By Bob Willis
July 1, 2010 (Bloomberg) -- More Americans unexpectedly applied for jobless benefits last week, a sign the labor market recovery may be slowing. Initial jobless claims increased by 13,000 to 472,000 in the week ended June 26, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance rose, while those getting emergency benefits dropped after Congress failed to act on extending the legislation. The jump in applications raises the risk that the turmoil in financial markets brought on by the European debt crisis is leading to additional cutbacks in staff. The Labor Department tomorrow may report the U.S. lost jobs in June for the first month this year, reflecting a drop in temporary federal workers who helped to conduct the decennial census. “The labor market is not generating employment for anyone, even for people who have been out a long time,” said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York, who forecast claims at 470,000. “What we’re seeing in the backup of claims is not a particularly healthy story, showing we can’t generate upside momentum in the labor market.” Economists forecast jobless applications would fall to 455,000 from an initially reported 457,000 for the prior week, according to the median of 46 projections in a Bloomberg survey. Estimates ranged from 440,000 to 475,000.
Stock-Index Futures
Stock-index futures extended losses and Treasury securities were little changed after the report. Futures on the Standard & Poor’s 500 Index expiring in September dropped 0.4 percent to 1,022.8 at 8:45 a.m. in New York. The yield on the 10-year Treasury note rose was 2.93 percent, the same as late yesterday. This is the time of year when states cut back on payrolls in schools, a Labor Department spokesman said. The jump in claims may reflect even larger-than-typical reductions. Another report today showed job cuts announced by U.S. employers fell in June. Planned firings dropped 47 percent to 39,358 from 74,393 in June 2009, according to figures released by Chicago-based Challenger, Gray & Christmas Inc. It was the third straight month that announced reductions totaled less than 40,000. For the first half of the year, announced job cuts totaled 297,677, the lowest six-month tally since 2000. Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.
Four-Week Average
The four-week moving average, a less volatile measure than the weekly figures, climbed to 466,500, the highest level since March, from 463,250 the prior week, today’s report showed.
The number of people continuing to receive jobless benefits increased by 43,000 in the week ended June 19 to 4.62 million. The continuing claims figure does not include the number of Americans receiving extended or emergency benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments plunged by about 376,000 to 4.92 million in the week ended June 12. The Labor Department estimates about 3.3 million people will fall off extended-benefit rolls by the end of July if Congress doesn’t pass emergency legislation. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.6 percent in the week ended June 19. Forty states and territories reported a decrease in claims, while 13 reported an increase. These data are also reported with a one-week lag.
Employment Forecast
The Labor Department tomorrow may report payrolls fell by 125,000 in June, reflecting cuts in temporary census workers as the decennial survey nears completion, economists surveyed by Bloomberg forecast. Private payrolls, which are more revealing of labor-market conditions, probably rose by 110,000 after a 41,000 gain the prior month. A report yesterday showed companies added 13,000 workers to payrolls in June, the smallest gain since February, according to figures from ADP Employer Services. Economists surveyed had forecast a gain of 60,000, according to a Bloomberg survey median estimate. The economy lost 8.4 million jobs during the recession that began in December 2007, the biggest employment slump in the post-World War II era. From January through May, company payrolls grew by 495,000 workers.
Federal Reserve
Federal Reserve policy makers last week reiterated a pledge to keep the benchmark interest at a record low for an “extended period” and signaled the fallout from the European debt crisis poised a risk for economic growth. They acknowledged the labor market was “improving gradually,” even as employers are reluctant to boost hiring. The timing of the traditional summer auto-plant shutdowns to retool equipment for new models may reduce claims in coming weeks. General Motors Co. said June 17 most of its U.S. plants will remain open during the traditional shutdowns, a move that economists said could lower claims because some temporarily suspended workers usually apply for benefits.
--With assistance from Timothy R. Homan in Washington. Editors: Carlos Torres, Vince Golle
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
Showing posts with label Unemployment. Show all posts
Showing posts with label Unemployment. Show all posts
Thursday, July 1, 2010
Monday, June 28, 2010
The Third Depression
By PAUL KRUGMAN
The New York Times
June 27, 2010
Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.
Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer.
But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.
In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.
As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence. As a practical matter, however, America isn’t doing much better. The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels.
Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around the edges of Europe to justify their actions. And it’s true that bond investors have turned on governments with intractable deficits. But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which has been far more reluctant to take the hard-liners’ medicine.
It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.
So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.
And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.
The New York Times
June 27, 2010
Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.
Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer.
But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.
In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.
As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence. As a practical matter, however, America isn’t doing much better. The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels.
Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around the edges of Europe to justify their actions. And it’s true that bond investors have turned on governments with intractable deficits. But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which has been far more reluctant to take the hard-liners’ medicine.
It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.
So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.
And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.
Monday, January 11, 2010
America slides deeper into depression as Wall Street revels
The Telegraph, 10 January 2010
Is history repeating itself? President Obama has been accused by some economists of making the same mistakes policymakers in the US made in the Great Depression, which followed the Wall Street crash of 1929.
The labour force contracted by 661,000. This did not show up in the headline jobless rate because so many Americans dropped out of the system. The broad U6 category of unemployment rose to 17.3pc. That is the one that matters. Wall Street rallied. Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism. The home foreclosure guillotine usually drops a year or so after people lose their job, and exhaust their savings. The local sheriff will escort them out of the door, often with some sympathy –– just like the police in 1932, mostly Irish Catholics who tithed 1pc of their pay for soup kitchens. Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck's Grapes of Wrath. Judges are finding ways to block evictions. One magistrate in Minnesota halted a case calling the creditor "harsh, repugnant, shocking and repulsive". We are not far from a de facto moratorium in some areas. This is how it ended between 1932 and 1934, when half the US states declared moratoria or "Farm Holidays". Such flexibility innoculated America's democracy against the appeal of Red Unions and Coughlin Fascists. The home siezures are occurring despite frantic efforts by the Obama administration to delay the process.
How anybody can see imminent inflation in the dying embers of core PCE, just 0.1pc in November, is beyond me. Mr Rosenberg is asked by clients why Wall Street does not seem to agree with his grim analysis. His answer is that this is the same Mr Market that bought stocks in October 1987 when they were 25pc overvalued on Shiller "10-year normalized earnings basis" – exactly as they are today – and bought them at even more overvalued prices in 2007, long after the property crash had begun, Bear Stearns funds had imploded, and credit had its August heart attack. The stock market has become a lagging indicator. Tear up the textbooks.
Is history repeating itself? President Obama has been accused by some economists of making the same mistakes policymakers in the US made in the Great Depression, which followed the Wall Street crash of 1929.
The labour force contracted by 661,000. This did not show up in the headline jobless rate because so many Americans dropped out of the system. The broad U6 category of unemployment rose to 17.3pc. That is the one that matters. Wall Street rallied. Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism. The home foreclosure guillotine usually drops a year or so after people lose their job, and exhaust their savings. The local sheriff will escort them out of the door, often with some sympathy –– just like the police in 1932, mostly Irish Catholics who tithed 1pc of their pay for soup kitchens. Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck's Grapes of Wrath. Judges are finding ways to block evictions. One magistrate in Minnesota halted a case calling the creditor "harsh, repugnant, shocking and repulsive". We are not far from a de facto moratorium in some areas. This is how it ended between 1932 and 1934, when half the US states declared moratoria or "Farm Holidays". Such flexibility innoculated America's democracy against the appeal of Red Unions and Coughlin Fascists. The home siezures are occurring despite frantic efforts by the Obama administration to delay the process.
This policy is entirely justified given the scale of the social crisis. But it also masks the continued rot in the housing market, allows lenders to hide losses, and stores up an ever larger overhang of unsold properties. It takes heroic naivety to think the US housing market has turned the corner (apologies to Goldman Sachs, as always). The fuse has yet to detonate on the next mortgage bomb, $134bn (£83bn) of "option ARM" contracts due to reset violently upwards this year and next. US house prices have eked out five months of gains on the Case-Shiller index, but momentum stalled in October in half the cities even before the latest surge of 40 basis points in mortgage rates. Karl Case (of the index) says prices may sink another 15pc. "If the 2008 and 2009 loans go bad, then we're back where we were before – in a nightmare." David Rosenberg from Gluskin Sheff said it is remarkable how little traction has been achieved by zero rates and the greatest fiscal blitz of all time. The US economy grew at a 2.2pc rate in the third quarter (entirely due to Obama stimulus). This compares to an average of 7.3pc in the first quarter of every recovery since the Second World War.
Fed hawks are playing with fire by talking up about exit strategies, not for the first time. This is what they did in June 2008. We know what happened three months later. For the record, manufacturing capacity use at 67.2pc, and "auto-buying intentions" are the lowest ever.
The Fed's own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) in since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc. Professor Tim Congdon from International Monetary Research said the Fed is baking deflation into the pie later this year, and perhaps a double-dip recession. Europe is even worse. This has not stopped an army of commentators is trying to bounce the Fed into early rate rises. They accuse Ben Bernanke of repeating the error of 2004 when the Fed waited too long. Sometimes you just want to scream. In 2004 there was no housing collapse, unemployment was 5.5pc, banks were in rude good health, and the Fed Multiplier was 1.73.
