sluggishly in recent recessions and implemented policies that are known to create jobs. But they didn't...

We need policies that put people back to work immediately. Unfortunately, when the first fiscal stimulus package was being formulated, stimulus programs that hire people to do things that don't enhance long-run growth was a difficult sale politically, so we were left trying to stimulate employment largely with infrastructure projects that were difficult to bring online quickly (which will be even more true if there is another round). I would have preferred that more of the original stimulus package be devoted to projects that created immediate employment, and if we do another stimulus package, as we should given the shape that labor markets are in, I hope we pay more attention to the employment problem.

Update: Along these lines, recently, Brad DeLong wrote:

The Changing Nature of the American Business Cycle, by Brad DeLong: ...It used to be the case that businesses hoarded labor in recessions because they did not want their skilled workers to wander off and to have to train new ones....

Now it is really beginning to look as though businesses take recessions as opportunities to greatly slim down their workforces without making the workers they retain too angry and depressed. We saw this in 2002-2003. We saw it before in 1992-1993. The fact that productivity is no longer strongly procyclical countercyclical in recessions is good news in the long run--it means that our average long-run rate of productivity growth is higher than we used to think. But it also means that there is more headroom for expansionary policy, and more need.

Thus statements like this one from the very sharp Allan Sinai:

Phil Izzo reports:: "The mother of all jobless recoveries is coming down the pike," said Allen Sinai of Decision Economics. But he doesn't favor more stimulus now, saying "lags in monetary and fiscal policy actions" should be allowed to "work through the system..."

make me pound my head against the wall. If as the policies we have now in train to support the economy work their way through the system we find that we still have "the mother of all jobless recoveries," then we should be acting now to provide additional government support. A jobless recovery is not a good thing. And we should avoid it if we can figure out how in time.

For more, see:

Productivity in the Recession and Going Forward, by Paul Bauer and Michael Shenk, FRB ClevelandIn contrast to previous postwar recessions that tended to see sharply lower labor productivity growth, if not outright declines, the 2001 and the current recessions have had relatively strong labor productivity growth. In 2001, year-over-year productivity never dropped below 2.0 percent. In the current recession, productivity has remained over 1.9 percent. The sustainability of this productivity growth has implications for monetary policy, the affordability of the Federal deficit, and ultimately our living standards in the long run.


Gains in labor productivity (output per hour) come from three sources: increasing the amount of capital per worker (capital intensity); increasing workers' average level of skill, education, and training (labor composition); and a residual (multifactor productivity) that picks up economy-wide gains in knowledge and organizational methods not captured by the previous two effects. Only annual estimates are available for the breakdown in labor productivity. The post-1995 resurgence in labor productivity has been spurred largely by capital intensity and multifactor productivity. However, the growth for 2007 to 2008 was fueled more by capital intensity and a bit less multifactor productivity. ... [full article]

Posted by Mark Thoma on Sunday, August 2, 2009 at 01:02 PM in Economics, Fiscal Policy, Unemployment | Permalink | Comments (28)


KThomas says...

Not that I diagree with our host, but what jobs?

FDR gave men and women shovels and axes and hammers and bulldozers and cranes to build this country do we repeat this? What jobs, Prof.?

Bruce Wilder says...

Hoover was the Last Progressive Republican. He loved that kind of technical do-goodism, working out standards for traffic lights and the like.

And, he almost became the last Republican.


Ben says...

The reason we don't have enough job stimulus is simple. The working poor in general have no clout in the US. Unions are dead. To have clout you have to have money since all US politicians are for sale, one way or another. Without money to buy their votes you don't get anywhere and the poor even collectively don't have the money needed. So they don't get much from the political system. The plutocracy has made money the dictator of politics and so the people with money run things from top to bottom. If you disagree, please tell me what money in sufficient quantities the poor have to buy the votes they need. I challenge you to do so.

Bruce Wilder says...

It isn't just about jobs, it's about wages. And, the restructuring of debt. The size of the financial sector. And, the share of national income that goes to Labor vs. the share that goes to Capital and Top-Level Executive "Compensation".

We need a substantial re-structuring of debt. The value of mortgages and mortgage securities -- and all other forms of consumer debt -- has to be written down to realistic levels. If we wait for the American people to reduce their debt service burden, at whatever rate a pitiful 5% savings rate gets us, paying credit-card interest rates, while slowly repaying full principal, we will be waiting for a full recovery of business activity for decades, if not centuries.

If that debt restructuring requires inflation -- oh, well. Push employment up, and tax the rich to pay for it. Tax the financial sector down to half its present size. Tax top-level executive compensation down to one-fortieth its present size.

When you clear all the b.s. away, conventional macro economic policy aims to keep nominal wage growth lagging behind nominal asset value growth as the economy gradually expands.

We have followed that basic model for 60 years. And, it is completely played out.

If Fed policy is left in the hands of Bernanke or similar, then the first signs of wage increases will be followed by recession, to protect Capital and the financial sector. It is a policy that reinforces a trend that simply cannot be extended any further.

I'm very pessimistic, though, that any kind of reform will be accomplished without further disaster piled onto catastrophe.

I watch the Stock Market climb, and I am filled with gloom. Fed policy continues to fuel asset price growth, while wages stagnate and decline. Yet, without wage growth throughout the U.S. -- indeed, throughout the industrialized and industrializing world -- I cannot imagine how full-employment levels of economic activity can be restored.

Roger Chittum says...

Unless I misunderstand how productivity is measured, there is a fourth way in which measured productivity increases: When low-productivity jobs are eliminated, offshored for example, the average productivity of those who remain in the workforce goes up--even if none of them is individually more productive.

For example: A domestic manufacturer sees its gross margin decline from a healthy 20% toward an unsustainable 10% as a result of foreign competition. Finally, it offshores the manufacturing function, and eliminates all the domestic manufacturing jobs, which had become low-value-added jobs. If the displaced workers remain unemployed, they are not in the productivity calculation at all. If they find new jobs, typically those jobs will be at lower wages and higher value added. (Even flipping burgers is probably higher value added in that context.) Furthermore, the average value added of employees retained by the manufacturer goes up.

So there's another benefit to offshoring jobs--it increases measured productivity and economists can cheer.

Min says...

"We need policies that put people back to work immediately. Unfortunately, when the first fiscal stimulus package was being formulated, stimulus programs that hire people to do things that don't enhance long-run growth was a difficult sale politically,"

Fortunately, we now have millions more shovel ready people than we did then. :) That fact makes providing jobs more politically palatable.

@K Thomas

What jobs? There are always maintenance type jobs around. And with states and municipalities cutting back, things could be done to take up the slack. Also, a certain number of people who have lost their jobs have the talent and ideas to start new businesses. But the banks are not lending. Help them start businesses. New businesses may be more likely to fail than usual, but meanwhile they are putting people to work and providing goods and services to their communities.

Bruce Wilder says...

Ben: "If you disagree, please tell me what money in sufficient quantities the poor have to buy the votes they need."

I don't disagree.

At best, you can hope for political division among the monied classes: a politics of Tory v. Whig, that allows some degree of incremental progress. (Tories and Whigs were the binary division of Britain's ruling classes -- its landed aristocracy and gentry -- from 1688 to 1832; the Tories more authoritarian and the Whigs slightly more liberal.)

I read Obama, as a kind of Whig -- he's leveraged the fear and loathing of the Republicanism of GWB and birthism and racism, particularly among well-educated professionals -- to augment the Democratic Party's coalition. And, with that electoral (and media and campaign-financing) coalition in place, he's trying to restore a politics, where principled reason can still prevail, at least on the margins.

Having reason prevail at the margins doesn't result in ideal policy, but it results in incremental policy movement -- reform in the right direction, but well-short of the right destination.

If you are rooting on the sidelines, it's hard to know if there are any good guys, and it can be very hard to know how enthusiastic to be. Every proposal, let alone every enactment, falls so far short of ideal, that disappointment becomes universal. On the other hand, the true opposition, outside the deal-making, appears to be championing a species of UnReason or Crazy-Lieing.

I look at the political process, and the history of revolution, and I can't help think that Whiggish reformism and revolution by small steps is preferable to revolution. But, I look at the economic processes at work, and worry that we don't have time to work through decades of incremental reforms, which political realities squeeze down into such trivially small steps.

cm says...

Min: "There is enough work in want of takers" does not necessarily (and does not usually) translate to "there are enough (maintenance) jobs that somebody is WILLING TO PAY FOR".

While you did not say what kind of maintenance work you are envisioning, I suspect much of it is of the "public benefit" kind e.g. fixing crumbling infrastructure or cleaning up blight.

Work for the benefit of the public is generally never commissioned by private entities as the "ROI" does not accrue to the private entity but generally to others, in the way of improved (but intangible) quality of life. That's why public benefit work has to be commissioned by the state, and necessarily has to be financed by levying new taxes or redirecting existing revenue from current spending. Where our trillions are spent we have been seeing lately - bailouts for financiers and even before that, frivolous wars and police state bureaucracies.

ken melvin says...

Don't think we're going to stimulate or export our way out of this long building mess. Why in the hell do we persist? Even if we could somehow stimulate this great demand, one that would employ so many more people, what would be the consequences?

What's needed is a new way of distributing wealth and income.

gordon says...

Prof. Thoma: " A jobless recovery is not a good thing. And we should avoid it if we can figure out how in time".

Prof. Thoma continues to inch cautiously towards large-scale public employment based around a core of long-term industrial policy.

bakho says...

I am glad to see it called a JOBS program as opposed to another "stimulus"

mrrunangun says...

The downside of deficit spending to supply unsustainable infrastructure maintenance and repair employment is that it requires piling on further deficit spending. The administration is forecasting a $10 trillion+ deficit over the next 10 years with the programs it already plans. Someone should reasonably answer the question as to what level of deficits year by year is too much to justify the good that the programs do for the public. There is no limit to virtuous programs that can be formulated and undertaken if there is no limit on the deficit. For the last 40 years our govt has been run on the assumption that there is no practical limit.

If I were to borrow as an individual to give money away to my church, my old schools, needy acquaintances, the Democratic Party, etc. then I could do a lot of good with that money. Up to what point is that a sustainable policy for me?

Sundar Srinivasan says...

"The third quarter will be a critical time period for assessing the stimulus package," said Mark Thoma...

The important part of third quarter measurement is not just GDP, but also unemployment. Why did not the government intervention create jobs, along with boosting GDP? Is the smaller stimulus package responsible for the joblessness in the recovery process? There are a lot of questions about government intervention that needs to be answered that just attributing the GDP growth to stimulus.

Don the libertarian Democrat says...

I would favor a Tax Credit for Hiring:

"Sinai, of Decision Economics, wants Obama to reconsider providing tax credits to companies that take on more workers. Before becoming president, Obama proposed offering a $3,000 tax credit for each new hire."

Here's the problem:

"Economists of all political stripes have said businesses would likely claim the credit for hires they would have made anyway, or worse, lay off workers simply to rehire them and claim the tax break.

"That's one that gets a lot of opposition," said Sen. Charles Schumer, a New York Democrat."

"I don't think it works," said Sen. Kent Conrad (D-N.D.), a member of the Finance panel and chairman of the Senate Budget Committee. "I don't think it will give much lift to the economy.

"If someone offers you several thousands of dollars in tax credits when your product is not selling, are you going to hire someone?" Conrad asked rhetorically.

Obama surprised his colleague earlier this week by floating the idea of combining several hundred billion dollars' worth of tax cuts with the economic stimulus.

Conrad said economists learned from the Great Depression that marginal incentives are not effective "when the economy is falling away from you."

"People use it to pay debt or to save - that's human nature," he said.

Sen. John Kerry (D-Mass.), another member of Finance, voiced skepticism.

"I'm not that excited about it," Kerry said. "The creation of a tax credit for hiring isn't going to make up for the lack of goods being sold."

Sen. Ron Wyden (Ore.), another Democrat on the Finance panel, which has primary jurisdiction over the stimulus package, said that infrastructure spending is more important.

"In tough times, people don't respond that well to marginal changes," Wyden said."

In this crisis, job losses have been outpacing the drop in GDP. That means that employers have been letting workers go proactively. When the recovery begins, businesses will need to rehire and retrain many new workers. The Tax Credit would help, perhaps marginally, to give an incentive for hiring sooner rather than later. In this crisis, we need to use every weapon available, including this one.

save_the_rustbelt says...

Figuring the cost of hiring someone full time at $12 per hour, wages and payroll taxes (assuming no benefits) is about $28,000 per year. Benefits would increase the amount.

A $3,000 tax credit does not tip the decision in favor of hiring.

Roger Chittum says...

BW nails the issue: should policies lean toward persistent increases in real wages for worker bees, or lean toward stagnant or declining real wages? This is the defining political issue of our time. If policy makers were really committed to rising wages, they could figure out how to do that. But, in fact, the dominant coalition is adamantly opposed. Sure they'd like middle income workers to be happier, but reducing labor costs to increase returns to capital and increase global competitiveness has a higher value to them than labor happiness.

Here's what the Whigs are saying, according to a staff report to Obama's Middle Class Task Force:
"[T[he President and Vice President recognize that helping families make it through these hard times is just one part of their agenda for lifting up the middle class. They also are acutely aware of the disconnect between growth and middle-class incomes that persisted even in good times. They know, therefore, that an economic recovery is necessary, but not wholly sufficient to lift the fortunes of the middle class and to correct the economic imbalances that held them back in recent years."

But elsewhere in some emanation from this Task Force, they used in the same paragraph "stabilize middle class incomes" and "raise middle class incomes." They can't decide, it seems, what the goal should be.

Roger Chittum says...

Link to Task Force staff report:

Phillip Huggan says...

I skimmed a Michigan report that lists job category growth projections. The report does not take into account federal spending and policy platforms. It is a report being used by community colleges to offer courses.

I don't know if the need is to offer federal community colleges or to put more resources and coordination into existing job category growth estimates....

This is a very basic part of addressing globalization that needs to work for other solutions to follow. You should be able to magically snap your fingers when you pass a final Bill, and instantly adjust next year's colleges's curriculums at the same time as well as begin hiring unemployed workers to be teachers of desired trades.

If this is fundamental it would represent a limit to specialization. But the report listed finance occupations that won't be back; "Hot Jobs" section was being updated every two years, I think. Hire some analysts at least.

Bobby the Red says...

Bruce Wilder said: "Hoover was the Last Progressive Republican. He loved that kind of technical do-goodism, working out standards for traffic lights and the like....And, he almost became the last Republican....How?"

See Kevin Baker's July Harper's article. Hoover was brilliant, heroic, and flawed. He maybe saved more lives than anyone in history before Norman Borlaug. I think Baker writes Hoover caused blacks to abandon the Republicans by giving them short shrift during the '27 Mississippi flood crisis. Underestimating the scale of the response needed to address the onset of the Great Depression probably didn't help either.

I'm guessing Hoover also didn't support job creation programs.

bob mcmanusb says...

but reducing labor costs to increase returns to capital and increase global competitiveness has a higher value to them than labor happiness.

The Sub-Proletarianization of America:An Overview Part 8 of 8

Some of the leftists have seen this coming. I have not yet seen any solutions over there yet. Ends with a whimper, I suppose.

Lafayette says...

MT: "The third quarter will be a critical time period for assessing the stimulus package," said Mark Thoma, an economics professor at the University of Oregon.

The third quarter is not the best time in any national economy. Too many vacations during the summer period and too many people thinking of vacations. Besides, I suspect the numbers are skewed by "summer jobs", however they massage the employment data.

[NB: Maybe the US is different, but anyone taking to the highways in France in early August will note that Europe is on vacation that month. The swing in population is massive and the money inflow into France from tourism as well. I suspect the US may be the same. All the tourism jobs evaporate in September.]

Would not the transition from the third to the fourth quarter be when any real growth should have sufficient traction to generate jobs? True enough, the stimulus money had better be at the rendezvous.

If BO&Co had 5% unemployment by September, he'd be looking pretty good, whatever happens to Obamacare.

