James Pethokoukis

Politics and policy from inside Washington

12 reasons the job market is worse than you think

Dec 9, 2009 20:30 UTC

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:

1. Add in long-term discouraged workers and the unemployment rate is 22 percent. (via Shadow Government Statistics)

2. The ISM non-manufacturing employment index in November pointed to a 192,000 drop in service sector jobs vs. the increase of 58,000 the Labor Department reported. (via David Rosenberg of Gluskin Sheff)

3. On a rolling 12 month basis, individual taxes withheld have dropped by nearly percent, from $1.42 trillion to $1.31 trillion. (via  Zero hedge)

4. If not for discouraged workers leaving the workforce, the unemployment rate would have only ticked down to 10.1 percent. And that is after a surge to 10.2 percent in October from 9.8 percent in September. Sounds like a bit of reversion to the mean.

5. Single month dips are common. The unemployment rate bottomed at 3.8 percent in April 2000 and peaked at 6.3% in June 2003. During that time, the jobless rate fell five times. In the early 1990s unemployment cycle, the unemployment rate actually fell no fewer than six times. Just last July, the rate dipped by a tenth of a percent. (via David Rosenberg of Gluskin Sheff.)

6. The JOLTS survey showed that job openings fell back by 80,000 in October and new hires plunged 95,000. (via David Rosenberg of Gluskin Sheff.)

7. Both the median and average duration of unemployment hit record highs.

8. The annual survey from the ISM found that just 32% of manufacturers intend to boost their staff requirements in 2010 and a mere 15% of non-manufacturers intend to do so (vai David Rosenberg of Gluskin Sheff)

9. The Business Roundtable survey showed just 19 percent of companies intend to boost employment.

10. Payroll processor ADP, America’s largest processor of payroll information, publishes an independent survey of employment based on its own data reported a loss of 169,000 jobs. Asblogger and bond guru David Goldman notes, the correlation between the ADP and BLS is 95 percent, so the discrepency “lies at the extreme range of error for the two series.”

11. According to the Conference Board’s monthly survey of consumer confidence. those “claiming jobs are ‘hard to get’ increased to 49.8% from 49.4%, while those claiming jobs are ‘plentiful’ decreased to 3.2% from 3.5%.”

12. It is tough to top Goldman’s analysis:

The level of un- and underemployment is so huge by historical standards as to make the usual sort of measurement questionable. With nearly 20% of the population unable to find proper work, there is a different sort of workforce. The vast majority of job creation in the US during the past two generations came from small businesses, which display only vaguely on the radar of government agencies as well as the bigger private surveys. The financial crisis killed small entrepreneurs as surely as Joseph Stalin killed the kulaks, and the roots of the economy are dead and dry.


Lost Soul,HELP I have been on my job for 5yrs.On 1/08/10 I went to work as always with my smileing face,Ready to jump in and work my depts.The company is know as Freds in the big town of Quincy Fl.The sweat blood an tears i put into my job was meant for nothing.the big shots that went home to there prime rib had come an went.left the word i had been let go.IT goes deep about my app.that i filled out 11/10/2005 wow!They always love me when iwas going an doing by the way iam now 54yrs old WOW.With no job ,Taken care of my 80yr old MoM. they dont even know how hard an long i have come in my life.from long long ago of recovery due they care.please can anyone HELP! My custermers my life of 5yrs my poor mother my confussed mind.my# is 850/875-1685

The state of the union

Dec 9, 2009 18:27 UTC

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.


Why am I always being told to “continue reading” when there is nothing additional to read? If this is going to be on every post could you at least put something like “more below the fold” on each one that has more to read? That way we don’t have to click on every single link to see if we are missing anything. It makes no sense.

Posted by Mark | Report as abusive

Drilling into Obama’s jobs plan

Dec 9, 2009 17:50 UTC

Keith Hennessey:

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.

