James Pethokoukis

Politics and policy from inside Washington

Where are the jobs? The bear case on the November jobs report

Dec 4, 2009 18:58 UTC

From David Rosenberg of Gluskin Sheff, of course:

While it is abundantly clear that companies are near the end of the job downsizing phase, there is scant evidence of any renewal in the pace of new hiring. In fact, it is quite the contrary. This assertion is underscored by the fact that both the median (20.1 weeks) and the average (28.5 weeks) duration of unemployment hit new record highs last month. The share of the unemployed that has been looking for work without success for six months or longer also reached an unprecedented 59% last month. We are fairly certain that these folks will have a slightly different take on today’s employment number than the mainstream economics community. In addition, also keep in mind that the employment diffusion index, while improving in November, was still unacceptably low at 40.6. In other words, roughly 6 out of 10 businesses are still rationalizing their staff loads, even if at a less dramatic rate than in previous months.

All in, the November employment report was positive relative to expectations, but still quite lackluster in view of the dramatic government stimulus underpinning the pace of economic activity at this time. It’s hard to reconcile such a soft employment decline with anything else we saw in the month and at the same time, a diffusion index of 40, weakening wage growth, a record-high level of time to find a new job within the ranks of the unemployed and the lowest employment-to–population ratio in 26 years is hardly consistent with a vibrant labour market.

COMMENT

Jim, Can’t get through the day without checking your superb blog. With the new look of your blog, I am missing the list of your favorite websites and blogs. Can you bring that back? Keep up the good work…..Jim Quick

Posted by Jim Quick | Report as abusive

The November jobs report and the 2010 midterms

Dec 4, 2009 17:46 UTC

A few thoughts, sports fans:

1)  The drop in the U3 rate is welcome news for the WH, congressional Dems (and US workers, of course). But it is really just a smoothing out of last month’s weird pop from 9.8 percent to 10.2 percent. As Action Economics notes:

The jobless rate also fell by a welcome two-ticks, to 10%, though this just reversed half of the surprising four-tick October pop to leave intact the recent uptrend of roughly 0.1% per month for this measure. We now assume a flat payroll figure in December, with the resumption of positive payroll growth in Q1, but we still expect a modest up-trend to remain in place for the unemployment rate.

2) That being said, there was certainly good news in both temporary hires and hours worked — though if the labor force participation rate had stayed steady, U3 would have been 10.1 percent.

3) But economics is one thing and politics another. The U3 rate is an ugly indicator to Americans that the economy is still broken.

4) Still a quite good chance that on Election Day 2010, unemployment for over a year will have averaged in double digits. This is virgin territory for political forecasters, and the single biggest reason why 2010 may be more like 1994 (incumbent Ds lose 52 House seats) than 1982 (Rs lose 26 seats). Average the two and you get a loss of 39 House seats — not a bad guess for a U-shaped recovery.

COMMENT

hey, charlie cook has 15-25 (and 3-5 senate seats) as a conservative case …if its 35, hardly a shocker

Posted by James Pethokoukis | Report as abusive

Goldman Sachs 2011 forecast would be an absolute disaster for Dems

Dec 3, 2009 00:32 UTC

This would be New Normal with extreme prejudice. Bad for Democratic incumbents in the 2010 congressional midterms, but it should make the White House political team nervous as well for 2012. If Goldman Sachs is right, of course. Here is the firm’s 2011 forecast:

The key features of our 2011 outlook: (1) a strengthening in growth from 2.1% on average in 2010 to 2.4% in 2011, with real GDP rising at an above-potential 3½% pace in late 2011; (2) a peaking in unemployment in mid-2011 at about 10¾%; (3) extremely low inflation – close to zero on a core basis during 2011; and (4) a continuation of the Fed’s (near) zero interest rate policy (ZIRP) throughout 2011.

That said we see risks that could upset these markets.  On the one hand, we might be underestimating the vigor of the economic recovery, and therefore the pressures for Fed tightening.  In addition, surging asset prices and worries about a “bubble” could prompt Fed officials to tighten before such a move seems warranted on real-economy grounds.  On the other hand, the economy (and the markets) could struggle under the weight of credit restraint for small businesses, weakness in commercial real estate markets, or fiscal tightening, especially by state and local governments.