Mattyoung says...

My forecast is plenty of jobs. Boom times like mankind could not have imagined, just a year away. In the epic battle, Silicon vs Oil, Oil will be crushed.

kthomas says...

Mattyoung, hey, you writing a book? ;)

gordon says...

Thanks for bringing up the Task Force, Roger Chittum.

Bob Mcmanusb, have you checked out the EPI's Agenda For Shared Prosperity? Probably not perfect, but it's not all whimpers out there.

gordon says...

The link to Agenda For Shared Prosperity is:

Chrome isn't solving all my problems.

Ben says...

Obama's health reform is a very mild attempt to shift some money from the plutocrats to the proletariat and see the difficulty it is having to be passed. Almost insurmountable. And of course it will have only the tinyest effect on the Gini distribution, if any. Wall Street pigs will still be giving themselves 100 million dollar bonuses and the White House will still just sigh in dismay and do nothing. I wonder how Candy Spelling is doing selling her palace? What is she asking for it? 125 million? I will have to check.

Ben says...

Gee I got it wrong. She's asking 150 million. I mean now she's a widow and doesn't need quite all that space.

Sluggish Wages and Employment

"I think the downward pressure across the board (wages, unemployment, housing, etc) is going to make it very hard for wages to rebound with inflation as the driver and I don't think there's going to be much market opportunity to exploit that will drive up wages. "

Following up briefly on part of Tim's post, once the economy turns the corner, for wages to increase two things must happen.

Finally, note that when there is slack in the existing labor force due to a decline in hours worked, etc., there will be a delay between the time the economy turns around and the time when employment begins increasing. This isn't the only reason there is a delay in the response of employment, but it contributes to it.

Laurent GUERBY says...

"slack in the existing labor force"As of 2008 nearly 10% of USA men aged 25 to 54 years old are considered as inactive, that is to say not part of the labor force. In 1948 this percentage was around 3%.There's a 1948-2008 graph here:'d love to see economists acknowledge that this growing and now significant population is completely ignored by all models and so not taken into account by proposed solutions.And explain why there's exactly zero peer reviewed paper about this publically available data which clearly shows a major change in the work market.

Posted by: Laurent GUERBY | Link to comment | Jul 30, 2009 at 04:19 AM

Beezer says...

There does appear to be a structural change in the type of industries that will employ going forward.This change is in it's earlier stages right now, and it will be another reason employment will remain muted.There's slack in the economy now because what needs to be done isn't being done. The price mechanism which normally would force such change isn't being allowed to work. We subsidize the price of oil, for example, by refusing to directly acknowledge the costs of oil use and, therefore, refusing to pay for mitigating those consequences.Price will work eventually, of course, but our current subsidies prolong the day of reckoning.Cap and trade or carbon taxes (energy reform), environmental protection and restoration, health care reform, transportation reform: These all involve the efforts being made that will result in future industries where employment will increase. They all arise as a result of a growing awareness that subsidies for the status quo are warping the price signals.As just one example: The original "unintended consequences" of fossil fuel use are now intentional because the subsidies produced warped investment flows which built energy oligopolies who fight against ending, or even acknowledging, those subsidies.Conclusion: Much of the employment slack has been produced by subsidies that built oligopolies in a number of industries, from energy to health care to finance. Posted by: Beezer | Link to comment | Jul 30, 2009 at 04:50 AM

ken melvin says...

Bon dit Laurent.There has been continuous downward pressure on wages, especially for the past 8 yrs and in general for the past 30 yrs. People aren't making what they made 30 yrs ago, so upward pressure is needed, and , in fact, would help come out of the recession.

And, by the by, why is it good to inflate (reinflate?) equity and not wages? The continuous denial of the reality of the unemployment continues to be bothersome.

Lowered wages didn't make us competitive with China, can't, and they won't replace the jobs lost due automation. The old model simply is no longer applicable. Are we going to waste the next 3-4, 10 yrs chasing our tail?Posted by: ken melvin | Link to comment | Jul 30, 2009 at 05:20 AM

SS says...


Unfortunately it is hardly an enlightened one as a member of the Cambridge Police Force - not Officer Crowley though - has sent e-mails calling Professor Gates a "banana eating Jungle bunny" Glen Beck, a Fox show host, has started criticizing Obama for being racist, along with Rush Limbaugh, the Senator from South Carolina (R) gets taken to task in his state for voting for Sotamayor and as we have seen here the health care debate is being is being hijacked away from technical considerations of cost, quality and extent of coverage to whether it might actually help obese people or the poor.While this right wing reaction was to be anticipated, its quickness to emerge even with the economy showing some positive signs as a result of the stimulus, before what I believe is a second deeper downturn, is very disturbing. One can anticipate sites like this being banned or, if not literally banned, becoming anathema if there is a right wing reassertion of power in 2010.

The only positive I can see coming out of this is that people being paid to spread disinformation in the blogosphere will lose their income along with the rest of us if the liberal blogosphere is forced into quietude.SS Posted by: SS | Link to comment | Jul 30, 2009 at 05:45 AM

Dave says...

I think the downward pressure across the board (wages, unemployment, housing, etc) is going to make it very hard for wages to rebound with inflation as the driver and I don't think there's going to be much market opportunity to exploit that will drive up wages. This is all seems eerily familiar to Japan's wages and liquidity traps, no? Posted by: Dave | Link to comment | Jul 30, 2009 at 06:32 AM

bob mcmanusb says...

I have no particular problems with flat or declining wages as long as returns to productivity or profits are put into public goods and the commons. I guess the options are either a higher level of targeted inflation, 3-5% or higher or tax profits and wealth till it screams and bleeds.

But if the gains from flat wages continue to be sent to Goldman-Sachs I want guillotines.

Laurent GUERBY says...

ken melvin, thanks :).I hope Mark Thoma will mention this graph one of these days and ask fellow bloggers if they know something about this.Is the work market really the same when you have 3% unemployment and 3% inactive versus the same 3% unemployment and 10% inactive?I'd say any econ 101 student should ask the question. And watch the astounding silence from her teachers ...

david says...

big biz has been getting one over on workers, unions notwithstanding, for a couple decades. but particularly ever since 1991 the modern labor market is a scam for most of the drones. everyone knows this, but economists require high falutin math n such to eventually come to this conclusion, long after the patient is dead.what mt says is spot on. with each recession capitalism gets one over on our working conditions in order to further extract productivity gains in search of the fabled 20% margins and growth in stock prices. those are ridiculous expectations fueled by a wall street which no one should trust anymore at this point.real wages don't have anywhere to go but sideways, and probably for a long long time. we are back to the story expounded in peddling prosperity (krug). this is not going to change until america stops letting itself get raped over and over.

anne says...

The situation is clear, nominal weekly and hourly earnings of ordinary workers are flat, real hourly earnings are decreasing, total compensation of all workers is increasing more slowly than productivity and the rate of increase is dramatically slowing. Average hours worked are the lowest since such data has been compiled from 1964. Initial claims for unemployment are averaging about 560,000 monthly, with claims needing to be below 400,000 for there to be any prospect of overall job creation. Unemployment rates for relatively older workers, from 45 on, are the highest recorded since such data collection began in 1948.

Where is inflation going to come from, and Paul Krugman looking to labor market conditions has repeatedly raised the prospect of deflation?

anne says...

Beyond all other labor market problems, beyond unemployment rates, there is a problem that is seemingly little recognized. These last 102 Bush-Obama months, there have been in all 793,000 jobs lost and 2.54 million private sector jobs lost. The job loss experience of the last 102 months is easily the worst since the Depression, dramatically so for private sector job loss.Simply keeping up with population growth would have meant creating 14.33 million jobs these 102 months, but we have lost 793,000 jobs. We have been losing 24,900 private sector jobs a month for 102 months, where 220,300 private sector jobs were created monthly through the 96 Clinton months. Where 240,300 jobs a month in all were created through the Clinton years, 7,800 jobs a month in all have been lost through these last 102 months.

anne says... Bush-Obama experience in monthly job loss has been,- 7,780 x 102 months = - 793,000 jobs lost in all;

enough job creation to keep up with civilian work force growth would have meant,

140,500 x 102 = 14.33 million jobs created in 102 months;the Clinton experience was,

240,310 x 96 = 23.07 million jobs created in 96 months.
anne says...

"Simply keeping up with population growth would have meant creating 14.33 million jobs these 102 months, but we have lost 793,000 jobs."I find the official unemployment statistics confusing.
Shouldn't unemployment figures have gone through the roof?[Through times of significant unemployment men and women who would otherwise be looking for work remain out of the labor force and are not recorded as looking for work. The potential workforce growth rate, as opposed to the actual workforce, increases during times of high job creation and decreases in difficult times.

The unemployment-underemployment rate gives somewhat of a sense of the problem, but the rate only extends to 1994 and shows too little in the way of what workforce potential is. Better to use actual job creation or job loss, and long term labor force growth statistics.]

anne says...

January 9, 2009Unemployment-Underemployment Rate, 1994-2009

Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.

1994 (10.9) *

1995 (10.1)
1996 ( 9.7)
1997 ( 8.9)
1998 ( 8.0)
1999 ( 7.4)

2000 ( 7.0) (Low)
2001 ( 8.1) Bush
2002 ( 9.6)
2003 (10.1)
2004 ( 9.6)

2005 ( 8.9)
2006 ( 8.2)
2007 ( 8.3)
2008 (10.5)June2009 (16.5) (High)* Employment age 16 and overMarginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.Posted by: anne | Link to comment | Jul 30, 2009 at 08:54 AM anne says... 9, 2009Employment Growth Summary, 1992-2009(Thousands) *December 1992 ( 109,415)
December 2000 ( 132,485)
December 2008 ( 135,074)
June 2009 ( 131,692)Clinton ( 23,070) (+ 21.1%) Total jobs created
Bush-Obama (- 793) (- 0.6%) Total jobs lost(Actual averages)Clinton ( 240,313) Monthly jobs created
Bush-Obama (- 7,775) Monthly jobs lost* Establishment data, seasonally adjusted.Posted by: anne | Link to comment | Jul 30, 2009 at 08:55 AM anne says... 9, 2009Total Nonfarm Private Employment, 1992-2009(Thousands) *December 1992 ( 90,537)
December 2000 ( 111,681)
December 2008 ( 112,542)
June 2009 ( 109,138)Clinton ( 21,144) (+ 23.4%) Total private jobs created
Bush-Obama (- 2,543) (- 2.3%) Total private jobs lost(Actual averages)Clinton ( 220,250) Monthly private jobs created
Bush-Obama (- 24,931) Monthly private jobs lost* Establishment data, seasonally adjusted.Posted by: anne | Link to comment | Jul 30, 2009 at 08:56 AM anne says...
Another sense of where we are can be gained looking to employment-population ratios, which show easily the lowest levels for men recorded since 1948, and show levels for women which had been steadily increasing since 1948 to have peaked at a high of 57.5 in 2000 and declining from there to 54.6 in June 2009. This, even though women are faring relatively better than men through this recession.The employment-population ratio for men has fallen from 71.9 in 2000 to 64.7 in June 2009, a record low.Posted by: anne | Link to comment | Jul 30, 2009 at 09:04 AM kharris says...

While there will be no upward pressure on wages while the slack conditions you (MT) outline are overcome, upward pressure is only half the story. We will (one hopes) have a diminution of downward pressure. Mathematically and in the sense of personal income, that is the same as upward pressure. Unless there is some discontinuity, a tipping point at which workers stop accepting any erosion in take-home or hourly pay all at once, an easing of downward pressure should make a difference in the trend in household and disposable income, downward pressure on prices and all that other stuff associated with changes in wages.Oh, we go again, with people claiming complete mastery of the economic literature, a mastery which informs them that they are aware of something no real economist has noticed, or of which they dare not speak.LG, you realize how econ PhDs are handed out? Grad students do original research on economic topics. If there is any obvious change in the labor market, somebody other than you knows about it - somebody with a PhD and somebody who wants a PhD. Not because they are nice or smart or have somehow fought their way free of a great intellectual conspiracy. No, they have noticed it because they spend months looking around for a topic that can be researched for a dissertation, and leave no stone unturned. Sheesh.

anne says... 12, 2009A Remarkable Achievement
By Paul Krugman[Percent change in employment in 8 years = 2.0 * ] How did Bush do that?I know, I know - "Presidents don't have much effect on the economy," etc. But that's not what the usual suspects were saying just a few months ago.And in any case, there's a mystery waiting to be solved: why were the last 8 years so bad? Even the good times weren't all that good: by my quick count there were only 11 months under Bush in which the economy added as many jobs as it did in an average month under Clinton. How did Bush manage that?*
Posted by: anne | Link to comment | Jul 30, 2009 at 09:28 AM anne says...
There are fundamentally sound ideas that are permissible to mention and ideas that cannot be safely mentioned even in academic circles, as the idea that increasing the minimum wage could be shown not to increase unemployment for which finding the researcher was subject to academic abuse enough to find a need to drop the subject even after being an established professor.When a New York Times columnist mere weeks before the formal beginning of this ferocious recession wrote of a recession in the labor market from the perspective of ordinary workers, a prominent academic economist immediately suggested the columnist "should be retired and sent to doing something socially useful."Posted by: anne | Link to comment | Jul 30, 2009 at 09:41 AM Dirk van Dijk says...
In the first quarter Wages and Salaries (WASCUR at FRED database) were $6495 billion or 46.07% of GDP vs. an averagae since 1947 of 49.28% of GDP. On the other hand after tax corporate profits, (CP in the FRED database) were 1054.2 billion or 7.48% of GDP vs. the long term average of 6.03%. CP was consistently north of 10% durring the W years, but prior to that more than 8% was extremely rare.Of course, the wages and salaries include those that work at GS as well as those that work at MCD, and says nothing about the distribution with in it. At the low end it is far worse.Posted by: Dirk van Dijk | Link to comment | Jul 30, 2009 at 10:25 AM mark says...

Worth remembering that wages are but a part of cost of employment to the employer. If health benefits are supplied, that is a second. Payroll tax is a third. Any sort of 401(k), a fourth. Workers' comp. Possibly other insurance or pension benefits. Other benefits - paid vacation time, paid family leave time, sick days, child care assistance, holiday bonuses, parking and car allowances, and among more esoteric benefits, gym memberships, team building trips, etc. Then there are training costs (both direct and opportunity costs)potentially incremental overhead, depending on efficiencies of scale, such as incremental office space and incremental accounting burden, and increased expense to comply with several jurisdictions' employment laws and tax laws. Depending on scale of your company, additional regulations with attendant cost may be triggered as your payroll grows. Contingent litigation risk grows. The normal headache of having to manage personality clashes and office politics grows. Then of course income tax on the profit that might be earned on the employee's work factors into the decision for there is no reason for private sector to hire someone without expectation of profiting from it and keeping that profit. If you look at these nonwage factors, it is clear that several of them have grown over the past few years. And several are likely to grow in the future. Thus from an employer's perspective, of which I am one, the cost of compensation per employee has actually grown and can be projected to grow, even though the worker may not see that translate into increased pay. Essentially, these other factors compete with the employee's desire for wages. I think "wage" studies and observations need to be put in this context. I also think hiring will continue to be weak over the next three years and wage growth nonexistent, at least due in part to the impact of these non-wage factors, as well as foreign competition and the macro and credit situations.

roger says...

kharris's remark reminds me of the old joke about two economists who come upon a ten dollar bill in the street. One goes to reach for it, and the other says, don't be silly. If there were a ten dollar bill in the street, someone would already have picked it up already.

Tom says...