The Fed's own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) in since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc. Professor Tim Congdon from International Monetary Research said the Fed is baking deflation into the pie later this year, and perhaps a double-dip recession. Europe is even worse. This has not stopped an army of commentators is trying to bounce the Fed into early rate rises. They accuse Ben Bernanke of repeating the error of 2004 when the Fed waited too long. Sometimes you just want to scream. In 2004 there was no housing collapse, unemployment was 5.5pc, banks were in rude good health, and the Fed Multiplier was 1.73.
How anybody can see imminent inflation in the dying embers of core PCE, just 0.1pc in November, is beyond me. Mr Rosenberg is asked by clients why Wall Street does not seem to agree with his grim analysis. His answer is that this is the same Mr Market that bought stocks in October 1987 when they were 25pc overvalued on Shiller "10-year normalized earnings basis" – exactly as they are today – and bought them at even more overvalued prices in 2007, long after the property crash had begun, Bear Stearns funds had imploded, and credit had its August heart attack. The stock market has become a lagging indicator. Tear up the textbooks.
Sunday, November 22, 2009
29 States show rising unemployment
California Was Among States With Record Unemployment (Update3)
By Courtney Schlisserman
November 20, 2009 (Bloomberg) -- California, Delaware, South Carolina and Florida registered record rates of unemployment in October as weakness in the labor market stretches from coast to coast and limits the economic recovery. Joblessness rose in 29 U.S. states last month compared with 22 in September, the Labor Department said today in Washington. Michigan had the highest jobless rate at 15.1 percent, followed by Nevada at 13 percent and Rhode Island at 12.9 percent. The national rate last month reached a 26-year high of 10.2 percent, weighing on consumer spending that accounts for about 70 percent of the economy. Federal Reserve Chairman Ben S. Bernanke said Nov. 17 that joblessness “likely will decline only slowly,” a reason policy makers will keep interest rates near zero to ensure growth is sustained. “We’ve had a surprisingly sharp jump in the jobless rate,” said Richard DeKaser, president of Woodley Park Research in Washington. “Businesses have truly been doing an extraordinary job of wringing out productivity from the labor force.” Stocks fell for a third day, with the Standard & Poor’s 500 Index declining 0.3 percent to 1,091.38 at 4:03 p.m. in New York. Dell Inc., the third-largest maker of personal computers, dropped 10 percent after reporting a 54 percent drop in profit.
Declines in 13 States
The unemployment rate fell in 13 states, including Massachusetts, where it declined to 8.9 percent from 9.3 percent; New Hampshire, with a drop to 6.8 percent from 7.2 percent; and West Virginia, which fell to 8.5 percent from 8.9 percent. The number of states with at least 10 percent unemployment held at 14 last month, the Labor Department’s report showed. The states reporting a record jobless rate were California at 12.5 percent, South Carolina at 12.1 percent, Florida at 11.2 percent and Delaware at 8.7 percent. The District of Columbia also set a high with an 11.9 percent rate. “Virtually every sector aside from the health-care sector is losing jobs,” said Sean Snaith, University of Central Florida economist in Orlando. “Housing has been central to Florida’s economic story throughout the entire cycle. Unfortunately, it has spread well beyond the sectors directly involved in the housing market.” President Barack Obama on Nov. 6 signed into law a plan to extend jobless benefits, expand a tax credit for first-time homebuyers and provide tax refunds to money-losing companies. The measure gives jobless people as many as 20 additional weeks of unemployment assistance. The president has also announced plans to convene a jobs summit at the White House next month.
State Payrolls
Payrolls declined last month in 21 states, today’s report showed. New York showed the biggest drop, with a loss of 15,300. Florida had 8,500 job losses, followed by Georgia with 7,500 and Virginia with 7,100. “When you apply for a job, because there are so many other people looking for jobs, you have to be the absolute perfect candidate and lucky, or be someone’s brother-in-law, to get a job,” said Mary Kough of Tellico Plains, Tennessee. “In this economy there are very few jobs for which to even apply.” Kough has been looking for work for four months, applying for as many as 25 positions. She’s been interviewed once. The 47-year-old said she has about 20 years of experience, including jobs as a customer service manager, supervisor and purchasing agent. Tennessee’s unemployment rate held at 10.5 percent in October, the Labor Department’s report showed.
Taking Comfort
“I try not to get discouraged,” Kough said. “I know that you will get a certain percentage of what you apply for, and since there are less jobs to apply for, I know it will just take a little longer. I take comfort in knowing that. I have faith.” Applied Materials Inc. is among companies still planning to cut jobs. The world’s biggest maker of chip equipment, based in Santa Clara, California, said Nov. 11 it plans to eliminate as many as 1,500 positions within 18 months. Over the last year, California showed the biggest loss of jobs, with payrolls falling by 687,700 workers, today’s report showed. Nationally, payrolls fell by 190,000 in October, the Labor Department said Nov. 6. The U.S. has lost 7.3 million jobs since the start of the recession in December 2007, the most of any downturn since the Great Depression. Other measures corroborate that while firms are firing fewer workers, it is harder for the unemployed to find work. The number of people getting extended payments jumped in the week ended Oct. 31 even as the number of Americans filing first-time claims for unemployment benefits held at a 10-month low last week, according to government data released yesterday.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net Last Updated:
By Courtney Schlisserman
November 20, 2009 (Bloomberg) -- California, Delaware, South Carolina and Florida registered record rates of unemployment in October as weakness in the labor market stretches from coast to coast and limits the economic recovery. Joblessness rose in 29 U.S. states last month compared with 22 in September, the Labor Department said today in Washington. Michigan had the highest jobless rate at 15.1 percent, followed by Nevada at 13 percent and Rhode Island at 12.9 percent. The national rate last month reached a 26-year high of 10.2 percent, weighing on consumer spending that accounts for about 70 percent of the economy. Federal Reserve Chairman Ben S. Bernanke said Nov. 17 that joblessness “likely will decline only slowly,” a reason policy makers will keep interest rates near zero to ensure growth is sustained. “We’ve had a surprisingly sharp jump in the jobless rate,” said Richard DeKaser, president of Woodley Park Research in Washington. “Businesses have truly been doing an extraordinary job of wringing out productivity from the labor force.” Stocks fell for a third day, with the Standard & Poor’s 500 Index declining 0.3 percent to 1,091.38 at 4:03 p.m. in New York. Dell Inc., the third-largest maker of personal computers, dropped 10 percent after reporting a 54 percent drop in profit.
Declines in 13 States
The unemployment rate fell in 13 states, including Massachusetts, where it declined to 8.9 percent from 9.3 percent; New Hampshire, with a drop to 6.8 percent from 7.2 percent; and West Virginia, which fell to 8.5 percent from 8.9 percent. The number of states with at least 10 percent unemployment held at 14 last month, the Labor Department’s report showed. The states reporting a record jobless rate were California at 12.5 percent, South Carolina at 12.1 percent, Florida at 11.2 percent and Delaware at 8.7 percent. The District of Columbia also set a high with an 11.9 percent rate. “Virtually every sector aside from the health-care sector is losing jobs,” said Sean Snaith, University of Central Florida economist in Orlando. “Housing has been central to Florida’s economic story throughout the entire cycle. Unfortunately, it has spread well beyond the sectors directly involved in the housing market.” President Barack Obama on Nov. 6 signed into law a plan to extend jobless benefits, expand a tax credit for first-time homebuyers and provide tax refunds to money-losing companies. The measure gives jobless people as many as 20 additional weeks of unemployment assistance. The president has also announced plans to convene a jobs summit at the White House next month.
State Payrolls
Payrolls declined last month in 21 states, today’s report showed. New York showed the biggest drop, with a loss of 15,300. Florida had 8,500 job losses, followed by Georgia with 7,500 and Virginia with 7,100. “When you apply for a job, because there are so many other people looking for jobs, you have to be the absolute perfect candidate and lucky, or be someone’s brother-in-law, to get a job,” said Mary Kough of Tellico Plains, Tennessee. “In this economy there are very few jobs for which to even apply.” Kough has been looking for work for four months, applying for as many as 25 positions. She’s been interviewed once. The 47-year-old said she has about 20 years of experience, including jobs as a customer service manager, supervisor and purchasing agent. Tennessee’s unemployment rate held at 10.5 percent in October, the Labor Department’s report showed.
Taking Comfort
“I try not to get discouraged,” Kough said. “I know that you will get a certain percentage of what you apply for, and since there are less jobs to apply for, I know it will just take a little longer. I take comfort in knowing that. I have faith.” Applied Materials Inc. is among companies still planning to cut jobs. The world’s biggest maker of chip equipment, based in Santa Clara, California, said Nov. 11 it plans to eliminate as many as 1,500 positions within 18 months. Over the last year, California showed the biggest loss of jobs, with payrolls falling by 687,700 workers, today’s report showed. Nationally, payrolls fell by 190,000 in October, the Labor Department said Nov. 6. The U.S. has lost 7.3 million jobs since the start of the recession in December 2007, the most of any downturn since the Great Depression. Other measures corroborate that while firms are firing fewer workers, it is harder for the unemployed to find work. The number of people getting extended payments jumped in the week ended Oct. 31 even as the number of Americans filing first-time claims for unemployment benefits held at a 10-month low last week, according to government data released yesterday.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net Last Updated:
Sunday, September 27, 2009
The dead end kids
By RICHARD WILNER
September 27, 2009
The New York Post
The unemployment rate for young Americans has exploded to 52.2 percent -- a post-World War II high, according to the Labor Dept. -- meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time.