The implications? I hardly know where to begin: a) with unemployment rising all next year, a GOP blowout in 2010; b) certainly more job creation packages; c) no capandtrade; d) increased anti-Wall Street/Fed sentiment; e) third party prez candidate in 2012; an Obama challenger in 2012 (Dean?). But who really knows. This would be like a technological singularity where seeing beyond the event is pretty much impossible. Such a Long Recession (essentially) would be so contrary to American expecatations — such a slow-mo, psychological shock — that it would be a full-out system perturbation equivalent to 9-11 or the Iraq War.

COMMENT

If GS Said they were Lying I wouldn’t Believe Them!

Posted by tmajor | Report as abusive

Obama’s reverse stimulus on its way

Nov 27, 2009 20:42 UTC

Jed Graham of IBD highlights the coming fiscal drag in a pretty picture:

0112509ibd

Me: What would that mean for GDP growth? A pre-financial crisis analysis by Goldman Sachs predicts, for instance, found that getting rid of all the Bush tax cuts at the end of 2010 would cause a 3 percentage point drop in the economy in 1Q 2011.  In any event, anti-growth fiscal policy is one more reason to believe in the dreary New Normal

COMMENT

Rick,Which is presumably why the chart cuts off at 2013 instead of showing the out years when the net impact of the reform will be neutral.

Posted by Chi Democrat | Report as abusive

Does Washington really get the jobs crisis?

Nov 27, 2009 18:46 UTC

David Rosenberg of Gluskin Sheff doesn’t think so:

These attempts to stimulate consumption at a time when household spending relative to GDP is already at an all-time high are not going to carry much of a multiplier impact. There is a youth unemployment crisis, a skills crisis, a crisis among the ability of small businesses, who have been responsible for 65% of the new hiring in the U.S.A. over the past 15 years — to secure financing for working capital purposes, there is a crisis in terms of a declining manufacturing capital stock, and the programs we get are these old and tired Keynesian attempts at temporary boosts to consumer demand. It truly boggles the mind, and as we show below, American taxpayers are still a long, long way from paying for all these transitory fiscal policies out of Washington.

Me: When I hear folks start talking about new WPA and CCC programs, I know they’re out of ideas.

COMMENT

Thanks for the post and for sharing the very useful information related to job crisis.

Why panicky Dems are bailing on Tim Geithner

Nov 23, 2009 20:38 UTC

One residual from Timothy Geithner’s rough confirmation back in January — “Turbo Tax Tim” and all that — is that his political position is probably a bit more precarious than that of the typical newbie treasury secretary.

Not only has Geithner been a frequent target of late-night comedy shows, he’s the public face of the unpopular bank and automaker bailouts. High unemployment rate isn’t helping either.

No surprisingly, a new Rasmussen poll finds that 42 percent of Americans think Geithner has done a “poor” job handling the economy versus 20 percent who rate him “good or excellent.” And the furor over his handling of the AIG bailout has yanked the competence issue back to the forefront.

So there is little political risk from calling for his resignation, as Representative Peter DeFazio, an Oregon Democrat, and several Republicans have done. But, my sources say, there seems to be little White House appetite at this moment for ousting Geithner, who certainly has no plans of his own for a fast exit.  Expect him to stick around until at least November 2010.

And why would Obama cut him loose when doing so would be tantamount to a vote of disapproval in his own economic policies?

No one has charged Geithner with going rogue, after all. So blame the model, not the man, if you must. Not to mention a quick hook would stink of panic. Top cabinet secretaries of first-term presidents rarely leave before the midterm elections.

Nor does Geithner have much to fear from a whisper campaign to put JPMorgan CEO Jamie Dimon in the job, according to insiders. Despite the rumors, Dimon doesn’t want the gig. What banker would, given the current populist political climate?

It seems unlikely that radioactive Wall Street will be supplying Geithner’s eventual successor. More likely candidates: Rahm Emanuel (he of the frequent phone calls to Geithner), White House chief of staff; Janet Yellen, president of the San Francisco Federal Reserve; Lawrence Summers, director of the National Economic Council; and Roger Ferguson, CEO of TIAA-CREF and former Fed vice chairman.