Beginning in 1982 America's information technology industry created considerable economic growth and jobs. However, entry into the global economy of Soviet block countries and Asia has greatly increased the supply of labor thereby changing the global balance between labor and capital ('Labor Market Imbalances' Richard Freeman, Boston Fed. Economic Conference, June 2006).The OECD's report, 'The Impact of the Crisis on ICTs and Their Role in the Recovery' (28 July 2009) [where 'ICT' stands for Information Computer and Communications Technologies] cites reports that suggest offshoring in the more middle class high tech sector will increase:"Other surveys conducted in the United States showed that IT (offshore) outsourcing is seen by IT executives as a means to reduce costs and to improve cash-flow. Info-Tech Research, for instance, surveyed more than 150 IT companies, and showed that more than 60% of the IT departments are "focusing on reducing costs via offshore outsourcing". According to the survey of Robert Half Technology, 43% of 1400 CIOs were planning to increase offshore transactions in 2009 (TEAM International, 2008). The European Information Technology Observatory (EITO) has also projected an increase in revenues for IT and BP outsourcing in 2009 in Europe. In Germany, for instance, annual revenues generated by IT and BP outsourcing are expected to increase by 7.2% in 2009 compared to 7.4% in 2008 (BITKOM, 2009)." (p. 21) American economy has continued to shift to the "service" sectors. But as Alan Blinder has pointed out service sector offshoring could be so large as to constitute a new industrial revolution (Offshoring: The Next Industrial Revolution?). In a more recent paper (How Many U.S. Jobs Might Be Offshorable?) he states: "Potential offshorability encompasses between 22% and 29% of all the jobs in the 2004 U.S. workforce, with the upper half of that range more likely than the lower half. Contrary to conventional wisdom, the more offshorable occupations are not low-end jobs, whether measured by wages or education."

Patricia Shannon says...;_ylt=At1C7BeHlAJKvBlwN9Po35ms0NUE;_ylu=X3oDMTMyYmRnOXE5BGFzc2V0A25tLzIwMDkwNzMwL3VzX2JvbnVzZXNfY3VvbW8EY3BvcwM2BHBvcwMzBHB0A2hvbWVfY29rZQRzZWMDeW5faGVhZGxpbmVfbGlzdARzbGsDbnlhZ3NvbWUwOGJhBy Grant McCool Grant Mccool – 1 hr 5 mins ago

NEW YORK (Reuters) – Bonuses paid to executives at nine banks that received U.S. government bailout money in 2008 were greater than net income at some of the banks, the office of New York Attorney General Andrew Cuomo said on Thursday.

anne says...

So the unemployment rates for men above 25 and 45 and 55 respectively, are the highest since 1948, while the unemployment rate for men above 20 was higher only in December 1982 (10.1 as opposed to 10.0). The employment-population ratio for men above 20 is easily the lowest since 1948 (70.5 in February 1983 as opposed to 67.7 now).

kthomas says...

Offshoring has completely decimated the IT employment oppurtunities of millions of Americans.Karl Marx is busy laughing his ass off in Heaven.

bakho says...


It is clear that the numbers are screaming for a federal jobs program, or jobs program or government demand for public services that creates private sector jobs. or some combination.Under Clinton, job loss in manufacturing was offset by job creation in other sectors. Since 2000, there has been no offset and recently, few sectors are NOT losing jobs. There are plenty of unmet public needs.

anne says...

Bakho:"It is clear that the numbers are screaming for a federal jobs program, or jobs program or government demand for public services that creates private sector jobs. or some combination."With real government spending ranging in all from $54 to $120 billion, the much smaller portion accounted for by New Deal programs created 3.5 million jobs, and created them fast, for a population of about 127 million. The object of New Deal programs was job creation, and simply notice to this day the benefits from work done in New Deal programs.

anne says...

Looking to Europe in comparison, the employment rate in the European Union 15 (the original member countries) for the population from 25 to 54 years in age was essentially the same in 2005, after being significantly lower for years, with the employment rate increasing in Europe from 2005 through 2008 and decreasing in America. The EU15 unemployment rate which had for years been much higher than the American rate was the same as that in America by March 2009 and is now lower.We are faring relatively more poorly than Europe in terms of labor markets, though recessions began within a month of each other and the general growth decline in Europe has been more severe than for America.Posted by: anne | Link to comment | Jul 30, 2009 at 01:51 PM

anne says... 25, 2009Initial Claims for Unemployment Insurance, 2007-2009Monthly averages *2007 01 ( 305,000)
2007 02 ( 335,250)
2007 03 ( 319,000)
2007 04 ( 328,750)
2007 05 ( 304,000)
2007 06 ( 317,800)
2007 07 ( 306,000)
2007 08 ( 325,250)
2007 09 ( 313,600)
2007 10 ( 327,500)
2007 11 ( 335,500)
2007 12 ( 342,400) Recession begins2008 01 ( 326,500)
2008 02 ( 360,750)
2008 03 ( 370,400)
2008 04 ( 364,250)
2008 05 ( 368,800)
2008 06 ( 390,500)
2008 07 ( 393,000)
2008 08 ( 443,200)
2008 09 ( 474,500)
2008 10 ( 477,000)
2008 11 ( 517,800)
2008 12 ( 552,750)2009 01 ( 560,800) Obama
2009 02 ( 643,250)
2009 03 ( 658,000)
2009 04 ( 638,250)
2009 05 ( 626,800)
2009 06 ( 616,000)
2009 07 ( 559,000)* Seasonally adjusted[While Brad DeLong notices the increase in and continuing high rate of new claims for unemployment insurance and worries this will increase the unemployment rate, I prefer focusing on job creation or loss and when new claims for unemployment insurance are above 400,000 we should expect significant job losses to come making a focused jobs program seem all the more important however little such a program is being discussed politically.*]Posted by: anne | Link to comment | Jul 30, 2009 at 01:59 PM anne says... 15, 2009Unemployment Claims and Employment Change
By Paul KrugmanNew claims for unemployment insurance are one of the highest-frequency economic indicators we have - that is, the data come in early and often, giving a quicker read than things like employment numbers and unemployment rates. And there's been some celebrating over the fact that new claims seem to have peaked.But the level of new claims is basically an indicator of the rate of change of employment. And we are nowhere near the point at which employment looks ready to expand, or for that matter to stop falling at a terrifying rate.Here's a plot of new claims (4-week average) versus the monthly decline in payroll employment. What the figure suggests is that to stabilize employment, we'd have to see new claims drop below 400,000 or so. We're nowhere near that point. In fact, a read of the data remains very, very grim.[ Plot, 1990-2009 ** , ]Posted by: anne | Link to comment | Jul 30, 2009 at 02:00 PM dw says...
I wonder how bad GDP is really since wages have been collapsing. If its almost 50% of it, it should be tanking rather badly unless it has been managed in some way. While a business can look at total compensation including benefits to show labor costs, the problem is that the employee (aka consumer) can only spend their income, not benefits, so in view of the real economy, only that should matter. and long term, I don't expect that the benefits to exist as they become to costly (health care, which means the current system will collapse sooner rather than later). and the masters of thing economic seem to have missed some thing of late, such as the current debacle yes? and why was that? maybe cause their models don't reflect the real world by ignoring things maybe? or maybe they just ignored some piece of data cause it didn't fit their world view? and students I am sure were looking for things for their thesis, but they want to get good marks, and that means it has to fit the current theories. or it won't be published? Posted by: dw | Link to comment | Jul 30, 2009 at 02:02 PM dw says...
and the current down pressure on wages is the logical conclusion of globalization. after all, in todays business view, all of us are just a cost factor, nothing more. Posted by: dw | Link to comment | Jul 30, 2009 at 02:04 PM anne says... 30, 2009The Lessons of 1979-82
By Paul Krugman[Unemployment rate, 1979-1984]One argument you often hear from anti-Keynesians - it pops up in comments here - is that the experience of stagflation in the 1970s proved Keynesian wrong. It didn't; what it did disprove was the naive Phillips curve, which said that there's a stable tradeoff between unemployment and inflation. By the end of the 70s most macroeconomists had accepted some version of the Friedman/Phelps natural rate hypothesis, which says that sustained inflation gets built into price-setting, so that inflation can persist for a while even in the face of high unemployment. But that's very far from rejecting the basic Keynesian insight that demand matters.Still, many people continue to use the 70s to denounce all things liberal or activist.What's odd, though, is how little talk there is about the way the 70s ended - which I viewed at the time, and still do, as a huge vindication of Keynesianism.Here's what happened: the Fed decided to squeeze inflation out of the system through a monetary contraction. If you believed in Lucas-type rational expectations, * this should have caused a rise in unemployment only to the extent that people didn't realize what the Fed was doing; once the policy shift was clear, inflation should have subsided and the economy should have returned to the natural rate. If you believed in real business cycle theory, ** the Fed's policies should have had no real effect at all.What actually happened was a terrible, three-year slump, which eased only when the Fed relented.It was 79-82 that made me a convinced saltwater economist. *** And nothing that has happened since - certainly not the current crisis - has dented that conviction.****** by: anne | Link to comment | Jul 30, 2009 at 03:54 PM anne says...
What we can also find in looking to the Carter and Reagan recessions, was that the resulting employment cycles corresponded quite closely to the production cycles. The Carter and Reagan recessions were essentially inventory adjustment cycles generated by the Federal Reserve. Recessions since then have a different character in which employment cycles do not correspond to production cycles. Seemingly inventory adjustment has been replaced by employment adjustment extending long after a recession has ended.The recessions of 1990-1991 and 2001 were generated by the Federal Reserve, but the current recession was decidedly not.Posted by: anne | Link to comment | Jul 30, 2009 at 04:24 PM anne says... 15, 2009Recessions and Employment Cycles, 1945-2009Private employment has declined for 18 months since the recession of 2007, from December 2007 to June 2009.Private employment declined for 32 months around the 8 month recession of 2001, from December 2000 to August 2003.Private employment declined for 23 months around the 8 month recession of 1990-1991, from March 1990 to February 1992.Private employment declined for 17 months around the 16 month recession of 1981-1882, from July 1981 to December 1982.Private employment declined for 4 months around the 6 month recession of 1980, from March 1980 to July 1980.Posted by: anne | Link to comment | Jul 30, 2009 at 04:25 PM anne says... 15, 2009Recessions and Employment Cycles, 1945-2009Recovery in private employment from the recession of 2001, coming in June 2005 or 54 months.Recovery in private employment from the recession of 1990-1991, coming in May 1993 or 38 months.Recovery in private employment from the recession of 1981-1982, coming in November 1983 or 28 months.Recovery in private employment from the recession of 1980, coming in February 1981 or 11 months.[While the recessions of 1990-1991 and 2001 were short and shallow, employment recovery took far longer than the severe recession of 1981-1982.]Posted by: anne | Link to comment | Jul 30, 2009 at 04:29 PM kthomas says...

"Seemingly inventory adjustment has been replaced by employment adjustment extending long after a recession has ended."OK, now please...tell us why. (not being rude)

anne says...

Possibly because the Japanese model was adopted by American business, possibly because computer applications increasingly made the Japanese model possible here, around 1980 businesses began to adopt production methods called "just-in time." Production at all levels was to be just as much as needed for just in time delivery from producer to consumer. Spark plugs were to be specially produced on Monday for delivery Tuesday for motor assembly on Wednesday. There would be a little storage of spark plugs as possible, the idea being to have good fly off the shelves.

Alan Greenspan thought this made the economy increasingly resistant to shock because adjustments could be faster. I suggest that Greenspan failed to notice that inventory adjust was faster and labor adjustment become slower.

anne says...

Another lesson from the Reagan recession, though I think the Obama stimulus was not nearly focused enough on job creation: 14, 2009Stimulus History Lesson
By Paul KrugmanRepublicans are pronouncing * Obama's stimulus a failure:" 'Today's announcement is an acknowledgement that the Democrats' trillion-dollar stimulus is not working, and the American people know it,' House Minority Leader John Boehner said in a statement. " 'When they passed this spending plan, Democrats said it would immediately create jobs, yet nearly four months later unemployment has continued to climb and none of their rosy predictions have come true.' "Just sayin':[Reagan tax cut of August 1981, and job loss to December 1982.] *

lonesome moderate says...

There are a lot of reasons for the trends shown in Laurent Guerby's graph, besides failures to find work. The WWII generation (my parents') had very rigid ideas of what men and women were supposed to do with their lives, which gradually fell away in the decades after 1960. The more recent increases, however may have more to do with difficulty finding and keeping work.

[Jul 28, 2009] The era of layoffs gets new vigor - Top Stocks Blog by Douglas McIntyre

Jul 28 2009 | MSN Money

Analysts have hoped that the rate at which Americans become unemployed will slow in the second half of 2009. There has been some evidence that the period in which the economy would lose 600,000 or more jobs a month is over. That may not be the case.

The press has observed that layoffs are one of the main reasons behind improved earnings in the second quarter. Sales at many companies are not up, but expenses are down, in many cases considerably. But, second quarter results may not only be the result of jobs cuts; they may be the cause for more, which will mean that the period in which the economy faces rapidly rising unemployment is not over.

Verizon (VZ) announced that it will cut 8,000 jobs. Its results for the last reporting period were below par. The recession is one reason for that. Another is that customers are canceling their landline phones and using cellular phones or VoIP instead. The poor economy and new technology are overwhelming Verizon's old way of doing business. The same thing has happened to AT&T (T).

Bank of America (BAC) will probably close over 600 branches, according to The Wall Street Journal. The move may be good business. Bank customers are turning to the Internet to handle their relationships with financial firms. B of A can take advantage of that, even though it means several thousand more people will be out of work. Other large banks with big branch systems including Citigroup (C) and Wells Fargo (WFC) will most likely follow B of A's example. The financial industry is not done pruning jobs, not by a long shot.

The recession and improvements in the technology that allows customers to control their relationships with companies with which they do business are combining to drive what is likely to be a very large swell in job reductions between now and the end of the year. Airlines are able to book more reservations through online ticket outlets. A drop in passenger demand would make it necessary to cut more jobs in the industry anyway.

The sector that is still most likely to cut tens of thousand of additional workers is the retail industry. Consumer spending could actually continue to fall as unemployment moves above 10% and more people put money toward savings and less toward buying. The trend affects businesses from car dealers to electronics stores. Layoffs in retail are likely to accelerate, if the 2009 holiday shopping season begins to look bad.

The Fed and private economists have projected that unemployment rates will stabilize in late 2009 and early 2010. That will not be the case if earnings in the third and fourth quarters are weak. Companies still do not have access to credit to get them through a hard winter. Recent data show that banks are still extremely reluctant to lend money. This is likely to be an acute problem in industries that financial firms view as risky because of the recession.

Unemployment rates may rise more quickly between now and the end of the year than is expected by most economists. Job cuts may have worked to help company margins in the first half. Another stretch weak sales will show that the first round of job cuts at many companies was not enough.

macroblog When cycles collide

Yesterday we saw that initial claims for unemployment insurance declined rather sharply again last week, another hint that U.S. labor markets may be beginning to mend. But the improvement came with a word of caution from the folks at the Department of Labor, who note that these numbers are being affected by seasonal adjustments to the data that may present a misleading picture.

Virtually all of the economic information that gets reported by the data agencies has been seasonally adjusted. That is, the data are being reported after the agency has adjusted them for their usual variation for that time of year. The unemployment insurance claims data are a useful example. On an unadjusted basis, the initial claims data showed a fairly large increase last week-up 86,000 workers. But claims for unemployment compensation typically rise in early July as auto plants shut down to retool for the new model year. The jump in claims this July hasn't been as large as in years past since many of the auto plants were waylaid earlier in the year. So on a "seasonally adjusted" basis, the data showed a drop in claims of 47,000 workers.

Here we have that statistician's equivalent of an old existential puzzle: Do seasonal layoffs in the auto industry make a sound if there is no one there to lay off? We invite you to write up your own answer to that one. There is a long literature, perhaps most notably the work of Jeffrey Miron, that documents the interplay between the business cycle and the seasonal cycle. The thrust of this research is to help us better understand the general nature of economic cycles. But there are also more mundane issues we need to wrestle with. For instance, how accurate are seasonal adjustments to the data during times of severe cyclical disruption?