Small business to Washington: Stop confusing us

Dec 9, 2009 14:30 UTC

If you listen to the National Federal of Independent Business, the anemic recovery and weak consumer spending are its biggest concerns. But there is something else:

But the other major concern is the level of uncertainty being created by government, the usually source of uncertainty for the economy. The “turbulence” created when Congress is in session is often debilitating, this year being one of the worst. Themes including “tax more,” “tax the rich even more,” “VAT taxes,” higher energy costs due to Cap and Trade, mandates and taxes for health care, threats of “stimulus II,” incomprehensible deficits, and a huge pool of liquidity created by the Federal Reserve Bank that threatens price stability and higher interest rates. The list goes on and on. There is not much to look forward to here and good reason to “keep your powder dry.” Uncertainly is the enemy of the real economy as well as financial markets. …

But there are still many uncertainties ahead (most in Congress) that need to be resolved and plenty of “income redistribution” yet to come as we continue to clean up our financial system – all which creates major headwinds for the economy.


Government has always been – and always will be – the problem. I cringe when I hear people talk about the gov’mint. Hopefully all those voters who bought into Mr. Obama’s ‘change we can believe in’ will kick some Democratic butt next November, but I’m not holding my breath. Obama is a master of form over substance and there is apparently no lack of willing buyers.

Posted by gotthardbahn | Report as abusive

Obama’s jobs plan

Dec 8, 2009 20:15 UTC

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.

The problem right now is that Congress is overwhelmed with a range of high priority legislative measures ranging from health care reform to financial regulation. How soon Congress will be able to consider new stimulus measures is really hard to say, but we would not expect a bill to be proposed until January or February of the New Year.

The bottom-line is that these measures to stimulate small business in particular are critical in order to have any hope at all of getting the job market turned around in 2010.

Congress has a short window here in order to accomplish this, but if the bill is delayed beyond the January/February window then there is little chance of this happening.

Me: I think the timing issue is critical, both from a political and economic standpoint. Timing is running out given the difficulties of passing much in an contentious election year

Obama and jobs, take two

Dec 8, 2009 19:38 UTC

A few thoughts on the Brookings speech:

1) Lots of big ideas from liberal thinks on  how to boost jobs. Obama pretty much took a pass.

2) Obama proposals certainly aren’t game changers

3) To a great extent, Obama will still be relying on the unspent 70 percent of his $787 billion stimulus plan, passed earlier this year, to perk up the flaccid labor market.

4) It’s clear that the deficit is driving policy.The high government debt-to-GDP ratio of the U.S. risks crowding out private investment, reducing the future potential of the economy to grow. And rising deficits increase investors’ fears about the creditworthiness of the U.S. government.

5) Obama needs to keep interest rates as low as possible to boost growth and not worsen interest payments. So no mega-stimulus. This is his version of Clinton’s bond market strategy.

Here is Michael Feroli of JP Morgan:

For now, we’re not pencilling in any major change to our growth forecast for 2010. Many of the proposals — listed below — are business tax cuts which are infra-marginal and will probably have a muted impact on behavior. In addition, there are some one-time tax cuts or bonus payments which are less likely to affect household behavior than more permanent tax cuts. It is possible that accelerated infrastructure investment and some other secondary proposals will be significant enough to lead to a forecast revision.

* One year elimination of capital gains on small business stock
* One year expensing of up to $250,000 of capital investment for small businesses
* One year extension of bonus depreciation expensing
* “A new tax cut for small businesses to encourage hiring in 2010″
* Eliminating SBA fees and increasing guarantees
* More infrastructure spending, including “merit-based” infrastructure
* Incentives for energy efficient home retrofits, including expanding programs from the first stimulus
* Extending unemployment insurance (presumably extending past December 31, not extending past 99 weeks).
* Extending COBRA benefits
* Another $250 one-time bonus payment to social security recipients
* “Taking steps to ensure that state and local governments are not forced to layoff teachers”

The EPA and Obama’s Uncertainty Tax

Dec 8, 2009 11:23 UTC

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.

