James Pethokoukis

Politics and policy from inside Washington

Where the debt ceiling debate might be headed

Jun 28, 2011 17:02 UTC

This decision tree from Societe Generale (via Business Insider)  seems more or less correct. I think there will be a deal by Aug. 2 (or whatever the deadline ends up being).  But it is the content of the final austerity plan that remains impossible to predict.

 

 

 

 

 

The long, slow slog back to full employment

Jun 28, 2011 14:50 UTC

A neat chart from the Council on Foreign Relations:

And the explanation. At least one of them:

The shape of U.S. labor market declines and recoveries—as measured by the current level of employment relative to the prior peak—has changed dramatically over the past two decades. From the 1940s through the 1970s, they exhibited a V-shape of sharp declines and rapid recoveries, as seen in the chart above. By the 1990s they took on a U-shape, signifying longer, persistent unemployment.

“During times like the 1950s and 1960s, a rising level of educational attainment kept up with this rising demand for skill,” MIT economist David Autor writes, “but since the late 1970s and early 1980s, the rise in U.S. education levels has not kept up with the rising demand for skilled workers.”

The labor demand differential is particularly stark today: unemployment among the college-educated stands at 4.5%, compared with 14.7% for those without high school degrees. Unemployment compensation, the main tool in the U.S. arsenal to address joblessness, was created back in 1935 to buffer relatively short stints of unemployment, but the need today continuously to extend benefits is a sign that policy has got to address the skills mismatch far more effectively.

Americans aren’t eating the dog food

Jun 28, 2011 14:47 UTC

A few data points, two from today and one from last week:

–  Consumer confidence fell in June to the lowest point since November 2010 on concerns about the slack labor market and sputtering recovery, according to a Conference Board report released on Tuesday. The Conference Board, a private-sector industry group, said its index of consumer attitudes fell to 58.5 in June from a revised 61.7 in May. Something more like 90 is what you want to see with a healthy economy.

– “Only 37 percent of registered voters approve of [President Obama's]handling of the economy, his lowest rating ever, according to a new McClatchy-Marist poll. …  Overall, 45 percent said that they approved of the job the president is doing, while 47 percent disapproved, a range that’s held relatively steady since late 2009.”

– And this from an AP poll:

For the first time this year, less than 50 percent of respondents to an Associated Press-GfK poll say Obama deserves re-election. The new poll shows a virtual split of 48-47 in favor, raising a new hurdle for the president as economic concerns strip away the gloss he briefly gained in May after the death of Osama bin Laden. What’s more, four out of five now believe the economy is in poor shape, with 36 percent calling it “very poor,” a new high in AP-GfK polling.

At the same time, Wall Street and the Federal Reserve continue to downgrade their economic expectations.  As I wrote yesterday:

The economy grew at just a 1.9 percent pace in the first quarter, and many economists now think it might grow just 2.0 percent in the second quarter – or even less. This should be a red flag to Washington. New research from the Federal Reserve finds that that since 1947, when two-quarter annualized real GDP growth falls below 2 percent, recession follows within a year 48 percent of the time.

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