To provide some perspective, let's take a deeper look at the recently released June consumer price index (CPI) report. Last month, prices, as measured by the core CPI, were up 2.4 percent (annualized) from a 1.7 percent rise in May. There are a few bits of data that might cause you to scratch your head a little, given what we've been hearing about the economy lately. For instance, apparel prices jumped an annualized 8.8 percent last month. And new car prices were up 8.2 percent. So are department stores and car dealers having a better time of it than they are letting on? I don't think so. I believe the seasonal adjustments in the data offer a more reasonable explanation.

Apparel prices rose 8.8 percent on a seasonally adjusted basis but fell a whopping 25.5 percent (annualized) on an unadjusted basis. And new car prices? Well, they rose on an unadjusted basis, but not nearly as much as the seasonally adjusted data indicated (5.1 percent versus 8.2 percent). Indeed, this pattern seems to be consistent across many of the core components of the CPI in June. On a seasonally adjusted basis, the core inflation measure rose 2.4 percent. But on an unadjusted basis, the core CPI was largely unchanged for the second month in a row (up a slight 0.9 percent, annualized).

Here's a conjecture on my part. Many of the price declines that ordinarily occur in June didn't occur this year. Why? Perhaps it's because the sharp decline in business activity has resulted in such severe production and price cuts already that usual seasonal price discounts have been disrupted. In other words, in the current economic environment, there may not be much "season" to adjust for.

This isn't a criticism of seasonal adjustment. In fact, seasonal adjustment is an entirely appropriate-and necessary-transformation of the data if you are trying to see emerging trends. But it's certainly important to exercise caution when interpreting seasonally adjusted data during a period of strong cyclical movements. If the business cycle alters the usual behavior of the seasonal cycle in the data, seasonal adjustment could produce a misleading snapshot of the data. And I suspect we saw a bit of that in the June CPI report.

In closing, I want to put in a plug that the second weekly postings of the Atlanta Fed's Economic Highlights and Financial Highlights are now available on the Bank's Web site. These summaries of national economic and financial statistics complement our monthly REIN reports on the Southeastern economy.

By Mike Bryan, vice president and senior economist in the Atlanta Fed's research department

Unemployment rate: Count me surprised

Brad DeLong has taken a look at the job market and is counting himself among the economists who admit that, "Well, I just got it wrong." According to DeLong:

"… the rise in the unemployment rate during a recession should be a fraction of the decline we see in GDP relative to trend. According to Okun's Law, the unexpected extra 1.2 percent decline in real GDP in 2009 should have been accompanied by a 0.5 or 0.6 percentage-point rise in the unemployment rate. Instead, we experienced a 1.5 percentage point rise in the unemployment rate. I confess this comes as a surprise to me, but it shouldn't. Because evidence has been mounting that Okun's Law is broken-especially with regard to the retention of workers in a downturn."

I share Professor DeLong's surprise at the unemployment rate's response to this recession. Though I have never had a lot of faith in Okun's Law as a predictive device, I believe DeLong may be just a little too harsh on himself (and by extension, I guess, me) for not hitting the mark on unemployment prognostications. From what we know at the moment, the unemployment/GDP correlation is going to deviate from any other postwar experience by a fair margin. As noted in today's Wall Street Journal:

"Breaking from historical patterns, the unemployment rate-currently at 9.5%- is one to 1.5 percentage points higher than would be expected under one economic rule of thumb, says Lawrence Summers, President Barack Obama's top economic adviser. Since the recession began in December 2007, the economy has lost 6.5 million jobs, 4.7% of total employment. The unemployment rate has jumped five percentage points, while the economy has contracted by roughly 2.5%."

Below is a chart that illustrates the point. It plots the peak change in the unemployment rate during recessions (which has always been the unemployment rate change from the beginning to the end of the end of the recession) against the cumulative percent loss in GDP in those recessions. (In the chart, the blue dots represent the experience in each postwar recession. The red square represents the current downturn, making the assumption that GDP growth in the second quarter will be –0.5 percent and the recession will end sometime in the third quarter. For the sake of the exercise, I pulled these figures from Macroeconomic Advisers, the forecasting group run by former Federal Reserve Gov. Larry Meyer.)

[Jul 20, 2009] The Jobless Recovery Has Begun...

July 20, 2009 May I beg after the fact for "the jobless recovery may well be about to begin" for a title? I feel a bit overexposed here...

The financial crisis that gathered force from the summer of 2007 through the summer of 2008 and then exploded after the collapse of Lehman Brothers last fall did more damage to the economy than most forecasters had imagined. Last December, economists forecast 2009 unemployment at 7.8 percent. As of this writing, it seems likely to be 9.3 percent or higher-at least 1.5 percentage points higher than originally estimated. Year-2009 real GDP also looks to be lower than predicted-coming in at $11.4 trillion rather than the $11.53 trillion forecast by the Obama administration. Even without the downward revision of GDP, however, the next stretch of road bears all the marks of a jobless recovery.

Back in the 1960s one of President Johnson's economic advisers, Brookings Institution economist Arthur Okun, established a rule of thumb quickly named "Okun's Law." Here is the gist: if GDP (production and incomes, that is) rises or falls two percent due to the business cycle, the unemployment rate will rise or fall by one percent. The magnitude of swings in unemployment will always be half or nearly half the magnitude of swings in GDP.


Four reasons:

For all four of these reasons, the rise in the unemployment rate during a recession should be a fraction of the decline we see in GDP relative to trend. According to Okun's Law, the unexpected extra 1.2 percent decline in real GDP in 2009 should have been accompanied by a 0.5 or 0.6 percentage-point rise in the unemployment rate. Instead, we experienced a 1.5 percentage point rise in the unemployment rate. I confess this comes as a surprise to me, but it shouldn't. Because evidence has been mounting that Okun's Law is broken-especially with regard to the retention of workers in a downturn.

In 1993-two full years after the National Bureau of Economic Research said that the 1990-1991 recession had ended-the unemployment rate was still higher, and the employment-to-population ratio lower, than it had been at the recession's trough. We saw this same kind of "jobless recovery" after the recession of 2001. It wasn't until 55 months after that recession ended that a greater share of Americans were working than had been working before the contraction.

Now in 2009, we are poised once again for economic recovery. But as the old Texas Ranger George W. Bush liked to say: "Fool me once, shame on you. Fool me twice-we won't get fooled again!"

So get ready for another jobless recovery.

The question is, why the shift? Why is a jobless recovery likely now, and why have there been jobless recoveries for the past two decades?

Paul Krugman has a theory: "[Past] recessions . . . were very different. . . . Each of the slumps-1969-70, 1973-75, and the double-dip slump from 1979 to 1982-were caused, basically, by high interest rates imposed by the Fed to control inflation. In each case housing tanked, then bounced back when interest rates were allowed to fall again. Since the mid 1980s, however . . . recessions haven't been deliberately engineered by the Fed, they just happen when credit bubbles or other things get out of hand. . . . [T]hey've proved hard to end . . . precisely because housing-which is the main thing that responds to monetary policy-has to rise above normal levels rather than recover from an interest-imposed slump."

I'm guessing there is another set of factors at work. Manufacturing firms used to think that their most important asset was skilled workers. Hence they hung onto them, "hoarding labor" in recessions. And they especially did not want to let go of their prime productive asset when the recovery began. Skilled workers were the franchise. Now, by contrast, it looks as though firms think that their workers are much more disposable-that it's their brands or their machines or their procedures and organizations that are key assets. They still want to keep their workers happy in general, they just don't care as much about these particular workers.

The hypothesis is that firms believe that their remaining workers will forgive them if they fire large numbers of workers during a recession out of economic necessity, but not at other times. Hence the start of the recovery is a business's last moment to slim down its labor force and become more efficient and profitable in the coming boom.

At least it is likely to be a recovery. The prevailing forecast right now is for real GDP to contract at a rate of one percent per year or less between the first and second quarters of 2009, followed by growth between the second and third quarters at an annual rate of two percent or so. When the NBER Business Cycle Dating Committee gets around to it, it is most likely to call the end of this recession for June 2009, with the second most likely call for April and a date sometime after June 2009 as a less likely possibility.

Yes, that would mean the recession is over right now. One reason for that is the much-maligned stimulus package, which probably boosted the real GDP annual growth rate by about one percentage point in the second quarter of 2009, and will boost it by another two percentage points between now and the summer of 2010. (After that, its effects will not only tail off, but actually exert a drag on subsequent GDP growth, which is why White House Council of Economic Advisers Chair Christina Romer has been warning of the dangers of pulling the plug on economic stimulus too soon.)

Politically, the question "did the stimulus work?" might well be answered in the affirmative. Democratic members of Congress seeking reelection in 2010 will be able to point to real GDP growth and an official end to the recession in the second quarter of 2009. However, that is probably not the most relevant question to ask.

Comparing the second quarter of this year to the first, work-hours have declined at a rate of six percent annually. Unless new unemployment claims fall precipitously, work-hours from the second to third quarter will decline at a rate of about three percent per year. Productivity is growing not because of new investment in technology but because businesses continue to fire what workers they can, knowing that in so lousy an economy they won't be blamed for it.

Barring much faster real GDP growth than is currently in the cards, we appear destined for another jobless recovery. So the answer to the question "did the stimulus work?" depends on the metric you use. If the metric is the unemployment rate, the answer is very likely to be: No. Why? Because it was too small.

Selected comments


Up until the 1960s, unions advocated for shorter working time as a remedy for unemployment. The shorter day was the founding philosophy of the American Federation of Labor. In the wake of the Great Depression, full employment became a central policy goal of the federal government. At first, economic growth was touted as the surest path to full employment. So economic growth became the means for achieving full employment. But in the 1970s, full employment was criticized by Milton Friedman as inflationary. So non-inflationary economic growth became the goal instead of the means. Meanwhile, the unions had jumped on the "economic growth as a means for achieving full employment" bandwagon.

The only way to get back to having a dialog about full employment is for the unions to get back to their traditional advocacy of the shorter day and the shorter week. Here's what Samuel Gompers, first president of the AF of L said back in 1888:

"When thousands and hundreds of thousands of our fellow working men and women, through no fault of their own, are consigned to be paupers, tramps, or worse, while all become competitors for the labor of those who are fortunate enough to find employment, I then, as now, laid particular emphasis upon the question that strikes deeper into the evils of society than all others combined; that question which raises man out of the sloughs of poverty and despair; that question which reaches the farthest ramifications of society; that question which creates the greatest revolution in the conditions of the people with the slightest friction upon any; that question of all questions: THE REDUCTION OF THE HOURS OF LABOR."

And here's what the AFL-CIO was saying in 1962:

"The case for shorter hours does not rest on the notion it is the best way. It is based rather on the view, supported by ample evidence in the past decade of mounting unemployment, that: (1) other economic measures to achieve full employment are not being applied and perhaps cannot be applied; and (2) even if other economic policies are successful in stimulating greater growth in the period ahead, the rate of advance in technology and other labor-displacing changes is gathering such momentum that, unless part of the gains in efficiency are distributed in reductions in hours, it is virtually inevitable that it will show up in persistent and increased unemployment."

And here's what the AFL-CIO and the Change to Win federation are saying today:


Sandwich, none of that's going to matter as long as companies can simply outsource the work to China. What I've seen happening is that American jobs get chopped during the recession, and those jobs never come back. Instead, when demand turns back up, they send a message to their factotum in China and hire more employees *there*, instead of *here*. In short, there is some jobs rebound involved -- it takes workers to unload those cargo ships from China, and sell those goods to their fellow Americans after all -- but far less than would have happened during a recession in, say, the 1960's, when the majority of world manufacturing was still done in the United States. During the 1960's companies would have hung on to those workers because there was no guarantee that they'd be able to hire the workers back again once the economy turned up -- one of their competitors might have hired them away. But there are one BILLION Chinese... In the computer industry we used to work that way too. You might let go of your least talented workers during a recession (indeed, that gave a great excuse to clean the deadwood out), but you kept your best workers because a) it's hard to recruit good workers, and b) there was no guarantee you could get them, or equivalently talented, workers back if you laid them off during a recession.

But increasingly recessions are being used to do outsourcing here too, with everybody being fired except a small core of creative architects and designers who then drive the overseas development via remote control. Thus the Silicon Valley's unemployment rate is over 11% right now...


think part of it is cultural. Twenty years ago I worked for DEC, which was facing tough times. It was hard for that particular business culture to wrap its collective head around their first ever layoff. People were moved all over and retrained before pushed out. And, the industry proudly pointed to IBM, which claimed the same feat-- never having a layoff. Since then DEC's successors have simultaneously laid off and hired workers almost continuously through ups and downs.

To today's business culture there is always a reason for layoffs even during boom times-- acquisitions, changed strategies, new technology. And, behind those motives are, I suspect, darker impulses, like getting rid of that older more expensive work force.

Does anybody ever retire anymore, you know, watch and party and so forth? I haven't seen one in over 20 years.

Edward J. Dodson

GDP is a very misleading measurement of how well the economy is doing. Virtually all government spending (whether paid for by tax revenues, financed by borrowing or financed by the printing of more Federal Reserve Notes) increases total GDP. A far better indicator is the net increase in the value of capital goods.



How many millions of manufacturing jobs have been eliminated over the past 2 decades? It should be undeniable that our economy is undergoing a massive restructuring. Manufacturing will require fewer domestic workers going forward, more due to increases in productivity than out sourcing.

The period of the Great Depression was also a period of massive economic restructuring. We went from over 30% of labor working in agriculture to less than 2% today. The excess agriculural labor was eventually (over about a decade) shifted into manufacturing. The workforce was trained by the military in WWII and the GI Bill post WWII. The economy is once again transforming and eliminating most of the manufacturing jobs. The economy needs to transition. Jobs going forward will not be in manufacturing. They will be elsewhere. The financial crisis merely speeds up a process that has been ongoing for a while. Just as the 1970s oil crisis followed by decrease in US oil demand in the early 1980s led to the closure of over half the oil refineries (most small and inefficient) so this crisis is weeding out the marginal manufacturing operations.

From this POV, we are having jobless recoveries because we are restructuring how the economy employs labor. This process is much slower than merely recalling former workers back from layoff.

BTW Manufacturing lost a lot of jobs under Clinton but his administration had incentives for new job creation. We need a jobs program going forward because it will take a while to create enough new jobs for the unemployed.

Nancy Kirsch

Why do you keep cranking out this garbage? It is totally worthless garbage. This paper and the next one and all the ones you have posted here.

Why don't you tell people what you really believe? I'm just guessing that it includes a much larger and different type of stimulus jobs, not these deflation inducing jobs that Obama asked for.

I'm also guessing that you wish the banks and brokerage houses had just gone to hell. Why should we pay all that money for the rich to maintain their assets when the unemployed get a fraction of that? I am sure there is a lot more to it than that. But the only way to find out is to ask him directly because he sure isn't posting it here.


I'm not a numbers person, but the premises of this article seems to be that the recession is over and the manufacturing sector won't rehire workers that they have been shedding.How does that premise hold up with freight carloadings (I'm assuming this is both import and export) down 25% from last year, tax revenues remain down not just in the US, but places like India, and a diversified GE's overall revenue is down 17% compared to last year? As noted by others we are in a global economy and that doesn't apply to just the manufacturing sector.How long will the US be able to protect the financial industry from the reality that their assets are not valued properly and the American consumer is unable to take on more debt? Now I read that US taxpayers like me may be liable for up to $23+ trillion to prop up the rentier system?While I still have my job, I have no confidence that my employer will cut the real deadwood and not just cut everybody, but that is a very personal outlook. How am I to reconcile all this other news with the idea that the recovery is here?

[Jul 18, 2009] The Joblessness Threat by Nouriel Roubini

July 18, 2009 | Khaleej Times Online

Recent data suggest that job market conditions are not improving in the United States and other advanced economies. In the US, the unemployment rate, currently at 9.5 per cent, is poised to rise above 10 per cent by the fall. It should peak at 11 per cent some time in 2010 and remain well above 10 per cent for a long time. The unemployment rate will peak above 10 per cent in most other advanced economies, too.

