James Pethokoukis

Politics and policy from inside Washington

US unemployment rate surges to 10.2 percent; 190,000 jobs lost in October

Nov 6, 2009 14:03 UTC

This is an extraordinarily bad number, and makes this week a 1-2 punch for Democrats. A 10.2 percent jobless rate is the highest since April 1983, even though the labor force participation rate actually dipped a bit. The broader U6 measured surged to 17.5 percent. Recall that 7 quarters of average GDP growth of roughly 7 percent in the 1980s only brought down the unemployment rate by 2 1/2 percentage points. As the Labor Department sums things up:

The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade.

In October, the number of unemployed persons increased by 558,000 to 15.7 million. The unemployment rate rose by 0.4 percentage point to 10.2 percent, the highest rate since April 1983. Since the start of the recession in December 2007, the number of unemployed persons has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points.

The number of long-term unemployed (those jobless for 27 weeks and over) was little changed over the month at 5.6 million. In October, 35.6 percent of unemployed persons were jobless for 27 weeks or more.

Total nonfarm payroll employment declined by 190,000 in October. In the most recent 3 months, job losses have averaged 188,000 per month, compared with losses averaging 357,000 during the prior 3 months. In contrast, losses averaged 645,000 per month from November 2008 to April 2009. Since December 2007, payroll employment has fallen by 7.3 million.

Construction employment decreased by 62,000 in October. Manufacturing continued to shed jobs (-61,000) in October, with losses in both durable and nondurable goods production. Retail trade lost 40,000 jobs in October.

Health care employment continued to increase in October (29,000). Since the start of the recession, health care has added 597,000 jobs.

Temporary help services has added 44,000 jobs since July, including 34,000 in October.

The average workweek for production and nonsupervisory workers on private nonfarm payrolls was unchanged at 33.0 hours in October.

In October, average hourly earnings of production and nonsupervisory workers on private nonfarm payrolls rose by 5 cents, or 0.3 percent, to $18.72. Over the past12 months, average hourly earnings have risen by 2.4 percent, while average weekly earnings have risen by only 0.9 percent due to declines in the average workweek.

The change in total nonfarm payroll employment for August was revised from -201,000 to -154,000, and the change for September was revised from -263,000 to -219,000.

COMMENT

The job market is definitely a scary place right now. Many job seekers are trying to differentiate themselves from the stiff competition and doing so in creative ways, including printing their resumes on t-shirts and offering vacations to people who can help find them a job. Are outside-the-box ideas like these the wave of the future or a gamble in an already-difficult job market?

http://bit.ly/3tyupy

Economic fears drive Pelosi’s healthcare push

Oct 30, 2009 14:17 UTC

First you have to realize that Mark Zandi has become the de facto chief economist for congressional Democrats. Here is a bit from his testimony yesterday to the Joint Economic Committee:

The Great Recession is over, but the recovery will be a difficult slog through much of next year. The risks are also uncomfortably high that the economy will backtrack into recession. This would be an especially dark scenario, as the economy would almost certainly be engulfed in a deflationary cycle of falling wages and prices. The Federal Reserve and fiscal policymakers would also have fewer options and resources with which to respond.
A range of problems suggest that such a scenario cannot be easily dismissed. Most obvious are the very high and rising unemployment and increasingly weak wage growth, the mounting foreclosure crisis, rising commercial mortgage loan defaults and resulting small bank failures, budget problems at state and local governments, and dysfunctional structured-finance markets that are restricting credit to consumers and businesses.

Me: So if you are Speaker Pelosi and Harry Reid, here is how you interpret this: The economy will still stink on Election Day 2012. Voter disapproval of Dems will continue rise.  Better pass healthcare as soon as possible or you won’t be able to pass it all.

COMMENT

Good point. Another problem is that the benefits to any bill that passes won’t start until 2013, but the taxes will start earlier, which won’t go over well, especially in a bad economy. Obama told people their premiums would fall if he passed his bill, but this seems unlikely to happen. That is when we’ll hear that you just can’t trust the insurance industry and it’s time for single-payer.

Obama’s bad economic bet may ruin Democrats

Oct 29, 2009 18:19 UTC

The anemic third-quarter U.S. GDP report is another indication that President Barack Obama’s economic gamble may yet fail to pay off. And that could be terrible news for Democrats heading into the 2010 midterm elections.