And worse, without a clear economic recovery plan aimed at creating entry-level jobs, the odds of many of these young adults -- aged 16 to 24, excluding students -- getting a job and moving out of their parents' houses are long. Young workers have been among the hardest hit during the current recession -- in which a total of 9.5 million jobs have been lost.
"It's an extremely dire situation in the short run," said Heidi Shierholz, an economist with the Washington-based Economic Policy Institute. "This group won't do as well as their parents unless the jobs situation changes."
Al Angrisani, the former assistant Labor Department secretary under President Reagan, doesn't see a turnaround in the jobs picture for entry-level workers and places the blame squarely on the Obama administration and the construction of its stimulus bill.
"There is no assistance provided for the development of job growth through small businesses, which create 70 percent of the jobs in the country," Angrisani said in an interview last week. "All those [unemployed young people] should be getting hired by small businesses."
There are six million small businesses in the country, those that employ less than 100 people, and a jobs stimulus bill should include tax credits to give incentives to those businesses to hire people, the former Labor official said.
"If each of the businesses hired just one person, we would go a long way in growing ourselves back to where we were before the recession," Angrisani noted.
During previous recessions, in the early '80s, early '90s and after Sept. 11, 2001, unemployment among 16-to-24 year olds never went above 50 percent. Except after 9/11, jobs growth followed within two years.
A much slower recovery is forecast today. Shierholz believes it could take four or five years to ramp up jobs again.
A study from the National Longitudinal Survey of Youth, a government database, said the damage to a new career by a recession can last 15 years. And if young Americans are not working and becoming productive members of society, they are less likely to make major purchases -- from cars to homes -- thus putting the US economy further behind the eight ball.
Angrisani said he believes that Obama's economic team, led by Larry Summers, has a blind spot for small business because no senior member of the team -- dominated by academics and veterans of big business -- has ever started and grown a business.
"The Reagan administration had people who knew of small business," he said.
"They should carve out $100 billion right now and create something like $5,000 to $6,000 job credits that would drive the hiring of young, idled workers by small business."
Angrisani said the stimulus money going to extending unemployment benefits is like a narcotic that is keeping the unemployed content -- but doing little to get them jobs.
Labor Dept. statistics also show that the number of chronically unemployed -- those without a job for 27 weeks or more -- has also hit a post-WWII high.
September 27, 2009
The New York Post
The unemployment rate for young Americans has exploded to 52.2 percent -- a post-World War II high, according to the Labor Dept. -- meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time.
And worse, without a clear economic recovery plan aimed at creating entry-level jobs, the odds of many of these young adults -- aged 16 to 24, excluding students -- getting a job and moving out of their parents' houses are long. Young workers have been among the hardest hit during the current recession -- in which a total of 9.5 million jobs have been lost.
"It's an extremely dire situation in the short run," said Heidi Shierholz, an economist with the Washington-based Economic Policy Institute. "This group won't do as well as their parents unless the jobs situation changes."
Al Angrisani, the former assistant Labor Department secretary under President Reagan, doesn't see a turnaround in the jobs picture for entry-level workers and places the blame squarely on the Obama administration and the construction of its stimulus bill.
"There is no assistance provided for the development of job growth through small businesses, which create 70 percent of the jobs in the country," Angrisani said in an interview last week. "All those [unemployed young people] should be getting hired by small businesses."
There are six million small businesses in the country, those that employ less than 100 people, and a jobs stimulus bill should include tax credits to give incentives to those businesses to hire people, the former Labor official said.
"If each of the businesses hired just one person, we would go a long way in growing ourselves back to where we were before the recession," Angrisani noted.
During previous recessions, in the early '80s, early '90s and after Sept. 11, 2001, unemployment among 16-to-24 year olds never went above 50 percent. Except after 9/11, jobs growth followed within two years.
A much slower recovery is forecast today. Shierholz believes it could take four or five years to ramp up jobs again.
A study from the National Longitudinal Survey of Youth, a government database, said the damage to a new career by a recession can last 15 years. And if young Americans are not working and becoming productive members of society, they are less likely to make major purchases -- from cars to homes -- thus putting the US economy further behind the eight ball.
Angrisani said he believes that Obama's economic team, led by Larry Summers, has a blind spot for small business because no senior member of the team -- dominated by academics and veterans of big business -- has ever started and grown a business.
"The Reagan administration had people who knew of small business," he said.
"They should carve out $100 billion right now and create something like $5,000 to $6,000 job credits that would drive the hiring of young, idled workers by small business."
Angrisani said the stimulus money going to extending unemployment benefits is like a narcotic that is keeping the unemployed content -- but doing little to get them jobs.
Labor Dept. statistics also show that the number of chronically unemployed -- those without a job for 27 weeks or more -- has also hit a post-WWII high.
Saturday, September 12, 2009
Obama Adviser: High unemployment for years to come
By: Eamon Javers
http://www.politico.com/
September 11, 2009
The president’s chief economic adviser warned Friday that the nation’s unemployment rate could stay “unacceptably high” for years to come — a situation that would seriously complicate Barack Obama’s ability to convince Americans that he’s beating back the recession. “The level of unemployment is unacceptably high,” National Economic Council Director Larry Summers said Friday. “And will, by all forecasts, remain unacceptably high for a number of years.” Summers’ comments came in a briefing with reporters ahead of Obama’s speech in New York City on Monday, marking the one-year anniversary of the collapse of Lehman Brothers, an event widely regarded as having created a panic that caused the global economic meltdown.Even with his gloomy forecast for unemployment, Summers said the economy is getting better and made the case that Obama’s $787 billion stimulus package and other fiscal rescue steps headed off even more economic pain. “We are making a clear transition from rescue as a priority of public policy to sustained recovery,” Summers said. “We have moved back from the brink of financial catastrophe.” “Today, the question is, when will the recession phase end?” Summers said. He said the forecast is “for economic growth at a significant rate during the second half of 2009.” But as is usually the case in economic recovery, job creation continues to lag. The national unemployment rate is at 9.7 percent, a 26-year high, and Obama has repeatedly said he ultimately expects it to hit double-digits before beginning to fall again. The economy lost 216,000 jobs in the month of August, which was fewer than the July number of 276,000. Overall, 6.9 million jobs have been lost in the recession, which economists call the worst since the Great Depression. With his remarks about sustained high unemployment, Summers touched on one of the most sensitive issues in the economy, closely watched by average Americans as a key reading of the nation’s economic health. Unemployment is probably the single most important statistic for Democrats eyeing the mid-term Congressional elections next fall. If the unemployment rate begins to decline, the White House may have an easier time convincing voters that its enormous stimulus spending and massive federal intervention into the economy were effective. But if all the White House’s enormous efforts are unable to move the needle on unemployment, a so-called “jobless recovery” could seriously hamper the president’s party in the mid-terms.
White House spokesman Matthew Vogel said, "The President and the economic team are committed to tackling unemployment and are focused every single day on getting Americans back to work. Many economic indicators have turned positive, but employment is a lagging indicator and obviously the toughest nut to crack. We are confident that we are headed in the right direction, but that there's no room for complacency even as we see a return to growth later this year."
At the briefing, Summers walked a fine line between taking credit for the economic turnaround and declaring premature victory over the crisis. “These problems were not made in a week or a month or a year,” Summers said. “They are not going to be fixed in a week or a month or a year.” And he used the opportunity to make a pitch for the passage of financial regulatory reform – a key theme of Obama’s address Monday at Federal Hall near Wall Street. The administration’s proposals to change the rules of the road on Wall Street have been languishing on Capitol Hill. “We believe that this is the year, after what has happened, to overhaul financial regulation,” Summers said. Earlier in the week, the White House said its research indicated the $787-billion economic stimulus bill passed earlier this year had saved or created 1 million jobs so far. That’s on pace, officials said, to hit the president’s goal of saving or creating 3.5 million jobs by the time the program ends in 2010.