These raw figures on job losses, bad as they are, actually understate the weakness in world labor markets. If you include partially employed workers and discouraged workers who left the US labor force, for example, the unemployment rate is already 16.5 per cent. Monetary and fiscal stimulus in most countries has done little to slow down the rate of job losses. As a result, total labor income – the product of jobs times hours worked times average hourly wages – has fallen dramatically.

Moreover, many employers, seeking to share the pain of recession and slow down layoffs, are now asking workers to accept cuts in both hours and hourly wages. British Airways, for example, has asked workers to work for an entire month without pay. Thus, the total effect of the recession on labour income of jobs, hours and wage reductions is much larger.

A sharp contraction in jobs and labour income has many negative consequences on both the economy and financial markets.

  1. First, falling labour income implies falling consumption for households, which have already been hard hit by a massive loss of wealth (as the value of equities and homes has fallen) and a sharp rise in their debt ratios. With consumption accounting for 70 per cent of US GDP in the US, and a similarly high percent in other advanced economies, this implies that the recession will last longer, and that economic recovery next year will be anemic (less than 1 per cent growth in the US and even lower growth rates in Europe and Japan).
  2. Second, job losses will lead to a more protracted and severe housing recession, as joblessness and falling income are key factors in determining delinquencies on mortgages and foreclosure. By the end of this year about 8.4 million US individuals with mortgages will be unemployed and unable to service their mortgages.
  3. Third, if you plug an unemployment rate of 10 to 11 per cent into any model of loan defaults, you get ugly figures not just for residential mortgages (both prime and subprime), but also for commercial real estate, credit cards, student loans, auto loans, etc. Thus, banks losses on their toxic assets and their capital needs will be much larger than recently estimated, which will worsen the credit crunch.
  4. Fourth, rising job losses lead to greater demands for protectionist measures, as governments are pressured to save domestic jobs. This threatens to aggravate the damaging contraction of global trade.
  5. Fifth, the higher the unemployment rate goes, the wider budget deficits will become, as automatic stabilizers reduce revenue and increase spending (for example, on unemployment benefits). Thus, an already unsustainable US fiscal path, with budget deficits above 10 per cent of GDP and public debt expected to double as a share of GDP by 2014, becomes even worse.

This leads to a policy dilemma: rising unemployment rates are forcing politicians in the US and other countries to consider additional fiscal stimulus programmes to boost sagging demand and falling employment. But, despite persistent deflationary pressure through 2010, rising budget deficits, high financial-sector bailout costs, continued monetization of deficits, and eventually unsustainable levels of public debt will ultimately lead to higher expected inflation – and thus to higher interest rates, which would stifle the recovery of private demand.

So, while further fiscal stimulus seems necessary to avoid a more protracted recession, governments around the world can ill afford it: they are damned if they do and damned if they don't. If, like Japan in the late 1990's and the US in 1937, they take the threat of large deficits seriously and raise taxes and cut spending too much too soon, their economies could fall back into recession. But recession could also result if deficits are allowed to fester, or are increased with additional stimulus to boost jobs and growth, because bond-market vigilantes might push borrowing costs higher.

Thus, even as mounting job losses undermine consumption, housing prices, banks' balance sheets, support for free trade, and public finances, the room for further policy stimulus is becoming narrower. Indeed, not only are governments running out of fiscal bullets as debt surges, but monetary policy is having little short-run traction in economies suffering insolvency - not just liquidity - problems. Worse still, in the medium turn the monetary overhang may lead to significant inflationary risks.

Little wonder, then, that we are now witnessing a significant correction in equity, credit, and commodities markets. The irrational exuberance that drove a three-month bear-market rally in the spring is now giving way to a sober realisation among investors that the global recession will not be over until year end, that the recovery will be weak and well below trend, and that the risks of a double-dip W-shaped recession are rising.

Nouriel Roubini is Professor of Economics at the Stern School of Business, New York University, and Chairman of RGE Monitor. In cooperation with Project Syndicate

[Jul 15, 2009] Broad Unemployment Across the U.S. - Interactive Graphic -

U6 in NJ, Mich, S.C and several other places looksmore like a Depression then Recession.

Under a broader definition of joblessness, some states have rates higher than 20 percent. This rate includes part-time workers who want to work full time, as well some people who want to work but have not looked for a job in the last four weeks.

[Jul 14, 2009] Average length of unemployment highest since 1948. -

Here are 10 reasons we are in even more trouble than the 9.5% unemployment rate indicates:

Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period.

Can we find comfort in the fact that employment has long been considered a lagging indicator? It is conventionally seen as having limited predictive power since employment reflects decisions taken earlier in the business cycle. But today is different. Unemployment has doubled to 9.5% from 4.8% in only 16 months, a rate so fast it may influence future economic behavior and outlook.

How could this happen when Washington has thrown trillions of dollars into the pot, including the famous $787 billion in stimulus spending that was supposed to yield $1.50 in growth for every dollar spent? For a start, too much of the money went to transfer payments such as Medicaid, jobless benefits and the like that do nothing for jobs and growth. The spending that creates new jobs is new spending, particularly on infrastructure. It amounts to less than 10% of the stimulus package today.

About 40% of U.S. workers believe the recession will continue for another full year, and their pessimism is justified. As paychecks shrink and disappear, consumers are more hesitant to spend and won't lead the economy out of the doldrums quickly enough.

It may have made him unpopular in parts of the Obama administration, but Vice President Joe Biden was right when he said a week ago that the administration misread how bad the economy was and how effective the stimulus would be. It was supposed to be about jobs but it wasn't. The Recovery Act was a single piece of legislation but it included thousands of funding schemes for tens of thousands of projects, and those programs are stuck in the bureaucracy as the government releases the funds with typical inefficiency.

Another $150 billion, which was allocated to state coffers to continue programs like Medicaid, did not add new jobs; hundreds of billions were set aside for tax cuts and for new benefits for the poor and the unemployed, and they did not add new jobs. Now state budgets are drowning in red ink as jobless claims and Medicaid bills climb.

Next year state budgets will have depleted their initial rescue dollars. Absent another rescue plan, they will have no choice but to slash spending, raise taxes, or both. State and local governments, representing about 15% of the economy, are beginning the worst contraction in postwar history amid a deficit of $166 billion for fiscal 2010, according to the Center on Budget and Policy Priorities, and a gap of $350 billion in fiscal 2011.

Households overburdened with historic levels of debt will also be saving more. The savings rate has already jumped to almost 7% of after-tax income from 0% in 2007, and it is still going up. Every dollar of saving comes out of consumption. Since consumer spending is the economy's main driver, we are going to have a weak consumer sector and many businesses simply won't have the means or the need to hire employees. After the 1990-91 recessions, consumers went out and bought houses, cars and other expensive goods. This time, the combination of a weak job picture and a severe credit crunch means that people won't be able to get the financing for big expenditures, and those who can borrow will be reluctant to do so. The paycheck has returned as the primary source of spending.

This process is nowhere near complete and, until it is, the economy will barely grow if it does at all, and it may well oscillate between sluggish growth and modest decline for the next several years until the rebalancing of excessive debt has been completed. Until then, the economy will be deprived of adequate profits and cash flow, and businesses will not start to hire nor race to make capital expenditures when they have vast idle capacity.

No wonder poll after poll shows a steady erosion of confidence in the stimulus. So what kind of second-act stimulus should we look for? Something that might have a real multiplier effect, not a congressional wish list of pet programs. It is critical that the Obama administration not play politics with the issue. The time to get ready for a serious infrastructure program is now. It's a shame Washington didn't get it right the first time.

Mr. Zuckerman is chairman and editor in chief of U.S. News & World Report.

[Jul 12, 2009] Obama's Jobless Safety Net Torn by Rebecca Alvarez (Update1) - By Rich Miller

See also Unemployment rate, United States Helping banksers was probably done with excess zeal. Now Government needs to concentrate on problem of unemployment. It's fairly evident that the national "unemployment rate" (U3) produced by the Department of Labor's Bureau of Labor Statistics represents a low-end figure ... "It will be a big public-policy problem." that can doom the reelection chanced for Obama... There is a blog devoted to the problem:
July 10 | Bloomberg

Rebecca Alvarez says she's "barely hanging on."

Without a job for seven months, the 48-year-old computer- network administrator said she's stopped dining out, cut back cable-television services and put off paying a photography class bill from her 14-year-old son's school in Monrovia, California. She is among more than 4 million Americans who have been looking for work for more than 26 weeks, representing 29 percent of the unemployed, the most since records began in 1948.

Hundreds of thousands of lost jobs in industries such as autos and construction haven't been replaced with new ones, shrinking payrolls by 6.5 million since the recession began in 2007, Labor Department figures show. The June jobless rate reached 9.5 percent, the highest since 1983.

"We are going to have a huge pool of unemployed, second only to the Great Depression," said Allen Sinai, chief economist at Decision Economics in New York. "It will be a big public-policy problem."

Benefits Run Out

As many as 650,000 workers may exhaust even their extended benefits within three months, said Maurice Emsellem, policy co-director for the National Employment Law Project, a nonprofit advocacy group headquartered in New York.

That means Obama may need to aim directly at reducing joblessness, said Mark Zandi, chief economist at Moody's in West Chester, Pennsylvania. Among options: enhanced job training, tax credits for businesses that take on new employees or a temporary cut in payroll taxes.

The U.S. traditionally hasn't had to deal with long-term joblessness. During the last 30 years, Americans who were thrown out of work took an average 15.8 weeks to find new positions. In June, the average duration of unemployment was 24.5 weeks, the longest since records began in 1948. The number of people collecting unemployment benefits reached a record 6.88 million in the week ended June 27.

Peak Unemployment

While unemployment will peak between 10.5 percent and 11 percent in the U.S., it will remain high and stay above 7 percent, said Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., manager of the world's largest bond fund.

"The United States right now is in transition," El-Erian said in an interview from Pimco headquarters in Newport Beach, California. "It's coming out of one regime. It's on this bumpy and painful journey to what we've called here the new normal."

Alan Blinder, the former Fed vice chairman (one of Greenspan's cronies -- NNB) who is now an economics professor at Princeton University, isn't as pessimistic as El-Erian about the economic outlook. He says he sees the jobless rate peaking at 10 percent or a little higher in the first half of next year, then gradually coming down.

The proportion of unemployed workers who have permanently lost their jobs -- as opposed to those on temporary layoff -- reached a record 53.5 percent in June, government figures show. About six people are seeking work for every job opening, the most since the government began keeping such records in 2000. A year ago, the ratio was a little more than two-to-one.

'Plain Depressing'

"Being out of work for three weeks is very different from being out of work for 30 weeks," said Dirk van Dijk, director of research for Zacks Investment Research Inc. in Chicago. "It is a very scary prospect. Economically it further depresses your spending and psychologically it is just plain depressing."

A measure of consumer sentiment fell in July to the lowest level since March, as mounting job losses undermined confidence. The Reuters/University of Michigan index slid to 64.6, less than forecast, from 70.8 in June, a report today showed.

The average American is ill-prepared for a lengthy spell of unemployment, said van Dijk. Households reduced their savings in the last expansion -- putting aside less than 1 percent of disposable income in 2005-2006, compared with an average 6 percent the previous 30 years -- and thus didn't have much in reserve.

Savings Gone

"I don't have any more savings," said Alvarez, who is drawing jobless benefits and "trying to avoid" taking other government assistance. "I'm down to living on $200 a week."

Home-equity borrowing is no longer an option for many families. House prices are down about 25 percent from their 2006 peak, according to the National Association of Realtors in Washington. And banks, stung by $1.5 trillion of writedowns and credit losses since 2007, are getting stingier. The Federal Reserve's latest quarterly survey of senior loan officers showed about 65 percent of banks lowered credit-card limits.

Even the highly educated are finding it tough to get work. Washington resident Alexandra Moller, 34, who holds a law degree and two master's degrees, has been unemployed since September. She's searching for a position with the federal government or a nonprofit organization.

The most frustrating part is "the constant refrain that it's such a hard time to find something," she said. "It adds to a certain resignation that it's going to take a long time."

Lowered Expectations

The surfeit of job seekers is forcing people to lower their salary expectations. Liz Mandel, who lost her job in January as a senior clinical-data manager at a biopharmaceutical company, said she has had to look for positions that pay about $15 less an hour than what she earned before.

"I absolutely, definitely feel anxious," said the 42- year-old San Francisco resident.

Earnings per hour for production workers climbed at a 0.7 percent annual pace in the second quarter, the least since records began in 1964, according to government figures.

That's putting a squeeze on spending, even for essentials. A national poll of unemployed workers conducted in November by Peter D. Hart Research Associates in Washington for the National Employment Law Project found that more than two-thirds had cut back on food expenditures.

Long-term joblessness is also a "profound problem" for housing, said Paul Willen, senior economist at the Boston Fed.

"If a person becomes unemployed, they're going to start missing mortgage payments," he said. "The main exit strategy for a troubled borrower is another job. At this time, it's extremely hard to find one."

Mortgage Delinquencies

Mortgage delinquencies rose to a record in the first quarter, and about one in every eight Americans is now late on a payment or already in foreclosure, according to the Washington- based Mortgage Bankers Association.

Unemployment also has "immense social costs," said JoAnn Prause, senior lecturer at the University of California in Irvine's Department of Psychology and Social Behavior. "Bouts of unemployment have been associated with increases in depression, reduced self-esteem, and increases in alcohol abuse," she said.

That's prompting calls for added stimulus.

"We're going to need more medicine," Warren Buffett, chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc., said in a June 24 interview. "We're going to have more unemployment."

Worker Training

Besides beefing up jobless benefits, economists are calling for more training and education programs, tax changes and government support for corporate investment.

Obama's original stimulus package provided $3.95 billion for training, including $750 million in grants to prepare and place workers in jobs in high-growth and emerging industries.

Senators Sherrod Brown, an Ohio Democrat, and Olympia Snowe, a Maine Republican, proposed legislation to pair companies offering new jobs with workers seeking specialized skills.

The bill would "allow local people to come up with what they need to train workers," Brown told a New America Foundation conference in Washington on June 24.

Sinai, of Decision Economics, wants Obama to reconsider providing tax credits to companies that take on more workers. Before becoming president, Obama proposed offering a $3,000 tax credit for each new-hire.

[Jul 5, 2009] American jobs data are worse than we think By Mohamed El-Erian

July 2 2009 |

What if the US unemployment rate rises above 10 per cent and stays there for an extended period? This is a question that is not being asked enough, even though it entails yet another historical anomaly that will further complicate policy formulation and open it up to greater political interference.

The unemployment rate is traditionally characterised as a lagging indicator and, as such, is viewed as having limited predictive power. After all, unemployment is a reflection of decisions taken earlier in the cycle so the rate always lags behind the realities on the ground – or so says conventional wisdom.

This conventional wisdom is valid most, but not all of the time. There are rare occasions, such as today, when we should think of the unemployment rate as much more than a lagging indicator; it has the potential to influence future economic behaviours and outlooks.

Today's broader interpretation is warranted by two factors: the speed and extent of the recent rise in the unemployment rate; and, the likelihood that it will persist at high levels for a prolonged period of time. As a result, the unemployment rate will increasingly disrupt an economy that, hitherto, has been influenced mainly by large-scale dislocations in the financial system.

In just 16 months, the US unemployment rate has doubled from 4.8 per cent to 9.5 per cent, a remarkable surge by virtually any modern-day metric. It is also likely that the 9.5 per cent rate understates the extent to which labour market conditions are deteriorating. Just witness the increasing number of companies asking employees to take unpaid leave. Meanwhile, after several years of decline, the labour participation rate has started to edge higher as people postpone their retirements and as challenging family finances force second earners to enter the job market.

Notwithstanding its recent surge, the unemployment rate is likely to rise even further, reaching 10 per cent by the end of this year and potentially going beyond that. Indeed, the rate may not peak until 2010, in the 10.5-11 per cent range; and it will likely stay there for a while given the lacklustre shift from inventory rebuilding to consumption, investment and exports.