While the new report showed the economy shifting into recovery mode, it looks like a pretty anemic expansion. As the economics team at IHS Global Insight see things, temporary factors such as cash for clunkers (accounting for nearly half of the past quarter’s growth) and the homebuyers tax credit artificially inflated growth during the past three months. The firm puts underlying growth in the economy at closer to 2 percent than the 3.5 percent.

See, back at the start of 2009, the new White House team wagered that it could construct a stimulus plan that would both boost the economy, helping Democrats in the 2010 midterms, and serve as a significant down-payment on its long-term policy agenda in areas like clean energy and education. That would help Obama in 2012.

It’s a lot to ask of one plan, even a $787 billion one.

Of course, the task would have been easier had the administration gone with a $1.2 trillion stimulus option suggested by White House adviser Christina Romer. But worried that the deluxe option would stall in Congress while also spooking global bond vigilantes, Team Obama went with the mid-sized approach.

The administration didn’t count on the recession being far worse than it anticipated, driving the unemployment rate toward double digits. So while the stimulus plan was effective enough to help nudge the economy away from depression in the second quarter — it’s tough to spend a trillion dollars with absolutely zero short-term impact — and into mild recovery mode during the third, it wasn’t nearly powerful enough to ignite a V-shaped recovery.

Indeed, during the first quarter of the last 10 economic recoveries, real GDP rose a far more impressive 5.8 percent on average. For instance, the first five quarters of the Reagan Boom coming out of the 1981-82 recession showed GDP growth of 8.1 percent, 9.3 percent, 8.1 percent, 8.5 percent,  and 8.0 percent.

There was another, better path Obama could have taken. In a new study, Harvard economists Alberto Alesina and Silvia Ardagna conclude that fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. The Obama stimulus was two-thirds spending and one-third tax cuts or credits. And of course tax cuts thought more permanent by Americans could have produced a large impact on working, savings and investing – and powerful economic growth.

Romer herself has conducted research showing the economic oomph that tax cuts produce. And there’s research from economist Robert Barro who found that “a one-percentage-point cut in the average marginal tax rate raises the following year’s GDP growth rate by around 0.6 percent per year.”

As it is, Democrats are saddled with an economy that may not grow fast enough over the next year to substantially bring down the unemployment rate, if at all. So now there is a new wager in Washington: Just how bad will Democrat losses be next year?

COMMENT

Another Kudlow idiot-supply side has ruined this country

Posted by paul nelson | Report as abusive

Scary unemployment in metro areas

Oct 26, 2009 14:50 UTC

An analysis by IHS Global Insight looks at unemployment in major metro areas:

Looking ahead, payrolls will be rising in most metros for consecutive quarters a year from now, but the unemployment rate will have shown little improvement, as employment gains will not be sufficient to absorb enough job seekers.  A third of metro areas will have jobless rates in double digits in the fourth quarter of 2010, with 16 exceeding 15%.  … By the end of 2012, the jobless rate will still be above historic norms, but it will finally slip below 8% in more than half of metro areas.

102609ubranunemployment

U.S. unemployment, state by state

Oct 22, 2009 18:13 UTC

A great map by NPR. Notice the high rates in swing states like Florida, Ohio and Michigan.

statemap

COMMENT

I live approximately 30 miles west of Cleveland in a town called Lorain. I spent 30 years in the United States Army, and each trip home on leave, I saw more and more deterioration.

I have watched my town go from a reasonably employed and populated flourishing place, to a virtual ghost town. The Steel Mill and the Ford Plant are barely existing. Many of the businesses in the downtown area have been boarded up and long gone. The Lakefront area, prime for development and recreation, is languishing. The sad fact is that many of the residents are complacent to the point of being comatose.

The once thriving industrial base was wiped out, in part, by unions. Businesses and corporations have no incentive to invest in this area, and who can blame them? The Lorain City government throws up so many roadblocks in the form of high taxes, red tape, and bureaucratic stupidity, that unless we throw all of them out and start over, they’ll be no resurgence for this town. The zombies in this area keep voting the same party back into office.

Oh, I forgot to mention: Northeast Ohio is a democratic stronghold.

Congratulations, swing states….how’s that “change” working out for ya?