But the calls for Geithner’s resignation, as well as stunts like the Congressional Black Caucus blocking a key House committee vote on financial reform, indicate a degree of desperation among congressional Democrats. They see high unemployment and dissatisfaction with Obama’s scattered focus on the issue as driving the anti-incumbent mood.

Unlike in sports, in government it’s the players, not the coach, who gets fired. And that’s why some Dems think one way to save their jobs in 2010 is by suggesting that Geithner lose his today.

COMMENT

Blaming Geithner, or Paulson, for the great panic of 2008 is absolutely insane. Bears and Lehman were ruined when giant banks around the globe began reporting huge mortgage losses, securities where both Bears and Lehman were heavily invested. Then, behemoth banks, hege fund managers, and overnight financiers panicked and began yanking their financing from investment banks like, Bears and Lehman, who were heavily invested in these securities. It was nothing short of a good ol’ fashion panic; only this time it hit the unregulated, grossly leveraged investment houses. In unprecedented fashion, Geithner, Paulson, and Bernanke used the powers of the Fed to rescue the entire financials industry. Their alleged bailout of Bear Stearns did little more than protect Bears’ creditors and the global financial system. Bears shareholders and employees lost billions!! Look at what happened when Paulson couldn’t stomach being castigated again in the press and let Lehman fall: the down plunged over 500 points and the recession was on in earnest! Could you imagine what would have happened if Bears, Lehman, Merrill Lynch, AIG, and Fannie and Freddie were all allowed to go under? Lehman alone tanked the markets over 500 points!! If these institutions defaulted on ALL of their contractual obligations, commercial banks all over the world would have been ruined! You think 10% unemployement is bad, which we had in 1982 under Reagan, try the 30% and up we had in the great depression. That’s where we we’re headed but for the courage of these guys to take extraordinary steps to save us. If Greenspan had acted with similar aplomb, and taken the air he knew existed out of the housing bubble, it probably would never have come to this. The simple truth is that capitalism, like everything else, fails every now and then. And those who save us from its uncommon failures shouldn’t be pilloried by a bunch of brain dead politicians, many of whom thought that Enron and it’s real crooks were great guys!

Posted by Chad Swenson | Report as abusive

Goldman Sachs forecasts nightmare 2010 economic scenario for Dems

Nov 21, 2009 03:10 UTC

Trust me, these are not the kind of numbers that the White House and congressional Democrats want to see. Goldman Sachs is now forecasting unemployment to rise all next year, peaking at 10.5 percent. The firm expects the economy to grow at just 2.1 percent. Also, the budget deficit will be a few billion bigger at $1.6 trillion. If correct, these stats absolutely confirm the collective freakout happening right now among Ds on Capitol Hill, such as calling for Geithner to resign. Economist Jan Hatzius:

Until hiring resumes in earnest, the jobless rate is apt to keep drifting up. This is less tautological than it sounds, as net changes in unemployment mask significant flows into and out of the pool of unemployed workers. However, most research finds that stronger hiring rather than reduced layoffs is the key driver of changes in unemployment early in a recovery. Unfortunately, none of the indicators of labor demand—job vacancies, help-wanted indexes, and consumers’ perceptions of job availability— shows any significant sign of life. The best that we can find is that respondents to the Michigan confidence survey, who have a decent track record for forecasting one-year changes in unemployment, are looking tentatively for stabilization.

COMMENT

Their only argument will be that things would have been worse if they hadn’t been in charge. How well will that go over?

Here comes Sarah Palin and the anti-Wall Street GOP

Nov 20, 2009 17:08 UTC

Don’t interpret passage of the watered-down Kanjorski amendment as the peak of the “break up the banks” movement. It may be about to get some new allies on the right, folks tired of Big Government, Big Money and crony capitalism.

For the moment, though, it was arguably the best that Representative Paul Kanjorski, a Pennsylvania Democrat, could have gotten through the House Financial Services Committee. All the committee Republicans and even some of the Democrats voted against it. And even in its much-diminished state, the Kanjorksi amendment would likely be weakened further in the Senate. At the same time, the Obama administration seems little interested in such pre-emptive powers.