Beyond the public sector hiring spree fuelled by the fiscal stimulus package, the post-bubble US economy faces considerable headwinds to sustainable job creation. It takes time to restructure an economy that became over-dependent on finance and leverage. Meanwhile, companies will use this period to shed less productive workers. This will disrupt consumption already reeling from a large negative wealth shock due to the precipitous decline in house prices. Consumption will be further undermined by uncertainties about wages.

This possibility of a very high and persistent unemployment rate is not, as yet, part of the mainstream deliberations. Instead, the persistent domination of a "mean reversion" mindset leads to excessive optimism regarding how quickly the rate will max out, and how fast it converges back to the 5 per cent level for the Nairu (non-accelerating inflation rate of unemployment).

The US faces a material probability of both a higher Nairu (in the 7 per cent range) and, relative to recent history, a much slower convergence of the actual unemployment rate to this new level. This paradigm shift will complicate an already complex challenge facing policymakers. They will have to recalibrate fiscal and monetary stimulus to recognise the fact that "temporary and targeted" stimulus will be less potent than anticipated. But the inclination to increase the dose of stimulus will be tempered by the fact that, as the fiscal picture deteriorates rapidly, the economy is less able to rely on future growth to counter the risk of a debt trap.

Politics will add to the policy complications. The combination of stubbornly high unemployment and growing government debt will not play well. The rest of the world should also worry. Persistently high unemployment fuels protectionist tendencies. Think of this as yet another illustration of the fact that the US economy is on a bumpy journey to a new normal. The longer this reality is denied, the greater will be the cost to society of restoring economic stability.

The writer is chief executive and co-chief investment officer of Pimco. His book, When Markets Collide, won the 2008 FT/Goldman Sachs Business Book of the Year

[Jul 3, 2009] "Hire the Unemployed"

"Audacity of hope" is for Goldman bankers only...
Economist's View

The stimulus package had two components, new spending and tax cuts. Everybody knew that the spending component would take time to put into place, six months or more for a lot of the infrastructure projects, and that meant that we needed something to increase demand and provide a bridge until the new spending comes online.

Enter the tax cuts that the GOP insisted upon, tax cuts that were a larger part of the stimulus package than I thought justified. These cuts were to come online immediately and stimulate demand until the spending could begin taking up some of the slack later in the year. I would have preferred targeted, non-infrastructure spending that could have been put in place almost as fast as the tax cuts (particularly those that simply require making existing programs more generous), but that type of spending was considered wasteful because it didn't add to our long-run capacity for growth and hence had little chance of being part of the stimulus package.

The problem was partly bad luck. A crisis hit and we had the bad luck of having an administration that opposed active intervention and though there was a bit of a stimulus attempt through a one time tax rebate, a strategy theory predicts won't do much to help, the real action in terms of stimulating the economy was left to the new administration. So nothing was done, nothing could have been done until the new administration took over, and given the insistence that any new spending be on infrastructure projects with clear benefits, tax cuts were the main hope for an immediate effect.

So if the policy has failed at this point, it is not the spending component since, fully consistent with predictions when it was enacted, it was going to be months before it could be of any help. What failed is the GOP's insistence that tax cuts be used to provide an immediate boost to the economy. Increasing food stamps, unemployment compensation, payments to help states with declining revenues and increasing demands for social services, payments to help unemployed workers maintain health care, digging (needed) holes, there were many, many other ways to provide more immediate relief and stimulate the economy at the same time, but no, it had to be tax cuts or nothing.

Finally, I want to note that what we maximize matters. For example, we can maximize GDP growth over the next ten or twenty years, or we can maximize employment over the next few months. Which we choose to maximize has a big effect on the policies we put in place. If we use the stimulus money to maximize GDP and growth - which is essentially what we did - that will have a much slower effect on employment than if we maximize employment directly. The efficiency argument always leads you to maximize output, and efficiency prevailed in the structure of the current package, but I think an argument can also be made that maximizing employment provides social benefits that are just as large, or larger.

Just noticed this, which makes a surprisingly similar point:

A Message to President Obama: Stop Priming the Pump, Hire the Unemployed, by Pavlina R. Tcherneva: Many have called President Obama's stimulus plan a return to Keynesian policy. Some of us who like reading Keynes professionally or for leisure have already been scratching our heads. I have wondered in particular whether the plan isn't set up to work in a manner completely backwards from what Keynes himself had in mind when he advocated economic stabilization by government.

There are two things to remember about Keynes's fiscal policy proposals: 1) government spending was always linked to the goal of full employment... and 2) to achieve macro-stability and full employment, the government had to employ the unemployed directly into public works.

By contrast, most modern economists believe that 1) there is some natural level of unemployment that includes the structurally unemployed, which governments cannot generally tackle, and that 2) public employment is an inefficient use of public resources.

So, when the government is called to action, the economic profession has replaced Keynes's "fiscal policy via public works" with a "leaky bucket pump-priming mechanism."

How is the latter policy supposed to work? Instead of employing the unemployed directly, the idea is to generate large enough government expenditures to produce a level of economic growth that would, in turn, gradually reduce unemployment. For example, the government could spend money on various private sector contracts, stimulate different private industries, offer investment subsidies and tax cuts, and increase unemployment insurance payments, in hope that it will boost GDP sufficiently to reduce unemployment to desired levels. This is essentially the underlying logic behind President Obama's stimulus package. But it is also a bit of a gamble.

Not all of these injections will be effective because the fiscal stimulus enters the economy through "a leaky bucket". Some of the money will be lost in transit (because of administrative costs, for example) and much of it will have no direct job creation effects (e.g. the tax cut component of the recovery act). Nevertheless, despite this leaky bucket, the theory goes, sooner or later, large enough government expenditures will produce the kind of growth that would reduce unemployment. ...

All of this is ... why Keynes never had any "leaky bucket" or "pump priming" idea in mind. For him "the real problem fundamental yet essentially simple…[is] to provide employment for everyone" (Keynes 1980, 267) and the most bang for the buck from fiscal policy would be achieved via direct job creation. This he called "on the spot" employment via public works.

As I have argued elsewhere, it is useful to think of Keynesian fiscal policy, not as aggregate demand management, but as labor demand management. ...

Commentators often call this a policy of "make work" but Keynes didn't advocate digging holes, burying jars with money and digging them out, or any other similarly worthless projects. The key was to marry the two goals: to employ the unemployed directly and to make sure that they do useful things. Once they are put to work on a particular project, Keynes argued, "there can be only one object in the economy, namely to substitute some other, better, and wiser piece of expenditure for it" (Keynes 1982, 146). We might as well ask a very basic question: is there really a shortage of useful things to do?

If we insist on calling ourselves Keynesians again, and more importantly, if President Obama's plan for economic stabilization should generate rapid reduction in unemployment, it would help to set fiscal policy straight. Instead of relying on "leaky fiscal buckets" we could return to "labor demand management" a la Keynes that provides immediate employment opportunities to the unemployed via bold and creative public works projects, which generate useful output and services for all.

[Jul 2, 2009] US private sector shed 473,000 jobs in June, ADP says

Broad employment is highly correlated to the production cycle...only one third of it is manufacturing jobs. If and when recovery materializes production jobs gains are going to be minimal and you can still lose service sector jobs...
Posted by Stacy-Marie Ishmael on Jul 01 13:58. Comment.

US companies cut more jobs than forecast in June, according to data released by ADP Employer Services on Wednesday.

The ADP jobs report showed a drop of 473,000 private sector jobs on a seasonally adjusted basis from May to June

[Jul 2, 2009] Unemployment Forecast: Too Much "Hope"

7/01/2009 | CalculatedRisk

From David Leonhardt at the NY Times: A Forecast With Hope Built In

In the weeks just before President Obama took office, his economic advisers made a mistake. They got a little carried away with hope.

... Without the stimulus, they saw the unemployment rate - then 7.2 percent - rising above 8 percent in 2009 and peaking at 9 percent next year. With the stimulus, the advisers said, unemployment would probably peak at 8 percent late this year.

We now know that this forecast was terribly optimistic.

Here is the January forecast with the actual data ...

Click on graph for larger image in new window.

This graph compares the actual quarterly unemployment rate (in red) with the Obama economic forecast from January 10th: The Job Impact of the American Recovery and Reinvestment Plan

There are two possible explanations that the administration was so wrong. ... The first explanation is that the economy has deteriorated because the stimulus package failed. ... The second answer is that the economy has deteriorated in spite of the stimulus.
Very little of the stimulus has been spent so far, so it is premature to say it failed. However Romer recently was quoted in the Financial Times:
Ms Romer said stimulus spending was "going to ramp up strongly through the summer and the fall".

"We always knew we were not going to get all that much fiscal impact during the first five to six months. The big impact starts to hit from about now onwards," she said.

Ms Romer said that stimulus money was being disbursed at almost exactly the rate forecast by the Office of Management and Budget. "It should make a material contribution to growth in the third quarter."

So we should see an impact in the 2nd half of 2009 ... and that starts now!

Selected Comments

Tim waiting for 2012 (homepage, profile) wrote on Tue, 6/30/2009 - 9:33 pm

Hope should be optional not standard in Econ Forecasts

14% UE here we come. 9% I hardly knew thee...

mock turtle (profile) wrote on Tue, 6/30/2009 - 9:48 pm

i saw what might be part of the "stimulus" expenditures (not to be confused with tarp and the many fed windows) as i recently drove cross country

massive road work coast to cost and huge number of wind turbines being assembled in iowa, wyoming and washington state

i guess that the planned infrastructure improvements will not be enough to stem the financial blood letting

something more and something different is obviously needed

couldnt we have public trials and executions of the most notorious bankstas...think of the ticket sales receipts and the sales tax collections!

kurtyboy (profile) wrote on Tue, 6/30/2009 - 10:02 pm

Why does DAVID LEONHARDT hate America?

Kidding, of course.

But why is anyone wondering about the efficacity of a stimpack that heavily (historically big) favors tax cuts instead of direct stimulus? Whether you are a Keynesian or not, the numbers always tilt in favor of DS over TC when it comes to calculating the multiplier effect of government stimulus. So--why be surprised that the package's impacts are late to the party?

And for that matter. why be surprised that the effects are not as great as hoped? In this case, the ARRA tried to bridge the philisophical divide of government responsibility with a package that had a "post-partisan" flavor, and will end up only pleasing those with short-term view of this nation's potential for production.

This is Bush's "soft prejudice of low expectations" applied differently and writ large.

I hope Ms. Romer takes the time to contemplate how much of her own soul is now mortgaged, without any hope of a loan modification.

YLSP (profile) wrote on Wed, 7/1/2009 - 1:00 am

Percentage of outlays spent by stimulus (parenthesis is total obligations, ie how much money given to each dept)

I excluded depts less than $1B. Figured that was noise (but there were some like DoD who was at 1% spent of $0.95B).

Dept Education 17% ($45B)
HHS 72% ($30B)
Dept Labor 33% ($20.5B)
DoT 1.9% ($19B)
SSA 99% ($13B)
HUD 13.6% ($5.1B)
EPA 0.3% ($4.4B)
USDA 66%($3.23B)
DoJ 21% ($1.73B)

Granted this seems really small amount for promised $600B (I think $200B of the $800B is actually tax benefits)... but to me it doesn't seem like the idea that most of these funds are going to roll into the economy will help; in fact we've got $13B from Social Security into the economy as well as a lot from HHS... these are actually scary numbers for expenditures... of course I don't know if the Feds outlay it to the states who then account for it and are not actually "spending" it as much as it appears.

Lucifer (profile) wrote on Wed, 7/1/2009 - 1:47 am

Corporate Bonds Show Lehman Doesn't Matter With 9.2% Return

By Bryan Keogh and Cristina Alesci

July 1 (Bloomberg) -- Nowhere is the recovery in financial markets more evident than in corporate bonds, where Lehman Brothers Holdings Inc.'s bankruptcy is becoming a distant memory.

U.S. investment-grade company debt returned 9.2 percent in the first half of the year, outperforming Treasuries by 13.7 percentage points, the most on record, according to Merrill Lynch & Co. index data. Corporate bonds also did better than the Standard & Poor's 500 Index of stocks, marking the first time since 2002 that the fixed-income securities outshined both Treasuries and equities.

[Jul 2nd, 2009] Explaining Non Farm Payroll Analysis By Barry Ritholtz

July 2nd, 2009
Its tine for everyone's favorite monthly data point, Non-Farm Payrolls.

For those of you who are relatively new to the site, here is a brief description of how our analysis has evolved over time.

  • Weak Jobs Recovery: Following the 2001 Recession, the economic recovery, from a jobs perspective, was rather weak. Indeed, from 2002-07, we had the weakest employment recovery of any post-recession period since World War 2. This data point - widely ignored on Wall Street and MSM - was a warning sign that the recovery was abnormal. It is what sent us looking for what was driving the economy - and the answer was borrowed money.

  • Survey Data: There are two employment surveys - Establishment and Household. Establishment works of employment tax data; Household is literally a Q&A survey. They sometimes vary dramatically, but when you control so they measure the same thing, they come pretty close to each other (most of the time).

  • Birth Death Adjustment: A major modification to the NFP measure is the Birth Death adjustment. Changes to the BD were proposed in 2001, and implemented a few years later. This attempts to capture early improvements in employment at the start of a recovery was the goal. The trade off is it wildly overstates strength at the end of a cycle. For example, in 2007, approximately 75% of reported new jobs were due to this adjusatment. In 2008, the BD adjustment inexplicably showed lots of job creation in construction and finance.

  • Measuring Unemployment: The main measure of Unemployment is the widely reported U3 Unemployment Rate - but my analysis of U3 has been that it significantly understates unemployment. Fortunately, a more complete measure of labor under-utilization is available – the U6 measure. They seem to run parallel, but U6 captures a lot more of the unemployed and under-employed workers than U3 does.

  • Leading vs Lagging Indicators: Lastly, economists will tell you that Employment is a lagging indicator, meaning that it lags the economic cycle, getting worse even after the economy begins to improve. And that is mostly true. However, since we are investors by trade, we want o identifty aspects of Employment data that have the qualities of a leading indicator - i.e., they improve before the economy does. There are at least 2 worth paying attention to: Temporary Help, and Hours Worked. Both aspects improve or worsen prior to the a recovery or recession occurring.

  • Note that there was a lot of pushback against these ideas when they were first discussed here; They have now more or less been recognized if not endorsed by many astute observers . . .

    Employment Situation

    Bloomberg consensus is 365,000 jobs lost; Barrons Consensus is 350k with a range of -435,000 to -225,000.
    1. cvienne Says:

      " Indeed, from 2002-07, we had the weakest employment recovery of any post-recession period since World War 2″

      IMO - The "recovery" was not a recovery at all (except in equity prices)…

      The whole period was a big drunken slobfest where Americans pulled counterfeit money out their artificially inflated homes…The only reason we're still standing now is that now we're pulling counterfeit money out of the Treasury…

      We've been in a bear market since 2000…This bear ends in late 2011 (at the earliest)…

      NFP will reflect that…

    2. dead hobo Says:

      cvienne Says:
      July 2nd, 2009 at 8:11 am

      " Indeed, from 2002-07, we had the weakest employment recovery of any post-recession period since World War 2″

      IMO - The "recovery" was not a recovery at all (except in equity prices)…

      Well, I'm not giving the money back.

    3. cvienne Says:


      "I see the 125% refinance as having ZERO impact"

      Oh it'll have SOME effect…The effect it will have is that after you do the re-fi, it buys you about 6 more months to stay in the house without making payments before they kick you out from defaulting on the RE-FI…

    4. HCF Says:


      Larger than the WORST estimate from Barron's….


    5. AmenRa Says:

      weekly hours decreased -.01 to 33.0
      U6 is 16.5%
      B/D added 220k

      Love those green shoots!

    6. call me ahab Says:


      agreed- that is what will happen- but those taking advantage will be a small sliver of the much bigger default pie-

      I feel poetic today

    7. manhattanguy Says:

      Reality Barry Reality. I predict a double dip recession in the offing.

    8. Bruce in Tn Says:

      Hours per week…..33.0….shoot!