Posted by SFC MAC | Report as abusive

Romer: Unemployment likely to remain “severely elevated”

Oct 22, 2009 17:04 UTC

Watch CEA chair Christina Romer manage voter expectations:

Consistent with the recent cyclical pattern, the unemployment rate is predicted to continue rising for two quarters following the resumption of GDP growth. Whether this happens and how high the unemployment rate eventually rises will obviously depend on the strength of the GDP rebound. …  With predicted growth right around two and a half percent for most of the next year and a half, movements in the unemployment rate either up or down are likely to be small. As a result, unemployment is likely to remain at its severely elevated level.

Is the amazing American jobs machine broken?

Oct 21, 2009 19:10 UTC

This chart, constructed by the Vice President’s office via BLS data, would seem to indicate just that:

grossjobcreation

COMMENT

There are 3 groups of people in any economy; call them A, B and C

Group-A goes to work and creates wealth.
Group-B chooses to live on the generosity of Group-A, through taxation and charitable giving.
Group-C is truly unable to care for themselves and relies on charity.

To have a vibrant economy with social justice the Government must ensure that Group-A can and does go to work. This requires infrastructure and reasonable taxes. Failure to do this will cause Group-C to die. The logical conclusion is that the cuts in government spending need to be from the program politicians have used to buy the Group-B votes.
Jobs are created by the activity of Group-A, if we continue to reduce the size of Group-A our economy cannot create jobs.

Zandi: Unemployment headed to 10.5 percent

Oct 12, 2009 13:44 UTC

Moody’s Economy.com economist Mark Zandi likes the stimulus (via Fox News) but still thinks unemployment is headed higher. In his own words:

10.5 percent is a very reasonable expectation for the peak in unemployment, but I think it would be measurably higher if not for the stimulus package. The stimulus in my view is working. It’s just gotten overwhelmed by the magnitude of the economic crisis.

Which, of course, brings us to the idea of a second stimulus.  Marc Ambinder gives the rundown:

1) Extend the first-time home buyer credit

2) Create a new credit for companies who hire

3) Extend jobless benefits in every state, or just particularly distressed states, or every state but even more in particularly distressed states.

4) Give tax refunds to struggling companies

5) Institute a payroll tax holiday

6) Pass another stimulus but call it something like “State Rescue Plan” and send most of the money to state governments

Stimulus vs. Unemployment

Oct 7, 2009 20:50 UTC

Correlation isn’t necessarily causality. Then again

100709stimulus

COMMENT

We’ll have November’s numbers in a few days.

Posted by Camron Barth | Report as abusive

The Michigan economic example

Oct 7, 2009 13:34 UTC

Both California and Michigan are turning into powerful economic examples of what not to do. Here is a bit on Michigan Gov. Jennifer Granholm’s green job push:

Since taking office in 2003, Granholm has created 163,300 positions, her office says. She expects that a recent infusion of more than $1 billion from the Obama administration aimed at nurturing car battery and electric-vehicle projects will generate 40,000 more positions by 2020.

In the past decade, however, as the auto industry has grown smaller, Michigan has lost 870,000 jobs — about 632,000 of them during Granholm’s tenure. The number is expected to reach 1 million by late next year, the end of her term.

Me: And what is the cost per job, I wonder, in various tax subsidies. The Tax Foundation plots a better way:

The typical pattern after such “job creation” purchases is:

  • far fewer jobs appear than were promised;
  • the tax incentives turn out to be far more generous than advertised (see recent scandal about Iowa’s film tax credits, a type of tax giveaway that Michigan has indulged in to a remarkable degree); and
  • the state’s politicians distract the public’s attention from the failure of previous job creation deals with new ones.

The bottom line is that politicians should focus on the nuts and bolts of government, which does not include gallivanting around the globe searching for companies to bribe.

The story also mention the fate of the Electrolux refrigerator plant in Greenville. It shut down three years ago, taking 3,000 jobs with it, despite tax breaks from the state. I am familiar with this story. I interviewed the union workers up there four years ago. Even though it had been clear for years that Electrolux was likely going to shift production to Mexico, the workers I met had done little to prepare for the eventuality. No reeducation or retraining such as upgrading of computer skills, for instance. And few seemed willing to move to cities or states with better economies.

COMMENT

Sorry folks, it’s unions pure and simple. Ask yourself would GM/steel companies/shoe manufacturers/fabric mills have financial problems/exist if the unions would never have existed? The cost of living would be much lower than it is today? The move to overseas production would never have occurred. Unions make things cost more than they are worth—see Walmart for evidence.

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