Wall Street, however, is hardly getting any more popular with Main Street. The Goldman Sachs Apology Tour is evidence of that. And there are mid-term elections in less than a year. Republican candidates will probably do well as high unemployment continues to drive voter anger at incumbents. As Gallup diplomatically puts it, “Republicans seem well-positioned to win back some of their congressional losses in 2006 and 2008.”  More accurately, fear of losing the House is now running high among congressional Dems.

And all those new Republicans are likely to be infused with the ethos of the Tea Party movement: anti-TARP, anti-Fed (the House GOP is already there on this), anti-bailouts and anti-Wall Street. It could be a group of newcomers, as John McCain recently said, that is populist, protectionist when it comes to China and the yuan and pro-financial regulation.

Sarah Palin could be a harbinger. Although she diligently promotes the wonder-working power of Reaganomics in her autobiography, she also warns about “the return of corporatism – government collusion and co-option of big business.”

On the web, right-of-center bloggers wrote favorably of a recent proposal by Bernie Sanders, the socialist independent senator from Vermont, to break up the banks.

Even among conservative intellectuals, there is little love for an unrestrained Wall Street these days. University of Chicago economist Luigi Zingales argues that “the finance sector’s increasing concentration and growing political muscle have undermined the traditional American understanding of the difference between free markets and big business.” Like a 21st century Teddy Roosevelt, Zingales would use anti-trust law to disperse financial power.

And one veteran Republican politico says he would be surprised if the 2012 GOP nominee wasn’t far tougher on Wall Street than President Barack Obama.

So it isn’t hard to imagine that the next incarnation of Congress — filled with “free-market populist” Republicans — might take another look at the state of Wall Street and conclude, as has Alan Greenspan, that any firm too big too fail really is too big to exist.

COMMENT

If she isn’t the biggest jerk,even in the Republican party,who is ? This is a vile,stupid,moronic idiot. A crass about as rogue as any other neo-con. How can such a conformist be a rogue ?

Posted by Dominick | Report as abusive

How the economy is killing the Obama agenda

Nov 20, 2009 14:00 UTC

The less popular Obama gets, the less political capital he has to push forward his agenda. I think this chart from Nate Silver nicely encapsulates things:

112009poll

Healthcare reform update: It’s all about 60 votes

Nov 18, 2009 19:37 UTC

My sources tell me that reconciliation — pushing through HC in the Senate with 51 votes with a special parliamentary procedure — isn’t going to happen. So the big votes will need 60, including just opening debate. And rest assured that if Reid thinks he has 60 to pass, the debate will immediately come to an end.

Keith Hennessey gives his odds update:

I am lowering from 60% to 50% my projection for the success of comprehensive health care reform.

  1. Pass a partisan comprehensive bill through the House and through the regular Senate process with 60, leading to a law; (was 40% –> 30%)
  2. Pass a partisan comprehensive bill through the House and through the reconciliation process with 51 Senate Democrats, leading to a law; (steady at 20%)
  3. Fall back to a much more limited bill that becomes law; (was 20% –> 15%)
  4. No bill becomes law this Congress.  (was 20% –> 35%)

I think there is zero chance a bill makes it to the President’s desk before 2010.  If a bill were to become law, I would anticipate completion in late January or even February. …

I have lowered my projection of Leader Reid succeeding for three reasons:  Pretty much everything has to go right for him to win on cloture in mid-December. He has no more wiggle room on the schedule, and new intra-Democrat policy fights are popping up.

I think his members are going to get beat up about health care and jobs over Thanksgiving recess, then return to Washington to face another bad jobs day Friday the 4th. If moderates demand large substantive concessions for their votes, liberals like Senators Rockefeller and Boxer may refuse. They may tell Reid they will oppose cloture if the bill moves toward the  center, and instead advocate abandoning regular order and starting a clean reconciliation process in January. House liberals might join this effort.

COMMENT

I’m hopeful this thing will get killed in the Senate, but have big doubts. The fact that Reid included a public option in the Senate bill suggests to me he has more confidence in getting those 60 votes than the critics are suggesting. Without a public option he could still armtwist liberals by saying it would be restored in conference. But including the public option suggests his fears of losing centrists over that issue may be overblown. For my money, Leiberman is the last best hope of sanity in this matter and his could be the key vote.

Posted by Bill, Fairfax, VA | Report as abusive
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