    9. investorinpa Says:

      Still trying to figure out how they expected 365K jobs and a 9.6% unemployment rate…but instead got 467K jobs and a 9.5% rate. There has to be a better statistic out there than this…for instance, how about totalling up overall wages and dividing it by number of hours worked, or number of workers? I just don't get all the BS and how it slips by the media. I mean, they aren't that dumb, are they?


      BR: 2 Different surveys - different methodologies - that answer each question separately.

    10. Transor Z Says:

      Here's the B/D explanation w/methodology from BLS.

    11. Mike in Nola Says:

      Amazingly, CNBC had a pretty decent set of people on this morning.

      Current B/D adjustment numbers anyone?

    12. Calvin Jones and the 13th Apostle Says:

      If you watched CNBC, you'd know that they were that dumb. Whether willfully or on purpose I don't know.

    13. willid3 Says:

      i always thought that we really never had a recovery from the last recession. we just had a credit fueled recovery. which blew up at the end of 2007. and is still collapsing

    14. Bruce in Tn Says:


      This is why investing on hope is dicey…It is ok to be optimistic, but the idea is that there is 12 trillion less of wealth in America than there was in 2007…that is almost one full year's GDP….

    15. Steve Barry Says:

      Who cares about these phony numbers…look around…where I live, I see hundreds of thousands of sq ft of commercial space sitting vacant and I can't imagine when it will possibly be filled.

      Some of it has already been vacant for years. I have neighbors who I'm finding out don't have jobs and they are pretending they do. I have a friend who bought a million dollar home and is now near foreclosure. the B/D model makes these numbers useless.

    16. Mike in Nola Says:

      Looks like B/D is 185k this month compared to May of 220k. A bit less effect than last month. So, if you subtract the diff, you get about a 100k increase from May.

    17. grumpyoldvet Says:

      The reported number showed decliines in all categories EXCEPT education & health care. Now I understand healthcare to take care of us old farts but an increase in education. So what do I make of this..

    18. rootless_cosmopolitan Says:

      Barry, your implicit suggestion that the B/D-adjustment significantly distorts the real nonfarm payroll data, compared to an approach that didn't apply the B/D-adjustment, needs to be proven using actual data.

      You only make the claim again and again in your postings. The benchmark revisions done every March don't support this claim, though.[*]

      For instance, nonfarm payroll data were revised down only 0.1% in March 2008. This doesn't support the hypothesis that that B/D-adjustment led to a significant overestimation of job creation in 2007. We will see what the March 2009 benchmark revision shows for the 2008 data.



    19. pjl Says:

      Those looking for additional sources of analysis on the jobs data should check out

    20. cvienne Says:


      " but an increase in education. So what do I make of this"


      You make of it as to understand why Franklin is so optimistic…Because this country will never live up to its potential until we drain the Treasury of money that's not even printed yet to create a nation full of schoolteachers preaching the evils of anything that's not ultra liberal…

    21. rootless_cosmopolitan Says:

      @Mike in Nola:

      But what makes you think that subtracting the change from the B/D-adjustment gives you a number for the nonfarm payroll change that is closer to reality than w/ B/D-adjustment?


    22. willid3 Says:

      dumb question. since the vast majority of small business do not have any employees, doesn't the use of a birth/death model cause the errors?

      such as over counting the number of jobs?

      and wouldn't they need to adjust them on a yearly basis when they do a count of real jobs that exist?

    [Jul 2, 2009] Unemployment Forecast: Too Much "Hope"

    Which is worse - bankers or terrorists (profile) wrote on Wed, 7/1/2009 - 12:07 am

    List of failed states 3.0

    1. Somalia
    2. Pakistan
    3. California
    4. Afghanistan
    5. Arizona
    6. Minnesota
    7. Seychelles (world's highest debt-GDP ratio)
    8. Rhode Island
    9. Zimbabwe
    10. etc....

    Lucifer (profile) wrote on Wed, 7/1/2009 - 1:57 am

    A hedge fund manager calling others greedy.. my irony meter just overloaded!
    Madoff Investors 'Greedy': Hendry

    By: | 30 Jun 2009 | 04:52 AM ET

    People who invested with Bernard Madoff were greedy and happy to accept high returns without probing too much in the way these were achieved, Hugh Hendry, chief investment officer at hedge fund Eclectica, told CNBC Tuesday.


    you might get a kick out of this one.
    How to Collaborate with Your Contractors
    04:27 PM Monday June 29, 2009

    By John Baldoni

    The other day a good friend of mine called to express the frustration he was feeling about working with his current IT vendor. My friend is in the pre-launch phase of an e-commerce start up and he was discouraged with the lack of progress the vendor is making. He was tempted to pull the plug on the project and award it to someone else. Entrepreneurs feeling frustrated with subcontractor work is nothing new. I know of another start-up executive who is expressing similar feelings about a manufacturing vendor.

    broward (homepage, profile) wrote on Wed, 7/1/2009 - 2:03 am How to Collaborate with Your Contractors

    My experience is a lot of dishonesty in consulting.... on both sides.
    I tried to get out in 2006 but after six months of unemployment, I took another contracting job.
    It's like being typecast in acting.

    The United States runs on dishonesty and denial.
    I've seen the real extent of it over the past few years.

    Lucifer (profile) wrote on Wed, 7/1/2009 - 2:08 am

    It always has.. it just happens that now we cannot keep on going down that road.

    Ponzi schemes require an ever increasing amount of fresh recruits.. demography has sealed that avenue.

    //The United States runs on dishonesty and denial.
    I've seen the real extent of it over the past few years.//

    Which is worse - bankers or terrorists (profile) wrote on Wed, 7/1/2009 - 2:06 am

    No, Broward, the US runs on oil. But that is about to change....

    hans (profile) wrote (in reply to...) on Wed, 7/1/2009 - 3:13 am

    I think this country has talent, but maybe not enough....

    One of the differences I've noticed between say a foreign engineer and an American one, is American ones tend to be much more creative and adaptable. It might just be the way people are raised here, maybe all that emphasis on creativity and art and such in high school compared to most Asian countries is paying off.

    That said, the problem with this country is people do not want to be engineers. It is a difficult job in general, and requires far more work than say trading derivative paper around (I know far more people involved in finance from my high school... than who went into engineering).

    Most of the people you have in my field (software dev , 6 years out of college, which puts me in a similar situation as you) love the field. But a lot of them uh aren't that talented. There are probably people who trade derivatives who love engineering and have even more innate talent who just let the idea of getting filthy rich get to them and went that way. I mean thats a much easier career path. College in that field is much more fun and easy. It is very very very tempting (hell I knew people who switched to business or econ majors from engineering, you really had to like it to stay I guess). My cousin wanted to be a chemist , but he thought that business would be more lucrative and now he works in client support at some retirement fixed income fund (customer support basically but it pays more than you'd think). He was prodded in that direction by 2 of my other cousins who are derivatives brokers for Goldman and Barclays. The influence of what is considered a high return on investment career path can derail tons of people from engineering.

    I think if the country destroys the financial incentive for smart people (who might even have a passion for say chemistry or electronics) to go into the FIRE jobs maybe we could be back on the right track. America has a lot of ingenuity, and plenty of talent. We just have to steer people back into where we need them , we definitely don't need people in banking. China does it by force. India does it because engineering pays A LOT there relatively.

    w10949 (profile) wrote (in reply to...) on Wed, 7/1/2009 - 3:43 am

    One of the differences I've noticed between say a foreign engineer and an American one, is American ones tend to be much more creative and adaptable. It might just be the way people are raised here, maybe all that emphasis on creativity and art and such in high school compared to most Asian countries is paying off.

    As a European working for US corp firms for last 12 years. My perspective is that the biggest issue I see working with Americans is that there is too much focus on the positive and too little reality in projects, issues and problems get buried and small successes get puffed up massively. There is a 'stated' culture of openness but no one ever wants to hear bad news. The reality is openness as long as its positive.

    On a cultural side there is always lots of talk of cultural awareness but in the background you get constant sniping around difficulties in making redundancies and changes in Europe without employee consultation. You can argue the rights and wrongs of this but you don't open the business up without knowing the situation.

    Business is run on a hunger and burst basis, its either massive bloated expansion or huge cuts. Its like a constant corporate bubble, inflating then deflating then fact corporate life is like the US in miniature.

    [Jun 26, 2009] No Recovery in Sight By BOB HERBERT

    June 26, 2009 |

    How do you put together a consumer economy that works when the consumers are out of work?

    One of the great stories you'll be hearing over the next couple of years will be about the large number of Americans who were forced out of work in this recession and remained unable to find gainful employment after the recession ended. We're basically in denial about this.

    There are now more than five unemployed workers for every job opening in the United States. The ranks of the poor are growing, welfare rolls are rising and young American men on a broad front are falling into an abyss of joblessness.

    Some months ago, the Obama administration and various mainstream economists forecast a peak unemployment rate of roughly 8 percent this year. It has already reached 9.4 percent, and most analysts now expect it to hit 10 percent or higher. Economists are currently spreading the word that the recession may end sometime this year, but the unemployment rate will continue to climb. That's not a recovery. That's mumbo jumbo.

    Some months ago, the Obama administration and various mainstream economists forecast a peak unemployment rate of roughly 8 percent this year. It has already reached 9.4 percent, and most analysts now expect it to hit 10 percent or higher. Economists are currently spreading the word that the recession may end sometime this year, but the unemployment rate will continue to climb. That's not a recovery. That's mumbo jumbo.

    Why this rampant joblessness is not viewed as a crisis and approached with the sense of urgency and commitment that a crisis warrants, is beyond me. The Obama administration has committed a great deal of money to keep the economy from collapsing entirely, but that is not enough to cope with the scope of the jobless crisis.

    There were roughly seven million people officially counted as unemployed in November 2007, a month before the recession began. Now there are about 14 million. If you add to these unemployed individuals those who are working part time but would like to work full time, and those who want jobs but have become discouraged and stopped looking, you get an underutilization rate that is truly alarming.

    "By May 2009," according to the Center for Labor Market Studies at Northeastern University in Boston, "the total number of underutilized workers had increased dramatically from 15.63 million to 29.37 million - a rise of 13.7 million, or 88 percent. Nearly 30 million working-age individuals were underutilized in May 2009, the largest number in our nation's history. The overall labor underutilization rate in May 2009 had risen to 18.2 percent, its highest value in 26 years."

    If it were true that the recession is approaching its end and that these startlingly high numbers were about to begin a steady and substantial decline, there would be much less reason for alarm. But while there is evidence the recession is easing, hardly anyone believes a big-time employment turnaround is in the offing.

    Three-quarters of the workers let go over the past year were permanently displaced, as opposed to temporarily laid off. They won't be going back to their jobs when economic conditions improve. And many of those who were permanently displaced were in fields like construction and manufacturing in which the odds of finding work, even after a recovery takes hold, are not good.

    Another startling aspect of this economic downturn is the toll it has taken on men, especially young men. Men accounted for nearly 80 percent of the loss in employment in this recession. As the labor market center reported, "The unemployment rate for males in April 2009 was 10 percent, versus only 7.2 percent for women, the largest absolute and relative gender gap in unemployment rates in the post-World War II period."

    Workers under 30 have sustained nearly half the net job losses since November 2007.

    This is not a recipe for a strong economic recovery once the recession officially ends, or for a healthy society. Young males, especially, are being clobbered at an age when, typically, they would be thinking about getting married, setting up new households and starting families. Moreover, work habits and experience developed in one's 20s often establish the foundation for decades of employment and earnings.

    We've seen what happens when you rely on debt and inflated assets to keep the economy afloat. The economy can't be re-established on a sound basis without aggressive efforts to put people back to work in jobs with decent wages.

    We also need to consider the suffering that is being endured by these high levels of joblessness, including the profound negative effect on the families of the unemployed. Lawrence Mishel, president of the Economic Policy Institute, warned about the consequences for children. "What does it mean," he asked, "when kids are under stress because there is no money in the household, or people have to move more, or are combining households, or lose their health insurance? I believe this is going to leave a permanent scar on a generation of kids."

    The first step in dealing with a crisis is to recognize that it exists. This is not a problem that will evaporate when the gross domestic product finally begins to creep into positive territory.

    1.W in the Middle

    New York State

    Bob, while I share your concern, I - coincidentally, just today - saw a green shoot. Or at least a glimmer of one (from CNN Money):

    "...GE Chairman and Chief Executive Jeff Immelt on Friday called for the U.S. to set a target for manufacturing to account for 20% of total employment as part of a "dramatic industrial renewal" of America.

    "...Immelt also said the U.S. should reinvigorate efforts to improve its competitiveness as an exporter, boosting investment in research and development, education and training.

    "'...'We should set a national goal to create high-value-added jobs and have manufacturing jobs be no less than 20% of total employment, about twice what it is today'...

    Bob, to - finally - hear someone talking about the need to revitalize American manufacturing, with a realistic quantitative target, no less, is exhilarating. And from someone in a position to do something about it.

    The multiplier effect for skilled manufacturing jobs is among the highest, of all job types.

    Let's applaud Jeff. Engage him supportively. And hold him to his word.

    2.Joan Ream

    Why can't our government be putting back to work our own legal Americans rather than over-loading an already stressed system with illegal immigrants?

    3. I chambers

    Thank you, Mr. Herbert , for this serious and needed editorial. On a personal level, I feel that the unscrupulous morons whose failed gambles caused this disaster are the only ones benefitting. The folks from Goldman Sachs and City have the President on speed-dial, while middle-income citizens worry , not just with their children's education, but with simply keeping their homes.

    The system is not just unfair; it is incorrigibly crooked and nothing that happened in the last election changed that for the better. People need to wake up and see who is really making the decisions in our government and our country.

    4. Aaron Sapiro

    I think this column is exactly right and I do not understand why no one else seems to have noticed.
    Never mind that the consumer economy is itself an exercise in waste.

    Everyone is waiting for the consumer to start parting with his dough again. Speaking as a recovering consumer who has been out of work for eight years ( I have always been leading edge), let me tell you that I don't buy because I have no money.

    When my unemployment insurance ran out I took early Social Security. So, like many others, I am off the radar, out of money and no longer buying. Don't hold your breath until I start buying again.

    5.Jonathan G.

    Very good, but short on solutions. As long as our priorities are to pour massive sums into things with limited amplifying benefits, such as armaments, intelligence gathering, drug enforcement, while letting oil companies exacting a huge tax on all citizens through windfall profits, insurance and pharmaceutical and financial companies diverting funds into the hands of the wealthiest few, it isn't clear what tools we have with which to fix things. High-paying jobs can't be created by waving a magic wand.

    6. CJGC

    And heaven forbid that Senator Baucus and his ilk on both sides of the aisle could consider a serious reform of our health care financing system that was more concerned with ensuring that all Americans could get health care than with protecting the profits and power of the health insurance companies and other wasteful private institutions.

    7. Ruskin

    There must be millions of people like me - not equipped to understand even a fraction of the elements that went into the creation of the economic turmoil that has overtaken us - who still long to find some collections of words they know the meaning of, which help elucidate matters. Thank you, Mr Herbert for giving us one such statement - chilling though it may be.

    I would also recommend going to - where you will find a review by a singularly gifted writer. It is of a book by a man the reviewer describes as "the world's most respected financial columnist" - Martin Wolf, who writes mainly for the Financial Times. Understanding what the review has to offer took some concentration, but I think I am right to say that both writers (author and critic) have a gift for bringing difficult-to-understand topics closer to the average person's comprehension skills. What I believe I read was an astutely balanced account of "how we got here" as well as of "what may await us in the future." And, to me at least, it brought an awareness that we are only near the beginning of a major global re-ordering, in which the United States will have no choice but to be fully engaged, even though the end result may well be a change in the pecking order.

    "Green shoots" may be as ambiguous a term as "the light at the end of the tunnel," it appears.