And on Friday, the White House put out a raft of statistics to emphasize its point that the economy is responding to the forceful efforts of the Obama team. The so-called Wall Street “fear index” is down by 58 percent since Inauguration Day; the S&P 500 is up 30 percent; and the LIBOR-OIS spread, which is widely seen as a measure of stress in the credit markets, is down 87 percent. Looking back to global economic history, Summers said, “I’m not aware of any case in which so profound a crisis was addressed so forcefully and quickly.” Summers also offered his thoughts on the TARP corporate bailout program, which has turned a profit on the amounts of money that have been repaid by large banks so far. But he said it wouldn’t be “reasonable” to expect that the entire program could turn a profit, because much of the money has been spent on inherently money losing efforts.
http://www.politico.com/
September 11, 2009
The president’s chief economic adviser warned Friday that the nation’s unemployment rate could stay “unacceptably high” for years to come — a situation that would seriously complicate Barack Obama’s ability to convince Americans that he’s beating back the recession. “The level of unemployment is unacceptably high,” National Economic Council Director Larry Summers said Friday. “And will, by all forecasts, remain unacceptably high for a number of years.” Summers’ comments came in a briefing with reporters ahead of Obama’s speech in New York City on Monday, marking the one-year anniversary of the collapse of Lehman Brothers, an event widely regarded as having created a panic that caused the global economic meltdown.Even with his gloomy forecast for unemployment, Summers said the economy is getting better and made the case that Obama’s $787 billion stimulus package and other fiscal rescue steps headed off even more economic pain. “We are making a clear transition from rescue as a priority of public policy to sustained recovery,” Summers said. “We have moved back from the brink of financial catastrophe.” “Today, the question is, when will the recession phase end?” Summers said. He said the forecast is “for economic growth at a significant rate during the second half of 2009.” But as is usually the case in economic recovery, job creation continues to lag. The national unemployment rate is at 9.7 percent, a 26-year high, and Obama has repeatedly said he ultimately expects it to hit double-digits before beginning to fall again. The economy lost 216,000 jobs in the month of August, which was fewer than the July number of 276,000. Overall, 6.9 million jobs have been lost in the recession, which economists call the worst since the Great Depression. With his remarks about sustained high unemployment, Summers touched on one of the most sensitive issues in the economy, closely watched by average Americans as a key reading of the nation’s economic health. Unemployment is probably the single most important statistic for Democrats eyeing the mid-term Congressional elections next fall. If the unemployment rate begins to decline, the White House may have an easier time convincing voters that its enormous stimulus spending and massive federal intervention into the economy were effective. But if all the White House’s enormous efforts are unable to move the needle on unemployment, a so-called “jobless recovery” could seriously hamper the president’s party in the mid-terms.
White House spokesman Matthew Vogel said, "The President and the economic team are committed to tackling unemployment and are focused every single day on getting Americans back to work. Many economic indicators have turned positive, but employment is a lagging indicator and obviously the toughest nut to crack. We are confident that we are headed in the right direction, but that there's no room for complacency even as we see a return to growth later this year."
At the briefing, Summers walked a fine line between taking credit for the economic turnaround and declaring premature victory over the crisis. “These problems were not made in a week or a month or a year,” Summers said. “They are not going to be fixed in a week or a month or a year.” And he used the opportunity to make a pitch for the passage of financial regulatory reform – a key theme of Obama’s address Monday at Federal Hall near Wall Street. The administration’s proposals to change the rules of the road on Wall Street have been languishing on Capitol Hill. “We believe that this is the year, after what has happened, to overhaul financial regulation,” Summers said. Earlier in the week, the White House said its research indicated the $787-billion economic stimulus bill passed earlier this year had saved or created 1 million jobs so far. That’s on pace, officials said, to hit the president’s goal of saving or creating 3.5 million jobs by the time the program ends in 2010.
And on Friday, the White House put out a raft of statistics to emphasize its point that the economy is responding to the forceful efforts of the Obama team. The so-called Wall Street “fear index” is down by 58 percent since Inauguration Day; the S&P 500 is up 30 percent; and the LIBOR-OIS spread, which is widely seen as a measure of stress in the credit markets, is down 87 percent. Looking back to global economic history, Summers said, “I’m not aware of any case in which so profound a crisis was addressed so forcefully and quickly.” Summers also offered his thoughts on the TARP corporate bailout program, which has turned a profit on the amounts of money that have been repaid by large banks so far. But he said it wouldn’t be “reasonable” to expect that the entire program could turn a profit, because much of the money has been spent on inherently money losing efforts.
Wednesday, August 26, 2009
Meltdown 101: Unemployment by State rising
WASHINGTON (AP) - Texas added the third-highest number of jobs among the states last month—but its unemployment rate still jumped because thousands of jobless people streamed into the work force. That's typical of the Labor Department's July state employment report, which includes a wealth of good news and bad news—often from the same state. Another example from the July report, released Friday: Michigan added 38,100 jobs, just ahead of Texas but behind New York, and its unemployment rate fell. That's clearly good news, but its jobless rate is still a sky-high 15 percent. That's bad news. Overall, 17 states and the District of Columbia reported lower unemployment rates in July—a significant improvement from June, when only 5 states experienced drops. But in the bad news category, 26 states saw their jobless rates rise. Fifteen states and the district have unemployment rates above 10 percent. Good news: Twenty-one states and the district added jobs last month, compared to only 10 in June. Bad news: Twenty-nine states still lost jobs. These and other tidbits can be found in the Regional and State Employment and Unemployment report. Here are some other interesting details, by the numbers.
STATES OF PAIN
15 percent: Michigan's unemployment rate, the nation's highest
12.7 percent: Rhode Island's unemployment rate, the second highest
12.5 percent: Nevada's rate
11.9 percent: California's rate
11.9 percent: Oregon's rate
STATES OF CONTENTMENT
4.2 percent: North Dakota's unemployment rate, the nation's lowest
4.9 percent: Nebraska's rate, the second lowest
4.9 percent: South Dakota's rate
6 percent: Utah's rate
6.5 percent: Wyoming's rate
6.5 percent: Oklahoma's rate
JOB GAINERS
62,100: Jobs added in New York in July
38,100: Jobs added in Michigan
37,900: Jobs added in Texas
15,600: Jobs added in Tennessee
13,200: Jobs added in District of Columbia
JOB LOSERS
35,800: Jobs lost in California
26,400: Jobs lost in North Carolina
25,200: Jobs lost in Florida
13,000: Jobs lost in Illinois
WESTERN WOES
10.5 percent: Unemployment in the Western region
10.2 percent: Unemployment in the Midwest
9.3 percent: Unemployment in the South
8.7 percent: Unemployment in the Northeast Copyright 2009
The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
STATES OF PAIN
15 percent: Michigan's unemployment rate, the nation's highest
12.7 percent: Rhode Island's unemployment rate, the second highest
12.5 percent: Nevada's rate
11.9 percent: California's rate
11.9 percent: Oregon's rate
STATES OF CONTENTMENT
4.2 percent: North Dakota's unemployment rate, the nation's lowest
4.9 percent: Nebraska's rate, the second lowest
4.9 percent: South Dakota's rate
6 percent: Utah's rate
6.5 percent: Wyoming's rate
6.5 percent: Oklahoma's rate
JOB GAINERS
62,100: Jobs added in New York in July
38,100: Jobs added in Michigan
37,900: Jobs added in Texas
15,600: Jobs added in Tennessee
13,200: Jobs added in District of Columbia
JOB LOSERS
35,800: Jobs lost in California
26,400: Jobs lost in North Carolina
25,200: Jobs lost in Florida
13,000: Jobs lost in Illinois
WESTERN WOES
10.5 percent: Unemployment in the Western region
10.2 percent: Unemployment in the Midwest
9.3 percent: Unemployment in the South
8.7 percent: Unemployment in the Northeast Copyright 2009
The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Fed offical admits US unemployment rate is actually 16%
The real US unemployment rate is 16 percent if persons who have dropped out of the labor pool and those working less than they would like are counted, a Federal Reserve official said Wednesday. "If one considers the people who would like a job but have stopped looking -- so-called discouraged workers -- and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart. He underscored that he was expressing his own views, which did "do not necessarily reflect those of my colleagues on the Federal Open Market Committee," the policy-setting body of the central bank. Lockhart pointed out in a speech to a chamber of commerce in Chattanooga, Tennessee that those two categories of people are not taken into account in the Labor Department's monthly report on the unemployment rate. The official July jobless rate was 9.4 percent. Lockhart, who heads the Atlanta, Georgia, division of the Fed, is the first central bank official to acknowledge the depth of unemployment amid the worst US recession since the Great Depression. Lockhart said the US economy was improving but "still fragile," and the beginning stages of a sluggish recovery were underway. "My forecast for a slow recovery implies a protracted period of high unemployment," he said, adding that it would be difficult to stimulate jobs through additional public spending.
"Further fiscal stimulus has been mentioned, but the full effects of the first stimulus package are not yet clear, and the concern over adding to the federal deficit and the resulting national debt is warranted," he said. President Barack Obama's administration has resisted calls for more public spending, arguing that the 787-billion-dollar stimulus passed in February needs time to work its way through the economy. Lockhart noted that construction and manufacturing had been particularly hard hit in the recession that began in December 2007 and predicted some jobs were gone for good. Prior to the recession, he said, construction and manufacturing combined accounted for slightly more than 15 percent of employment. But during the recession, their job losses made up more than 40 percent of all US job losses. "In my view, it is unlikely that we will see a return of jobs lost in certain sectors, such as manufacturing," he said. "In a similar vein, the recession has been so deep in construction that a reallocation of workers is likely to happen -- even if not permanent." Payroll employment has fallen by 6.7 million since the recession began.