But in practice, the only thing certain about the EPA ruling is more regulatory uncertainty leading to less economic growth and fewer jobs. Bad news, to be sure, for American businesses already flummoxed by the mercurial state of healthcare, financial and tax reform. Call it Obama’s Uncertainty Tax.

While a cap-and-trade bill has already passed the House of Representatives, few Capitol Hill observers expected the Senate to approve one, even by the end of 2010 thanks to the anemic economy and political risks for incumbent Democrats facing midterm elections. What’s more, expectations of a more Republican-leaning congress after 2010 made it seem like economy-wide carbon caps were sliding off the Obama agenda for the foreseeable future.

But now it’s conceivable carbon restrictions would be implemented as early as next year – even though the EPA itself admits its efforts would be more disruptive and less efficient than congressional action. Such an optimistic timetable assumes no legal challenges. But there will be plenty of those. Already, business groups are preparing to file suit against the EPA. It could fall to U.S. courts to determine the future of the nation’s approach to climate policy. This is a nightmare scenario for the private sector when it comes to planning for new expansion or hiring. Note that the big problem with the job market at the moment is not so much job losses and zippo new jobs being created. It will take a year of 4 percent growth adding 250,000 jobs a month to lower the unemployment rate to 9 percent.

Of course, about the only thing worse than regulatory uncertainty would be for the EPA to follow through with its top-down, command-and-control approach to dealing with perceived climate change.

One solution would be for Congress itself to act. GOP strategists would love to disrupt reeling Democrats with another controversial proposal – which is precisely why it won’t happen. Dems in the Senate are well aware of the shellacking their House colleagues have taken on their cap-and-trade vote.

Another option would be for the White House to devise a plan that would generate some bipartisan support. One idea might be a carbon tax whose revenue could be distributed back to citizens as a dividend, or used to offset payroll taxes. Such a refund could be progressive and popular.

But the most likely scenario is no cap-and-trade and no carbon tax, just more government “investment” in clean energy. But for now, workers and business are left to keep paying the Uncertainty Tax.


its been proved that these tax reforms will only bring more pain in the long term

Posted by cainindia | Report as abusive

Cost-benefit analysis of jobs stimulus

Dec 7, 2009 17:23 UTC

Hopefully any new plan will have a better ROI than the current stimulus package. Economic analyst  Ed Yardeni runs the numbers:

The Obama Administration is touting that their stimulus program has saved or created 640,329 jobs since it was enacted back in February through the end of October. This number is updated and posted on the Administration’s recovery.gov web site. That amounts to $246,436 per job based on the $157.8bn that has been awarded so far! Total compensation earned by the average payroll employee during October, on an annualized basis, was $59,867. If the government had simply used the funds awarded so far to pay for a year’s worth of labor, that would have paid for 2.6mn jobs!

James Pethokoukis is the money and politics columnist/blogger for Reuters Breakingviews. Previously, he was the economics columnist for U.S. News & World Report where he wrote the monthly Capital Commerce magazine column. Pethokoukis was also the managing editor of the magazine’s Money & Business section. He has written for many publications including the New York Times, the American, USA Today, Investor’s Business Daily, and TCS Daily. Pethokoukis is also an official CNBC contributor and appears frequently on that network’s Kudlow & Company, Power Lunch, and The Call shows. In addition, he has appeared numerous times on MSNBC, Fox News Channel, Fox Business Network, CNN, and Nightly Business Report on PBS. A 1989 graduate of Northwestern University where he double majored in Soviet politics and American history and a 1991 graduate of the Medill School of Journalism, Pethokoukis is a 2002 Jeopardy! champion.james.pethokoukis@thomsonreuters.com


I agree with the above post, and the post above that. I highly doubt that jabs were actually considered with the health care.

Posted by josephmorris90 | Report as abusive

The TARP slush fund gets slushier

Dec 7, 2009 15:25 UTC

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.

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.


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