    8. John

    The high permanent unemployment is the result of massive immigration over the last 30 years. Technology, by design, eliminates jobs and an outsourced job also means the loss of its supporting jobs. So a modern society needs fewer people to run it and at the same time jobs are leaving the country. The bubble only masked the problem and now that the bubble has burst and excess labor is being squeezed out in the form of high unemployment there is nowhere for workers to go unless there is another bubble. The Ameican people have been losing out year after year as immigration has ramped up and the competition for jobs has increased so much that wages (healthcare and pensions are wages) have fallen as people will work for less just to have a job. Everything has finally reached the end of the line. The middle class does not have money to spend so we do not have consumers which would put others to work. It's a real mess. Japan is trying to solve the problem by giving financial assistance to its foreigners in an attempt to send them home and lower its unemployment rate. Obama and gang will not solve the problem. They benefit too much by it. They receive the minority vote for continuing immigration and they receive money from the U.S. Chamber of Commerce, agribusiness and billionaire high tech entrpreneurs to continue this assault on the American people. Massive immigration and deregulation used to be the hallmark of the Republican Party until Clinton sold the working people out. It is a continuation of these policies which enriches the political class and for that reason it will continue. Obama has not imposed the tough regulations that are necessary to insure a healthy financial system due to the financial contributions nor will he address the lowered wages and loss of wages caused by immigration since it is not to his benefit to do so. Unfortunately, our people are paying for this lack of concern by the political class and it will continue.

    9. G. McCrary

    A very thoughtful and excellent article.

    10. LAS

    During the last half of the twentieth century appliances and computers were invented with the purpose of saving time and labor. These devices do save labor, but our society still operates on the premise that people are expected to work full time plus overtime.

    European countries scaled back the work week to less than 40 hours and have given workers much more vacation and family time.

    The unemployment problem won't be remedied until there is a restructuring of the way work is distributed among people. More people need to work a shorter work week with more vacation time. The problem is exacerbated by increasingly narrowminded human resources policies.

    Jobs not requiring a college degree are now universally filled by means of psychological tests, so a person who doesn't score on the test as a business "type" will not be considered. At the professional level, anyone who is older, female, a minority, has a disability or who has gaps on a resume, etc. will fall into a cycle of unemployment. There will be a percentage of perfectly decent people who can never obtain full time work.

    The disabled, for example, have a much higher unemployment rate in spite of anti-discrimination laws. We will need to have a public works program in which anyone who wants to work can sign up and work, and not just at a menial level of jobs, as well as an and to laissez faire employment law. The success or failure of the current stimulus package cannot be evaluated yet because the federal government has not even given out a great deal of the money, particularly in scientific research.

    11. Katy

    Isn't the first problem that we are a nation too heavily reliant on a consumer-geared economy? Isn't there something wrong when 70% of national income depends on consumer shopping? We stopped being innovative and simply bought into what ad agencies told us we needed to have. Too many of us even re-mortgaged homes in order to buy these thing. It was a bubble that couldn't last.

    Rampant unemployment in many areas in this country are a direct reflection of the nation no longer being able to be a consumer economy as well as the free fall of financial sector because of the sub-prime and credit messes.

    12. Charles

    Mr. Herbert, when you talk about structural unemployment you need to strongly advocate more government aid to disadvantaged students who give up going to college for economic reasons. More than 56% of our college students are now female, and the percentage is continuing to rise. In order to get more young males into the workforce, more of them must go on to higher education. If Obama and the Dems can't help overcome this gender gap, the underclass of unemployed males who could be contributing to society will grow larger and probably permanent. Of course, more help to young females wanting higher education is also imperative.

    Unemployment is closely connected to health care reform. Most of the unemployed have minimal or no health care coverage. Mandatory universal health care coverage with a robust public option and rebates for the unemployed and underemployed is a moral and economic necessity. Single payer health care coverage is the only way to adequately cover the poor and unemployed, but a strong public option would be a step in the right direction. Mr. Herbert, please come out even more strongly in support of single payer. Even if single payer is not enacted this year, the act of putting single payer on the table as a legitimate topic of debate would be a significant gain, since now the very term "single payer" is widely demonized and rational debate stifled. Once the punditocracy begins to show a little bravery and deal with single payer as a normal, worthy system that doesn't need to be mocked or treated like something ridiculous -- Obama called single payer a quixotic "windmill" -- then the real debate about health care and poverty can begin.

    13. Spence

    How can the president be expected to keep pulling rabbits out of a hat when the Party of No tries to obstruct everything because they want him to fail? On top of that we have a few old white Democrats who aren’t any better, muttering in their oatmeal about the country’s debt and balancing the budget. Nobody can balance a budget when there is no income! Making everything even worse we’re still paying for Bush’s war and will be for years. We’re still making the rich even richer. We’re still shoveling billions at a Pentagon that desperately needs trimming big-time.

    President Obama seems to be a pragmatist and he knows that there’s only so much he can do when the cards are stacked against the bold moves that are necessary.

    Ultimately it comes down to the American people. Are we going to stop bellyaching and start pressuring recalcitrant congress critters into doing what’s good for the nation, or sit around and watch the water circling in the bowl?

    Recommend Recommended by 68 Readers


    Maryanne Conheim


    June 27th, 2009

    9:39 am

    Bravo, Mr. Herbert -- you are a brilliant diagnostician. Our economy and 10 percent of its work force is on life support, and the cure is not investment bank bailouts, but massive, WPA-style public works programs. I am sure that President Obama knows what should be done. One can only hope that he has the grace and stamina to sell it to the Congress.

    Recommend Recommended by 64 Readers




    June 27th, 2009

    9:39 am

    About 15 years ago, The Economist carried a cover story that asked what happened to working class men when their jobs moved overseas. It was a sensible, well-written article that admitted that such job losses devastated communities and caused untold social problems. In other words, the "Free" Trade Cultists in Britain and the U.S. KNEW that their neoliberal policies were disastrous for ordinary working people, and yet they continued insisting the outsourcing first production, then IT work, and then routine clerical work to low-wage foreign countries was the route to prosperity for all. Were they blinded by their mostly affluent origins and therefore unable to see blue collar workers as human, or were they purposely trying to reverse the progress that the working classes in the West made in the twentieth century? Or were they so addled by their ideology, "politically correct" in the original sense of the term, that if their ideology and reality clashed, then there had to be something wrong with reality?

    If I were Economic Czarina, I would provide low-interest loans and training to displaced workers from shutdown plants who wanted to modernize and reopen their former workplaces. I would institute government purchasing policies that gave preferential treatment to manufacturers with U.S.-based workforces, no matter who the owners of the company were. I would shut down businesses that hired illegal immigrants and auction their tangible and intangible assets off to new owners who promised to use legal workers. I would put people to work on infrastructure projects, a WPA for the 21t century, building affordable housing, new recreation areas, mass transit, and intercity rail, and retrofitting existing communities for better access by non-automobile transport. (Such projects might help us catch up with Western Europe and East Asia.) How would I pay for this? Simply by cutting the Pentagon's budget back to a strictly defensive level and putting the world on notice that the U.S. was retiring from the policing business, since it isn't very good at that kind of work anyway.

    Reversing the long-standing sicknesses in our economy will require bold moves, maybe not the ones I suggested, but ones that will upset and annoy the rich and powerful nevertheless. The Republicans will never go against the powers that be, and the Democrats seem more desperate for the Republicans' approval than for the voters' approval, so I'm not optimistic about either of these political dinosaurs.

    My fondest wish would be for the more progressive elements in the Democratic Party to break away, unite with other left-leaning groups, and form a new party that realizes something that individual members of Congress have proved on a small scale: You don't need PAC money if you win the loyalty of the voters through your integrity and concern for the little person.

    Recommend Recommended by 112 Readers




    June 27th, 2009

    9:39 am

    As a person under 30 myself, I do have to mention that in addition to a bad economy, generation Y is also getting steamrolled by the attitude that college is a place to pursue your passions rather than learn a marketable skill that sets you apart from the crowd. I love art history, music, pyschology, and general business as much as the next person, but these are a dime a dozen. Yet professors continually advised them that this was ok, that they should pursue their passions as expensive time consumingcollege degrees, rather than hobbies. Combined with the fact that many of the degrees that are currently still in demand required hard courses like the calculus III or organic chem that were just too much of a hassle to take and you have a recipe for disaster when the paper pushing jobs evaporate. I can't stress enough the disillusionment right now among my friends who have debt from their 4 years and a degree that is currently worthless. For those of us who slaved through more challenging degrees, often at the expense of a few parties, we feel a mixture of sympathy and vindication.

    I suppose that what this means for recovery is that we should consider attacking this source of the problem as well, maybe by offering federal reimbursement for getting a degree in a field that is in demand (obviously a list that has to be revisited every so often). The nation gets its talent, the citizens who take advantage of the program get jobs. And I can assure the people who wanted to pursue studies in artistic fields that there is plaenty of time to perfect those crafts outside of work, and often with more perspective than if it were a career in itself.

    Recommend Recommended by 41 Readers



    New York

    June 27th, 2009

    9:39 am

    "The first step in dealing with a crisis is to recognize that it exists"
    Thank you, Bob. There are profound systemic problems which must be addressed. We need jobs and health care. Instead we hear mumbo jumbo/psychobabbling about volunteering (killing whose few jobs which still exist) and spinach eating. This is not normal.

    Recommend Recommended by 65 Readers




    June 27th, 2009

    9:39 am

    With the Madoff fraud and the stock market crash, there was panic earlier in the year by society's parasite class - the wealthy speculators. Now that the market has recovered some and the average taxpayer has bailed out their poor investment choices, they have no further concerns.

    I can't say I blame them. For forty years now, Republican crooks and criminals have been assuring them that only the wealthy are of any consequence in America. They now have the right wing press to continue this assurance.

    Recommend Recommended by 82 Readers


    Hira Biswas

    Queens, NY

    June 27th, 2009

    9:39 am

    Only 10% of the Stimulus funds is now out. With stimulus money, every state in the country is now selling tens of billions of dollars of bonds. You will see positive impacts on the job market by the middle of next year.

    Recommend Recommended by 5 Readers


    Malik Mukhtar

    Multan, Pakistan

    June 27th, 2009

    9:39 am

    " Recession may end sometime this year" what is really means to end the recession? These are ordinary persons that are directly suffred. What impact of it of ending the recession for these peoples? socio econoimc division is widening in the world, that creates multi ranging conquences, conquences that are threatening us. There is need to understand those consquences, and solemly efforts to handle them. But sorry to say that influential policy makers are not so serious, or neglecting those conquences.

    Recommend Recommended by 10 Readers



    New Orleans

    June 27th, 2009

    9:46 am

    Obama's administration needs to listen to the acute wisdom of Bob Herbert, Nick Kristof, and Paul Krugman now, or be in danger of realizing GWBush's 3rd term - more compassionate conservatism that lets the rich fly and the poor (and now middle class) die. How will Obama like be equated with that disaster?

    Recommend Recommended by 40 Readers




    June 27th, 2009

    9:46 am

    Herbert is on target. The recession/depression may slow down in coming months, but it's going to be a long time before the unemployment rate drops significantly. We were living above our means thanks to the housing bubble and a lot of the people who lost jobs won't be getting similar jobs anytime soon, if ever. There is clearly no basis on which to assume underemployment/unemployment is going to drop much. When it does go down, it will likely go down because people are either going back to work in lesser paying jobs or they have stopped looking for work period.

    It's no surprise that men have been hammered in this recession/depression. As companies look around for ways to cut costs, they often target salaries. Women have made major progress in pay equity, but men are still ahead in many circumstances. Companies let let one man go and keep two women. I happened at my company! The problem for young males is a different one. They are typically less skilled than older males at a time when low skill jobs are in short supply and companies are most interested in skilled workers.
    With the mess we have in manufacturing and health care and our dreadful education system, I really don't see any clear way out of the current mess. I frankly think we're in for a few years of flat growth.

    Recommend Recommended by 22 Readers


    Doug Stanard

    Columbia, SC

    June 27th, 2009

    9:46 am

    "aggressive efforts to put people back to work in jobs with decent wages"
    And Mr. Herbert, you would do that by how? Expand government?

    Recommend Recommended by 13 Readers


    Christian Rutz

    Richterswil, Switzerland

    June 27th, 2009

    9:46 am

    One third of the worldwide total working force is needed to produce all the goods we consume. Automation and efficency will reduce the number of employees even further. Consumption only is not enough to solve our economic problems. Other values need to be established and agreed open. E.g. accept life cycles and do not believe in constant linear growth. It is against nature.

    Recommend Recommended by 14 Readers


    Jack Lenahan

    Charleston, SC

    June 27th, 2009

    9:46 am

    Harvard Business School, Wharton, and the rest of the obscenely expensive top rated American business schools should be ashamed and disgraced by the crisis that they more than anyone caused. How is it that none of the vaunted MBAs or Phd's in finance saw this coming? How is it that no major player at any of the Wall Street firms made any attempt to warn the public? How is it that billions in bonuses can be paid out of the money collected from the little guy, to the big guys who are abject business failures? How is it that the proud graduates of the elitist Ivy League business schools who work at FANNIE, FREDDIE, SPIC, FIDC, The Fed etc. all failed to do their jobs?
    Yesterday GM announced that it's factory in Spring Hill Tennessee will layoff 2500 workers by November. Another small town facing 2500 more failed mortgages. Business is still contracting as a result of the credit crisis, and the trashing of the housing market by an inept federal reserve, an inept Bush Treasury Secretary, impressive Congressional stupidity, unbridled social activism, failed regulatory oversight, the sale of trillions of dollars of worthless derivatives, and the appointment by Obama of the same people who contributed to the mess in the first place. The little guy is once again the victim of massive systemic arrogance, recklessness, and the collapse of the American business education system.

    Economist's View Uneven Unemployment Rates

    Stratified unemployment rates reveal substantial differences by race, gender, education, and occupation:

    16.4%, by Richard Florida: That's the overall rate of unemployment, according to the Bureau of Labor Statistics' newly released U-6 measure which includes "marginally attached workers" as well as those who work part-time for economic reasons. That's quite a bit higher than the widely reported 9.4 percent figure...

    And, unemployment continues to fall unevenly by gender, race, class, and occupation.

    Unemployment is significantly lower for the creative class. For management and business occupations - including hard-fit financial jobs - overall the unemployment rate is 4.6 percent, up from 2.7 percent last year; and for professional and technical occupations it is 4.2 percent, up from 2.5 percent a year ago.

    I suppose the financial innovation that led to the crisis can be termed "creative," but the social utility of the products that were created is doubtful. People outside of the financial sector are paying a high cost for that creativity, and that inequity is one reason to support social insurance and other programs that dampen the effects of the financial meltdown. In that regard, here's Brad DeLong:

    Fiscal Policy in the Second Half of 2009: A DRAFT of a letter I might send next week:

    Dear President Obama--

    At the end of 2008, when your incoming administration was preparing your recession-fighting strategy, your forecasts were that the recession would bottom out in August of 2009, with a peak unemployment rate of 7.9%. The unemployment rate in May was already 9.4%. 10% unemployment this year is a nearly foregone conclusion. 11% unemployment--a recession twice as deep as the one your incoming administration was forecasting at the end of 2008--is not unlikely.

    An 11% unemployment rate would carry along with it an underemployment rate--a U-6--that would kiss 20%.

    Even had the fiscal expansion plans of your administration not been cut back by roughly a quarter in their employment-generating effectiveness by the Congress, fiscal stimulus plans that appeared to be adequate and appropriate at the turn of the year now appear to be inadequate.

    Compounding the problem of inadequate fiscal expansion at the federal level is the problem of inappropriate and substantial fiscal contraction at the state level. Last fall Nobel Prize-winning Princeton economist Paul Krugman feared "fifty Herbert Hoovers"--fifty states each trying to balance its budget year-by-year and each one delivering a substantial drag on employment and income in its and its neighbors' economies.

    I therefore believe:

    Sincerely yours,

    J. Bradford DeLong

    Posted by Mark Thoma on Saturday, June 6, 2009 at 11:17 AM in Economics, Unemployment



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