"Further fiscal stimulus has been mentioned, but the full effects of the first stimulus package are not yet clear, and the concern over adding to the federal deficit and the resulting national debt is warranted," he said. President Barack Obama's administration has resisted calls for more public spending, arguing that the 787-billion-dollar stimulus passed in February needs time to work its way through the economy. Lockhart noted that construction and manufacturing had been particularly hard hit in the recession that began in December 2007 and predicted some jobs were gone for good. Prior to the recession, he said, construction and manufacturing combined accounted for slightly more than 15 percent of employment. But during the recession, their job losses made up more than 40 percent of all US job losses. "In my view, it is unlikely that we will see a return of jobs lost in certain sectors, such as manufacturing," he said. "In a similar vein, the recession has been so deep in construction that a reallocation of workers is likely to happen -- even if not permanent." Payroll employment has fallen by 6.7 million since the recession began.
Tuesday, June 9, 2009
The Obama Numbers on Unemployment Are Pure Fiction.
The Media Fall for Phony 'Jobs' Claims
By WILLIAM MCGURN
Wall Street Journal
June 9, 2009
Tony Fratto is envious. Mr. Fratto was a colleague of mine in the Bush administration, and as a senior member of the White House communications shop, he knows just how difficult it can be to deal with a press corps skeptical about presidential economic claims. It now appears, however, that Mr. Fratto's problem was that he simply lacked the magic words -- jobs "saved or created."
"Saved or created" has become the signature phrase for Barack Obama as he describes what his stimulus is doing for American jobs. His latest invocation came yesterday, when the president declared that the stimulus had already saved or created at least 150,000 American jobs -- and announced he was ramping up some of the stimulus spending so he could "save or create" an additional 600,000 jobs this summer. These numbers come in the context of an earlier Obama promise that his recovery plan will "save or create three to four million jobs over the next two years."
The president should 'save or create' more jobs in Cleveland.
Mr. Fratto sees a double standard at play. "We would never have used a formula like 'save or create,'" he tells me. "To begin with, the number is pure fiction -- the administration has no way to measure how many jobs are actually being 'saved.' And if we had tried to use something this flimsy, the press would never have let us get away with it." Of course, the inability to measure Mr. Obama's jobs formula is part of its attraction. Never mind that no one -- not the Labor Department, not the Treasury, not the Bureau of Labor Statistics -- actually measures "jobs saved." As the New York Times delicately reports, Mr. Obama's jobs claims are "based on macroeconomic estimates, not an actual counting of jobs." Nice work if you can get away with it. And get away with it he has. However dubious it may be as an economic measure, as a political formula "save or create" allows the president to invoke numbers that convey an illusion of precision. Harvard economist and former Bush economic adviser Greg Mankiw calls it a "non-measurable metric." And on his blog, he acknowledges the political attraction. "The expression 'create or save,' which has been used regularly by the President and his economic team, is an act of political genius," writes Mr. Mankiw. "You can measure how many jobs are created between two points in time. But there is no way to measure how many jobs are saved. Even if things get much, much worse, the President can say that there would have been 4 million fewer jobs without the stimulus."
Mr. Obama's comments yesterday are a perfect illustration of just such a claim. In the months since Congress approved the stimulus, our economy has lost nearly 1.6 million jobs and unemployment has hit 9.4%. Invoke the magic words, however, and -- presto! -- you have the president claiming he has "saved or created" 150,000 jobs. It all makes for a much nicer spin, and helps you forget this is the same team that only a few months ago promised us that passing the stimulus would prevent unemployment from rising over 8%. It's not only former Bush staffers such as Messrs. Fratto and Mankiw who have noted the political convenience here. During a March hearing of the Senate Finance Committee, Chairman Max Baucus challenged Treasury Secretary Timothy Geithner on the formula. "You created a situation where you cannot be wrong," said the Montana Democrat. "If the economy loses two million jobs over the next few years, you can say yes, but it would've lost 5.5 million jobs. If we create a million jobs, you can say, well, it would have lost 2.5 million jobs. You've given yourself complete leverage where you cannot be wrong, because you can take any scenario and make yourself look correct."
Now, something's wrong when the president invokes a formula that makes it impossible for him to be wrong and it goes largely unchallenged. It's true that almost any government spending will create some jobs and save others. But as Milton Friedman once pointed out, that doesn't tell you much: The government, after all, can create jobs by hiring people to dig holes and fill them in.
If the "saved or created" formula looks brilliant, it's only because Mr. Obama and his team are not being called on their claims. And don't expect much to change. So long as the news continues to repeat the administration's line that the stimulus has already "saved or created" 150,000 jobs over a time period when the U.S. economy suffered an overall job loss 10 times that number, the White House would be insane to give up a formula that allows them to spin job losses into jobs saved. "You would think that any self-respecting White House press corps would show some of the same skepticism toward President Obama's jobs claims that they did toward President Bush's tax cuts," says Mr. Fratto. "But I'm still waiting."
Write to MainStreet@wsj.com
By WILLIAM MCGURN
Wall Street Journal
June 9, 2009
Tony Fratto is envious. Mr. Fratto was a colleague of mine in the Bush administration, and as a senior member of the White House communications shop, he knows just how difficult it can be to deal with a press corps skeptical about presidential economic claims. It now appears, however, that Mr. Fratto's problem was that he simply lacked the magic words -- jobs "saved or created."
"Saved or created" has become the signature phrase for Barack Obama as he describes what his stimulus is doing for American jobs. His latest invocation came yesterday, when the president declared that the stimulus had already saved or created at least 150,000 American jobs -- and announced he was ramping up some of the stimulus spending so he could "save or create" an additional 600,000 jobs this summer. These numbers come in the context of an earlier Obama promise that his recovery plan will "save or create three to four million jobs over the next two years."
The president should 'save or create' more jobs in Cleveland.
Mr. Fratto sees a double standard at play. "We would never have used a formula like 'save or create,'" he tells me. "To begin with, the number is pure fiction -- the administration has no way to measure how many jobs are actually being 'saved.' And if we had tried to use something this flimsy, the press would never have let us get away with it." Of course, the inability to measure Mr. Obama's jobs formula is part of its attraction. Never mind that no one -- not the Labor Department, not the Treasury, not the Bureau of Labor Statistics -- actually measures "jobs saved." As the New York Times delicately reports, Mr. Obama's jobs claims are "based on macroeconomic estimates, not an actual counting of jobs." Nice work if you can get away with it. And get away with it he has. However dubious it may be as an economic measure, as a political formula "save or create" allows the president to invoke numbers that convey an illusion of precision. Harvard economist and former Bush economic adviser Greg Mankiw calls it a "non-measurable metric." And on his blog, he acknowledges the political attraction. "The expression 'create or save,' which has been used regularly by the President and his economic team, is an act of political genius," writes Mr. Mankiw. "You can measure how many jobs are created between two points in time. But there is no way to measure how many jobs are saved. Even if things get much, much worse, the President can say that there would have been 4 million fewer jobs without the stimulus."
Mr. Obama's comments yesterday are a perfect illustration of just such a claim. In the months since Congress approved the stimulus, our economy has lost nearly 1.6 million jobs and unemployment has hit 9.4%. Invoke the magic words, however, and -- presto! -- you have the president claiming he has "saved or created" 150,000 jobs. It all makes for a much nicer spin, and helps you forget this is the same team that only a few months ago promised us that passing the stimulus would prevent unemployment from rising over 8%. It's not only former Bush staffers such as Messrs. Fratto and Mankiw who have noted the political convenience here. During a March hearing of the Senate Finance Committee, Chairman Max Baucus challenged Treasury Secretary Timothy Geithner on the formula. "You created a situation where you cannot be wrong," said the Montana Democrat. "If the economy loses two million jobs over the next few years, you can say yes, but it would've lost 5.5 million jobs. If we create a million jobs, you can say, well, it would have lost 2.5 million jobs. You've given yourself complete leverage where you cannot be wrong, because you can take any scenario and make yourself look correct."
Now, something's wrong when the president invokes a formula that makes it impossible for him to be wrong and it goes largely unchallenged. It's true that almost any government spending will create some jobs and save others. But as Milton Friedman once pointed out, that doesn't tell you much: The government, after all, can create jobs by hiring people to dig holes and fill them in.
If the "saved or created" formula looks brilliant, it's only because Mr. Obama and his team are not being called on their claims. And don't expect much to change. So long as the news continues to repeat the administration's line that the stimulus has already "saved or created" 150,000 jobs over a time period when the U.S. economy suffered an overall job loss 10 times that number, the White House would be insane to give up a formula that allows them to spin job losses into jobs saved. "You would think that any self-respecting White House press corps would show some of the same skepticism toward President Obama's jobs claims that they did toward President Bush's tax cuts," says Mr. Fratto. "But I'm still waiting."
Write to MainStreet@wsj.com
Thursday, June 4, 2009
Benefit spending soars to new highs
By Dennis Cauchon, USA TODAY
June 4, 2009
The recession is driving the safety net of government benefits to a historic high, as one of every six dollars of Americans' income is now coming in the form of a federal or state check or voucher. Benefits, such as Social Security, food stamps, unemployment insurance and health care, accounted for 16.2% of personal income in the first quarter of 2009, the Bureau of Economic Analysis reports. That's the highest percentage since the government began compiling records in 1929. In all, government spending on benefits will top $2 trillion in 2009 — an average of $17,000 provided to each U.S. household, federal data show. Benefits rose at a 19% annual rate in the first quarter compared to the last three months of 2008. The recession caused about half of the increase, according to the report. Unemployment insurance nearly tripled in the past year. The other half is the result of policies enacted during President George W. Bush's first term.
