The November jobs report may not be the only piece of good statistical news on the way. Wait until all those census workers start making their way into the data. But a drill down reveals deep, deep problems in the US labor market where unemployment averaged just 5.5 percent from 1989 through 2008:
It ain’t so hot, says David Rosenberg of Gluskin Sheff:
Things are so good in the U.S.A. that President Obama’s approval rating just sank to a new low for any president at this post-election juncture and Treasury Secretary Geithner is now seeking to have the $700 billion TARP extended to October. In fact, Obama wants to tap $200 billion from the program to fund a jobs initiative — let’s hope it turns out to be more effective than the last package that was supposed to cap the unemployment rate at 8%. It is rather amazing that here we are, 30 months after the onset of the credit crunch, and we see this as a headline on the front page of the FT: Obama to Boost Jobs With Bank Rescue Cash.
This looks like a smaller version of the original stimulus law. Its origins are more political and fulfilling a legislative need, than policy-driven. I’m OK with the UI extension and extending the health insurance subsidy, although I wish both were better designed. I generally support tax relief, but I am concerned the targeted capital gains reduction will give some cover to let the broader capital tax rates jump at the end of 2010. That would be very bad. The spending programs will have little near-term GDP effect, and so should be evaluated in how they meet other policy goals. They’re largely ineffective as immediate stimulus, because government spending is slow. The $250 check to seniors was pandering the first time Congress passed it (on a broadly bipartisan vote). It’s still pandering. Why are seniors more deserving of aid than, say, a low-income working family? The “using TARP dollars to help Main Street” is a transparent gimmick. If you’re going to increase the deficit, it’s better just to stand up and say the deficit increase is worth the short-term economic benefit you think will result from the other policies. I suggest they do a targeted bill that contains only the UI and COBRA provisions, because I think the large deficit impact of the other provisions, relative to their small macroeconomic benefit, isn’t worth it.
A few cents from IHS Global:
The President’s speech was short in terms of the details. He did not specify how much of the remaining resources from TARP should be dedicated to deficit reduction versus additional stimulus spending. Nor did he specify any targets for spending under the four areas that were highlighted in his speech. Effectively the President has kicked the ball into Congress’s court in order to work out the details.
Here’s the theory about the new U.S. position on greenhouse gases. The official finding by the U.S. Environmental Protection Agency that the emissions endanger human health sets the stage for permit requirements on power plants, factories and automobiles. It also supplies President Barack Obama with more evidence at the Copenhagen summit of a “new normal” in America when it comes to climate policy. And back home, it supposedly gives a nudge to the Senate where cap-and-trade legislation is stuck on the back burner.
The New Normal may be a bummer, but it’s not life-threatening for the economy. The only systemic risk at the moment is the political prospects of Democratic incumbents on Capitol Hill. They dread standing for reelection in 2010 if the unemployment rate remains anywhere near double digits. The forthcoming jobs bill is a product of political panic. And using TARP to pay for it confirms the fears of those back in the fall of 2008 who thought the bank bailout fund would eventually become a political slush fund.
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.