Following the 2001 recession — when costs normally decline — social spending soared to pay for the Medicare drug benefit, expanded health care for children and greater use of food stamps. The safety net is working, advocates say. "We're not seeing the hunger we saw in the 1930s because the food stamp program is doing what it's supposed to do," says Florida food stamp director Jennifer Lange. What's driving the $209 billion increase in benefit costs from a year ago:
• Unemployment insurance. One-fourth of the extra spending covers jobless benefits, a program started in the Depression. The stimulus law, passed in February, increased benefits.
• Social Security. The bad economy has prompted a 10%-15% jump in early retirements, the program's actuary says. A 5.8% increase took effect January 1. Bottom line: $55 billion in new costs.
• Food stamps. Enrollment hit a record 33.2 million people in March, up 5.2 million from last year. The stimulus law boosted the size of the benefit. Average March benefit: $114 per person.
"The increase in social spending is still relatively modest given the severity of the downturn," says economist Dean Baker of the liberal Center for Economic and Policy Research. "We're not France." Adam Lerrick, economist at the conservative American Enterprise Institute, says the benefits' explosion will eventually lead to an economic crisis. "We've seen this movie before in many countries. It always has the same ending," he says.
June 4, 2009
The recession is driving the safety net of government benefits to a historic high, as one of every six dollars of Americans' income is now coming in the form of a federal or state check or voucher. Benefits, such as Social Security, food stamps, unemployment insurance and health care, accounted for 16.2% of personal income in the first quarter of 2009, the Bureau of Economic Analysis reports. That's the highest percentage since the government began compiling records in 1929. In all, government spending on benefits will top $2 trillion in 2009 — an average of $17,000 provided to each U.S. household, federal data show. Benefits rose at a 19% annual rate in the first quarter compared to the last three months of 2008. The recession caused about half of the increase, according to the report. Unemployment insurance nearly tripled in the past year. The other half is the result of policies enacted during President George W. Bush's first term.
Following the 2001 recession — when costs normally decline — social spending soared to pay for the Medicare drug benefit, expanded health care for children and greater use of food stamps. The safety net is working, advocates say. "We're not seeing the hunger we saw in the 1930s because the food stamp program is doing what it's supposed to do," says Florida food stamp director Jennifer Lange. What's driving the $209 billion increase in benefit costs from a year ago:
• Unemployment insurance. One-fourth of the extra spending covers jobless benefits, a program started in the Depression. The stimulus law, passed in February, increased benefits.
• Social Security. The bad economy has prompted a 10%-15% jump in early retirements, the program's actuary says. A 5.8% increase took effect January 1. Bottom line: $55 billion in new costs.
• Food stamps. Enrollment hit a record 33.2 million people in March, up 5.2 million from last year. The stimulus law boosted the size of the benefit. Average March benefit: $114 per person.
"The increase in social spending is still relatively modest given the severity of the downturn," says economist Dean Baker of the liberal Center for Economic and Policy Research. "We're not France." Adam Lerrick, economist at the conservative American Enterprise Institute, says the benefits' explosion will eventually lead to an economic crisis. "We've seen this movie before in many countries. It always has the same ending," he says.
Sunday, April 26, 2009
Summers Says U.S. Economy to Decline ‘For Some Time’
By Matthew Benjamin
April 26, 2009 (Bloomberg) -- The U.S. economy will continue to contract “for some time to come,” said Lawrence Summers, director of the White House National Economic Council. “I expect the economy will continue to decline,” with “sharp declines in employment for quite some time this year,” Summers said today on “Fox News Sunday.” The International Monetary Fund, which held meetings last week in Washington, cut its forecast for each of the Group of Seven economies for this year and next. The lender said the U.S. economy would shrink 2.8 percent this year and have no growth in 2010, with unemployment rising to 10.1 percent. Summers said the economy will pick up as manufacturers rebuild depleted inventories and consumers replace aging cars. “These imbalances can’t continue forever,” he said. “When they are repaired they will be a source of impetus for the economy.”
Texas Instruments Inc., the second-biggest U.S. chipmaker, said April 20 that customers have begun to increase orders after reducing inventories. Summers said the Obama administration is “on a path toward containment and toward building a path toward expansion,” he said, adding that “even sharp plans take time” to work, perhaps six months or more.
Stress Tests
Summers reiterated the administration’s assertion that “the vast majority of banks in the U.S. are well capitalized.” Regulators have conducted stress tests on the 19 largest banks to determine whether they need more capital and are discussing their findings with bank officials this week. “There’s work that needs to be done,” to fix the ailing financial industry, including raising capital and providing additional government money to banks “where necessary,” Summers said. “We’re going to be in a good position to provide the support and set the framework in which the banking system can move along the process of recovery,” Summers said. Results of the stress tests are due for publication on May 4. Valerie Jarrett, a senior adviser to President Barack Obama, said Americans shouldn’t “pre-judge the outcome” of the tests. “Whether management changes occur, whether banks are asked to raise more capital, all of that’s going to come forth in the coming week,” Jarrett said on CNN’s “State of the Union” program today.
Chrysler Deadline
Summers said he was hopeful that Chrysler LLC, facing an April 30 deadline from the Obama administration to come up with a viable reorganization plan or face bankruptcy, would succeed in negotiating an alliance with Italy’s Fiat SpA. “It’s in everybody’s interest, we believe, to see these negotiations succeed, and we’re hopeful that they will,” Summers said. “It’s obviously a situation that we’re monitoring carefully, but it’s a negotiation between Chrysler and its potential acquirer, Fiat. There are important issues with creditors, with a range of stakeholders.”
He wouldn’t rule out bankruptcy for Chrysler, saying such a move wouldn’t mean liquidation but instead a “change in legal form” for the automaker to allow it “to function more effectively.” “You can’t have a situation in which companies proceed on a permanent basis relying only on cash from the government,” Summers said. Summers said the White House is working with credit card companies toward “provisions that would protect consumers.” If legislation the administration supports is passed, “you’ll see benefits to consumers that would come very quickly.”
To contact the reporters on this story: Matthew Benjamin
April 26, 2009 (Bloomberg) -- The U.S. economy will continue to contract “for some time to come,” said Lawrence Summers, director of the White House National Economic Council. “I expect the economy will continue to decline,” with “sharp declines in employment for quite some time this year,” Summers said today on “Fox News Sunday.” The International Monetary Fund, which held meetings last week in Washington, cut its forecast for each of the Group of Seven economies for this year and next. The lender said the U.S. economy would shrink 2.8 percent this year and have no growth in 2010, with unemployment rising to 10.1 percent. Summers said the economy will pick up as manufacturers rebuild depleted inventories and consumers replace aging cars. “These imbalances can’t continue forever,” he said. “When they are repaired they will be a source of impetus for the economy.”
Texas Instruments Inc., the second-biggest U.S. chipmaker, said April 20 that customers have begun to increase orders after reducing inventories. Summers said the Obama administration is “on a path toward containment and toward building a path toward expansion,” he said, adding that “even sharp plans take time” to work, perhaps six months or more.
Stress Tests
Summers reiterated the administration’s assertion that “the vast majority of banks in the U.S. are well capitalized.” Regulators have conducted stress tests on the 19 largest banks to determine whether they need more capital and are discussing their findings with bank officials this week. “There’s work that needs to be done,” to fix the ailing financial industry, including raising capital and providing additional government money to banks “where necessary,” Summers said. “We’re going to be in a good position to provide the support and set the framework in which the banking system can move along the process of recovery,” Summers said. Results of the stress tests are due for publication on May 4. Valerie Jarrett, a senior adviser to President Barack Obama, said Americans shouldn’t “pre-judge the outcome” of the tests. “Whether management changes occur, whether banks are asked to raise more capital, all of that’s going to come forth in the coming week,” Jarrett said on CNN’s “State of the Union” program today.
Chrysler Deadline
Summers said he was hopeful that Chrysler LLC, facing an April 30 deadline from the Obama administration to come up with a viable reorganization plan or face bankruptcy, would succeed in negotiating an alliance with Italy’s Fiat SpA. “It’s in everybody’s interest, we believe, to see these negotiations succeed, and we’re hopeful that they will,” Summers said. “It’s obviously a situation that we’re monitoring carefully, but it’s a negotiation between Chrysler and its potential acquirer, Fiat. There are important issues with creditors, with a range of stakeholders.”
He wouldn’t rule out bankruptcy for Chrysler, saying such a move wouldn’t mean liquidation but instead a “change in legal form” for the automaker to allow it “to function more effectively.” “You can’t have a situation in which companies proceed on a permanent basis relying only on cash from the government,” Summers said. Summers said the White House is working with credit card companies toward “provisions that would protect consumers.” If legislation the administration supports is passed, “you’ll see benefits to consumers that would come very quickly.”
To contact the reporters on this story: Matthew Benjamin
Friday, April 24, 2009
Spain: El paro supera la cifra de los cuatro millones y se dispara al 17,3%
800.000 personas más han engrosado la lista del paro en el primer trimestre del año, según la EPA El desempleo afecta ya a 4.010.700 personas, el dato más elevado desde 1976 Entre enero y marzo se han destruido 766.000 empleos
EP MADRID
ABC, Madrid: Actualizado Viernes, 24-04-09 a las 17:42
ABC, Madrid: Actualizado Viernes, 24-04-09 a las 17:42
El paro subió en 802.800 personas en el primer trimestre del año, el 25% en relación al trimestre anterior, con lo que el número total de desempleados se situó en 4.010.700 y la tasa de paro repuntó casi 3,5 puntos, hasta el 17,36%, alcanzando su valor más alto en 11 años, según los datos de la Encuesta de Población Activa (EPA) hecha hoy pública por el Instituto Nacional de Estadística (INE). En concreto, la tasa de desempleo es la más alta de la serie histórica comparable, que arranca en 2001, pero remontándose más atrás, utilizando series no comparables, no se alcanzaba un porcentaje de esta naturaleza desde el cuarto trimestre de 1998, cuando la tasa de paro llegó a situarse en el 17, 99%. Además, el número total de desempleados, que ya supera los temidos 4 millones, es el más elevado de toda la serie comparable, que arranca en el tercer trimestre de 1976, periodo al partir del cual el INE tiene realizada una retrospectiva de datos utilizando la nueva definición de paro que entró en vigor hace unos años. Según los datos de Estadística, en los últimos doce meses, el paro ha subido en 1.836.500 desempleados, un 84,4% más, cebándose más en los hombres que en las mujeres. De hecho, el paro masculino se incrementó en 1.177.200 desempleados en el último año, con un repunte del 115,6%, mientras que el femenino aumentó en 659.300 paradas, un 57% más. De enero a marzo se destruyeron 766.000 empleos (-3,8%), alcanzando el número total de ocupados la cifra de 19.090.800 personas. La mayor parte de los puestos de trabajo destruídos, 509.700, estaban ocupados por varones, frente a 295.900 desempeñados por mujeres. En el último año, el número de ocupados se ha reducido en 1.311.500 personas (-6,4%). El sector servicios generó 299.000 parados en el trimestre, un 26% más, y la construcción aumentó su cifra de desempleados en 158.800 personas, con un repunte del 27,1%. Destaca también el incremento en 188. 400 parados del colectivo que perdió su empleo hace más de un año (parados de larga duración), con un avance relativo del 24%.
Los hogares con todos sus miembros en paro aumentaron en el primer trimestre de 2009 en 241.200, un 29,1% más sobre el trimestre anterior, mientras que en el último año los hogares con todos sus miembros en paro se han incrementado en 555.800 hogares, un 108,4% más. En total, la cifra de hogares con todos sus miembros en el desempleo se situó en 1.068.400 al finalizar el mes de marzo. De los 802.800 parados más que se registraron en el primer trimestre, 524.700 eran españoles, con un crecimiento del 21,6% respecto al trimestre anterior, en tanto que 278.100 eran extranjeros (+35,7%). En el último año, más de 1,2 millones de españoles han entrado en el desempleo (+76,9%) frente a los 552.800 extranjeros que se han encontrado en esta situación (+109,5%). Así, la tasa de paro de los españoles se situó en el 15,24%, casi tres puntos más que en el trimestre anterior. No obstante, la tasa de desempleo de los extranjeros sigue siendo más elevada, con un 28,4%, siete puntos más que tres meses atrás. La población española también se llevó la peor parte en materia de ocupación, al perder 546.500 puestos de trabajo en el trimestre (-3,2%), frente a la destrucción de 219.500 empleos entre los extranjeros (-7,6%). La destrucción de empleo en el primer trimestre afectó especialmente a los servicios, que perdió 454.700 puestos de trabajo (-3,3%) en relación al trimestre anterior. En la construcción se destruyeron 202 800 empleos (-9,3) entre enero y marzo y en la industria se perdieron 142.500 efectivos (-4,7%). Sólo la agricultura creó empleo, con 34.000 nuevos puestos (+4,23%). En cuanto a la evolución del paro por sectores económicos, el sector servicios también encabezó los incrementos, con 299.000 parados más en el trimestre (+26%), seguido del colectivo de parados de larga duración, con 188.400 desempleados más en sus filas (+24%). En la construcción se registraron 158.800 parados más que en el trimestre anterior (+27,1%), en la industria el número de parados subió en 85.100 (+29,5%, el mayor aumento porcentual de todos los sectores), mientras que el paro de las personas que buscan su primer empleo se incrementó en 50.200 (+20,1%) y en la agricultura hubo 21.400 desempleados más (+14,3%).
Spain: El paro supera los cuatro millones de personas por primera vez en la historia
Deterioro del mercado laboral
El mercado laboral destruye empleo a su mayor ritmo en 32 años con una tasa de desempleo del 17,36%, según la EPA. -El Gobierno califica la posibilidad de llegar a los cinco millones de "apocalípticas"
El mercado laboral destruye empleo a su mayor ritmo en 32 años con una tasa de desempleo del 17,36%, según la EPA. -El Gobierno califica la posibilidad de llegar a los cinco millones de "apocalípticas"
AGENCIAS - Madrid - 24/04/2009
La grave crisis que atraviesa nuestra economía, que ha llevado al país a su primera recesión en 15 años, se está cebando en el mercado laboral, cuyo deterioro ha alcanzado ritmos desconocidos en la historia democrática de España y está superando hasta las previsiones más pesimistas tras rebasar por primera vez los cuatro millones de personas. Según la Encuesta de Población Activa del primer trimestre del año, la tasa de paro ha aumentado en los tres primeros meses de 2009 en 3,45 puntos hasta situarse en el 17,36% de la población activa, con lo que el número de desempleados ha alcanzado los 4.010.700, la cifra más alta de la historia, tras incrementarse en 802.800 personas entre enero y marzo.
Según ha publicado hoy el INE, la nueva EPA, el mejor termómetro del mercado laboral, ha dejado en papel mojado los últimos cálculos del Gobierno, y ha superado en dos puntos las cifras del entonces ministro de Economía, Pedro Solbes, que preveían una tasa del 15,9% para final de año. Hoy la nueva jefa de la política económica del Ejecutivo, Elena Salgado, no ha podido sino admitir que los datos de la encuesta son "malos y peores de lo esperado", aunque también ha anunciado un punto de inflexión en la recuperación de empleo a partir de abril.
Tampoco el titular del departamento de trabajo, Celestino Corbacho, consideraba la posibilidad de rebasar la cota psicológica de los cuatro millones por mucho que se le preguntó sobre este extremo. Aunque la tozuda realidad y la dureza de la crisis han acabado por imponerse a los argumentos del ministro.
De cara al futuro, la vicepresidenta María Teresa Fernández de la Vega ha rechazado hoy hacer "vaticinios" sobre dónde está el límite de la subida del paro, y "mucho menos apocalípticos", ha matizado tras ser preguntada por el hecho de si llegaremos o no a los cinco millones de desocupados. "Analizamos la situación con realismo, pero también con responsabilidad. Los ciudadanos deben saber que lo que estamos haciendo es trabajar, trabajar y trabajar" para dar el máximo rendimiento a las medidas adoptadas, ha añadido.
Por su parte, el secretario de Estado de Seguridad Social, Octavio Granado, ha atribuido a que nos encontramos en el "epicentro de la crisis" además de ser el "peor trimestre del año".
Ritmo récord de destrucción de empleo
Según la EPA, entre enero y marzo se destruyeron 766.000 puestos de trabajo, el mayor descenso desde hace 32 años -cuando comenzó a elaborarse esta estadística-, con lo que el número de ocupados se sitúa en 19.090.800. En los últimos doce meses el paro ha subido en 1.836.500 personas tras cerrar 2008 con una tasa del 13,9% y se han destruido 1.311.500 puestos de trabajo, lo que supone una caída del 6,43% frente a los niveles de hace un año.
La tasa de paro es la más alta desde el cuarto trimestre de 1998 cuando alcanzó el 17,99%, mientras que el total de desempeados es el más elevado desde 1976, primer año del que se tienen datos, ya que en la anterior crisis de 1993 el número de personas sin empleo alcanzó su máximo en 3.932.900 millones de parados al cierre del primer trimestre de 1994.
Pero, a partir de ahora, la crisis de referencia para los futuros historiadores será la crisis que empezó en 2008 y que ofrecerá a lo largo del presente ejercicio su peor cara en forma de aumento del paro. De hecho, todas las comunidades autónomas, grupos de edad, sexo y sectores se han visto afectados por el descenso del empleo y el aumento del paro entre enero y marzo, aunque el mayor ajuste se ha concentrado en los trabajadores temporales, jóvenes y otros grupos desfavorecidos. Además, por primera vez desde 1994 hay más hombres que mujeres en paro, a pesar de lo cual la tasa de desempleo masculina sigue siendo menor, con el 16,86% frente al 18,01% entre las féminas.También ha aumentado el número de hogares con todos sus miembros en paro, un 6,3% hasta las 1.068.400 familias, con lo que las familias sin ningún trabajo duplican a las que atravesan esta dramática situación hace un año.
Tres comunidades superan ya el 20%
El paro subió en el primer trimestre del año en todas las comunidades autónomas, especialmente en Baleares (59,3%), Cantabria (40,6%) y Cataluña (36,6%) y la tasa de paro supera ya el 20% en Canarias (26,1%), Andalucía (24%) y Extremadura (21,7%).
En términos absolutos, el paro subió más en Cataluña (166.900 desempleados más), Comunidad de Madrid (114.700) y Comunidad Valenciana (109.500). Respecto al mismo trimestre del año anterior, el paro subió en todas las autonomías, de manera especialmente significativa en Aragón (120,3%), seguida de Cataluña (114,1%) y Murcia (110%).
En cuanto a la tasa de paro, tras Canarias, Andalucía y Extremadura se sitúan, con las tasas más altas, Baleares (19,7%), Murcia (19,3%) y la Comunidad Valenciana (19,2%).
Tuesday, March 31, 2009
World Bank, OECD Warn of Jobless Jump, Cut Forecasts (Update1)
By Sandrine Rastello and Simon Kennedy
March 31 (Bloomberg) -- The World Bank and OECD warned surging unemployment may inflict another blow on the global economy as they cut their economic outlooks for emerging and rich nations. The Organization for Economic Cooperation and Development said in Paris that the economy of its 30 members will contract 4.3 percent this year and predicted unemployment in the Group of Seven will reach 36 million late next year. The World Bank lowered its growth forecast for developing countries this year by more than half to 2.1 percent and President Robert Zoellick expressed concern of a looming “unemployment crisis.” Rising joblessness adds urgency to the London summit of Group of 20 leaders in two days to find remedies to the worst economic and financial turmoil in six decades. Unemployment is climbing in Japan and Germany, new data showed today, and job cuts from Volkswagen AG to Agilent Technologies Inc. are pressuring authorities everywhere to do more even as they run out of room to ease fiscal and monetary policies. “We must take the action necessary to prevent the suffering of the past in mass long-term unemployment,” U.K. Prime Minister Gordon Brown, who will host the April 2 G-20 talks, said in London today. Zoellick said in a speech that “2009 will be a dangerous year.”
Unemployment Growing
Japanese unemployment surged to a three-year high of 4.4 percent in February, while Germany’s jobless rate gained for a fifth month in March, reports showed today. The OECD predicted unemployment across its bloc will reach 10.1 percent by the end of 2010 from 7.5 percent in the current quarter. “It is important and necessary for the summit to take credible decisions which will help to halt and reverse the current slowdown and to instill a sense of confidence in the global economy,” Indian Prime Minister Manmohan Singh said today before leaving for London. The OECD, which in November predicted an economic contraction of 0.3 percent this year, urged policy makers to “devise and implement without delay a coherent strategy that squarely tackles the mess in financial markets.” Governments with the scope to do so should introduce more fiscal stimulus to support demand, it said, singling out Canada, Germany, South Korea and Australia.
Japanese Contraction
Still, it was unlikely that world leaders would be able to agree to coordinate global stimulus measures, and the possibility that existing national plans may prove inefficient remains one of the biggest risks to a recovery next year, OECD Chief Economist Klaus Schmidt-Hebbel said today. The OECD projected Japan’s economy will shrink 6.6 percent, outpacing declines of 4.1 percent in the euro area and 4 percent in the U.S. Central banks should keep interest rates close to zero, and the OECD also urged policy makers to find ways to rid banks of toxic assets. Deflation “appears to be a significant risk” for many economies next year, the OECD said. The organization warned its outlook was subject to “risks that remain firmly tilted to the downside,” citing the potential for another bout of problems at banks. Deutsche Bank AG Chief Risk Officer Hugo Banziger said yesterday the credit crisis is “far from over.”
‘Real Hardships’
The World Bank’s Global Economic Prospects report forecast the global economy will shrink 1.7 percent this year, and Zoellick identified central and eastern European economies as the most vulnerable to the international slump. The OECD estimates a global contraction of 2.7 percent.
While joblessness, home repossessions and the collapse in asset values are “real hardships” in the developed world, Zoellick said poorer nations “have much less cushion: no savings, no insurance, no unemployment benefits, and often no food.” Capital flows to the developing world have shrunk this year to about one-third of the peak of $1.2 trillion reached in 2007. Financing shortfalls, declining commodity prices and a drop in demand may lead to a “social and human crisis,” Zoellick said.
In a separate report also released today, the Asian Development Bank cut its own forecast for the second time in four months to show the region, excluding Japan, growing by 3.4 percent this year. The revised forecasts were coupled with warnings that governments not resort to protectionism. The OECD predicted that international trade will plunge more than 13 percent this year. While the OECD said its bloc will contract 0.1 percent next year, the World Bank predicted the global economy will grow 2.3 percent. “Even if global growth turns positive again in 2010, output levels will remain depressed, fiscal pressures will mount and unemployment levels will rise further in virtually every economy well into 2011,” Hans Timmer, a World Bank economist, said in a statement.
To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net; Simon Kennedy at skennedy4@bloomberg.net
March 31, 2009 08:35 EDT
March 31 (Bloomberg) -- The World Bank and OECD warned surging unemployment may inflict another blow on the global economy as they cut their economic outlooks for emerging and rich nations. The Organization for Economic Cooperation and Development said in Paris that the economy of its 30 members will contract 4.3 percent this year and predicted unemployment in the Group of Seven will reach 36 million late next year. The World Bank lowered its growth forecast for developing countries this year by more than half to 2.1 percent and President Robert Zoellick expressed concern of a looming “unemployment crisis.” Rising joblessness adds urgency to the London summit of Group of 20 leaders in two days to find remedies to the worst economic and financial turmoil in six decades. Unemployment is climbing in Japan and Germany, new data showed today, and job cuts from Volkswagen AG to Agilent Technologies Inc. are pressuring authorities everywhere to do more even as they run out of room to ease fiscal and monetary policies. “We must take the action necessary to prevent the suffering of the past in mass long-term unemployment,” U.K. Prime Minister Gordon Brown, who will host the April 2 G-20 talks, said in London today. Zoellick said in a speech that “2009 will be a dangerous year.”
Unemployment Growing
Japanese unemployment surged to a three-year high of 4.4 percent in February, while Germany’s jobless rate gained for a fifth month in March, reports showed today. The OECD predicted unemployment across its bloc will reach 10.1 percent by the end of 2010 from 7.5 percent in the current quarter. “It is important and necessary for the summit to take credible decisions which will help to halt and reverse the current slowdown and to instill a sense of confidence in the global economy,” Indian Prime Minister Manmohan Singh said today before leaving for London. The OECD, which in November predicted an economic contraction of 0.3 percent this year, urged policy makers to “devise and implement without delay a coherent strategy that squarely tackles the mess in financial markets.” Governments with the scope to do so should introduce more fiscal stimulus to support demand, it said, singling out Canada, Germany, South Korea and Australia.
Japanese Contraction
Still, it was unlikely that world leaders would be able to agree to coordinate global stimulus measures, and the possibility that existing national plans may prove inefficient remains one of the biggest risks to a recovery next year, OECD Chief Economist Klaus Schmidt-Hebbel said today. The OECD projected Japan’s economy will shrink 6.6 percent, outpacing declines of 4.1 percent in the euro area and 4 percent in the U.S. Central banks should keep interest rates close to zero, and the OECD also urged policy makers to find ways to rid banks of toxic assets. Deflation “appears to be a significant risk” for many economies next year, the OECD said. The organization warned its outlook was subject to “risks that remain firmly tilted to the downside,” citing the potential for another bout of problems at banks. Deutsche Bank AG Chief Risk Officer Hugo Banziger said yesterday the credit crisis is “far from over.”
‘Real Hardships’
The World Bank’s Global Economic Prospects report forecast the global economy will shrink 1.7 percent this year, and Zoellick identified central and eastern European economies as the most vulnerable to the international slump. The OECD estimates a global contraction of 2.7 percent.
While joblessness, home repossessions and the collapse in asset values are “real hardships” in the developed world, Zoellick said poorer nations “have much less cushion: no savings, no insurance, no unemployment benefits, and often no food.” Capital flows to the developing world have shrunk this year to about one-third of the peak of $1.2 trillion reached in 2007. Financing shortfalls, declining commodity prices and a drop in demand may lead to a “social and human crisis,” Zoellick said.
In a separate report also released today, the Asian Development Bank cut its own forecast for the second time in four months to show the region, excluding Japan, growing by 3.4 percent this year. The revised forecasts were coupled with warnings that governments not resort to protectionism. The OECD predicted that international trade will plunge more than 13 percent this year. While the OECD said its bloc will contract 0.1 percent next year, the World Bank predicted the global economy will grow 2.3 percent. “Even if global growth turns positive again in 2010, output levels will remain depressed, fiscal pressures will mount and unemployment levels will rise further in virtually every economy well into 2011,” Hans Timmer, a World Bank economist, said in a statement.
To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net; Simon Kennedy at skennedy4@bloomberg.net
March 31, 2009 08:35 EDT
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