Applications for unemployment benefits stay below 300K

We could always go back to Republican solutions

Slightly fewer people filed for U.S. unemployment benefits last week, a sign the American job market remains healthy.

THE NUMBERS: The Labor Department said Thursday that applications for jobless aid slipped by 1,000 to a seasonally adjusted 261,000. The less volatile four-week average dropped by 1,250 to 264,000. Overall, the number of people receiving unemployment checks fell by 30,000 to 2.15 million, down 5 percent from a year earlier.

THE TAKEAWAY: Applications are a proxy for layoffs. They have remained below 300,000 for 77 straight weeks, longest streak since 1970. The current reading is even more impressive because the population has grown considerably since then…

KEY DRIVERS: The U.S. unemployment rate is 4.9 percent. Employers added 255,000 jobs in July and 292,000 in June.

Solid hiring amid slow growth is worrisome. It shows that the economy is less productive, with more workers needed to produce the same or slightly more output. Productivity, or the amount of output per hour, has dropped 0.4 percent over the past year.

Discussions about productivity are like the newly hot topic of the value of GDP analysis. Becoming the signal statistic after World War 2, the US economy has been dramatically altered by time, technology, inevitable globalization and political pimps to the military-industrial complex.

I wouldn’t even post about this topic – boring you to semi-consciousness – except the populist pimp hisself keeps throwing it out as evidence of dastardly plots by Progressives, Liberals and banks that won’t re-mortgage Trump Towers.

Fact remains that since the Bush’s Great Recession, Obama’s halfway-competent utilization of modern economics to whip Congress into motion – followed by simple and simplistic nudges from the Fed – have kept our dullish economy functioning better than most in the Western World. 77 straight weeks of sub-300K unemployment applications speaks to that point.

The inevitable whine about rigged numbers from Trumpkins is hilarious – since the essentials haven’t been altered since the days of Nixon who was responsible for criminal manipulation as often was his wont.

Just a touch of political economy…

Former Florida Governor Jeb Bush, though he has been short on specifics, has promised to produce an economy that grows 4 percent or more a year. His top economic advisers were leading decision-makers in the administration of his brother, President George W. Bush, when the rate of expansion never reached 4 percent. The only time over the past half-century that such growth was achieved for four consecutive years — the length of a presidential term — was under Bill Clinton.

No, this is not a ringing endorsement of the average Democrat understanding of economics – and, especially, political economy. Given the paucity of thought and understanding we’re allowed with the two old parties, this is what we have.

At least Al Hunt has managed to keep his sense of humor, the theater of the absurd, while covering the truckloads of horse manure that passes for social and economic analysis in the popular press, our political punditry and, most of all, Congressional ideologues and demagogues.

Thanks, Al Hunt

Stodgiest outfit on Wall Street agrees inequality is causing slower growth


Is income inequality holding back the United States economy? A new report argues that it is, that an unequal distribution in incomes is making it harder for the nation to recover from the recession and achieve the kind of growth that was commonplace in decades past.

The report is interesting not because it offers some novel analytical approach or crunches previously unknown data. Rather, it has to do with who produced it, which says a lot about how the discussion over inequality is evolving.

Economists at Standard & Poor’s Ratings Services are the authors of the straightforwardly titled “How Increasing Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide.” The fact that S.&P., an apolitical organization that aims to produce reliable research for bond investors and others, is raising alarms about the risks that emerge from income inequality is a small but important sign of how a debate that has been largely confined to the academic world and left-of-center political circles is becoming more mainstream…

Because the affluent tend to save more of what they earn rather than spend it, as more and more of the nation’s income goes to people at the top income brackets, there isn’t enough demand for goods and services to maintain strong growth, and attempts to bridge that gap with debt feed a boom-bust cycle of crises, the report argues. High inequality can feed on itself, as the wealthy use their resources to influence the political system toward policies that help maintain that advantage, like low tax rates on high incomes and low estate taxes, and underinvestment in education and infrastructure…

The report itself does not break any major new analytical or empirical ground. It spends many pages summarizing the findings of various academic and government economists who have studied inequality and its discontents, and stops short of recommending any radical policy changes favored by the likes of Thomas Piketty (who is among those cited).

And the S.&P. researchers are relatively limited in their policy prescriptions, avoiding much discussion of politically explosive debates over marginal tax rates and the scale of the social welfare system. They instead emphasize the usefulness of investing more heavily in education…

Anyone who wants to explain why the United States economy is evolving the way it is needs to at least wrestle with the implications of a more unequal society for the economy as a whole.

Overdue. Response to the problem from the talking heads in the White House has been limited to slogans and talking points. Response from our Do-Nothing-Congress has been to do nothing.

Thanks, Mike

The 1-percent’s solution

Economic debates rarely end with a T.K.O. But the great policy debate of recent years between Keynesians, who advocate sustaining and, indeed, increasing government spending in a depression, and austerians, who demand immediate spending cuts, comes close — at least in the world of ideas. At this point, the austerian position has imploded; not only have its predictions about the real world failed completely, but the academic research invoked to support that position has turned out to be riddled with errors, omissions and dubious statistics.

Yet two big questions remain. First, how did austerity doctrine become so influential in the first place? Second, will policy change at all now that crucial austerian claims have become fodder for late-night comics?

On the first question: the dominance of austerians in influential circles should disturb anyone who likes to believe that policy is based on, or even strongly influenced by, actual evidence. After all, the two main studies providing the alleged intellectual justification for austerity — Alberto Alesina and Silvia Ardagna on “expansionary austerity” and Carmen Reinhart and Kenneth Rogoff on the dangerous debt “threshold” at 90 percent of G.D.P. — faced withering criticism almost as soon as they came out.

And the studies did not hold up under scrutiny…Yet austerity maintained and even strengthened its grip on elite opinion. Why?

Part of the answer surely lies in the widespread desire to see economics as a morality play, to make it a tale of excess and its consequences. We lived beyond our means, the story goes, and now we’re paying the inevitable price. Economists can explain ad nauseam that this is wrong…No matter; many people have a visceral sense that we sinned and must seek redemption through suffering — and neither economic argument nor the observation that the people now suffering aren’t at all the same people who sinned during the bubble years makes much of a dent.

But it’s not just a matter of emotion versus logic. You can’t understand the influence of austerity doctrine without talking about class and inequality…

Class denied by that useless standard of America’s historic horseshit. The so-called Protestant ethic.

Continue reading

It’s official: Paul Krugman is right

For the past five years, a fierce war of words and policies has been fought in America and other economically challenged countries around the world.

On one side were economists and politicians who wanted to increase government spending to offset weakness in the private sector. This “stimulus” spending, economists like Paul Krugman argued, would help reduce unemployment and prop up economic growth until the private sector healed itself and began to spend again.

On the other side were economists and politicians who wanted to cut spending to reduce deficits and “restore confidence.” Government stimulus, these folks argued, would only increase debt loads, which were already alarmingly high. If governments did not cut spending, countries would soon cross a deadly debt-to-GDP threshold, after which economic growth would be permanently impaired. The countries would also be beset by hyper-inflation, as bond investors suddenly freaked out and demanded higher interest rates. Once government spending was cut, this theory went, deficits would shrink and “confidence” would return…

Those in favor of economic stimulus won a brief victory in the depths of the financial crisis, with countries like the U.S. implementing stimulus packages. But the so-called “Austerians” fought back. And in the past several years, government policies in Europe and the U.S. have been shaped by the belief that governments had to cut spending or risk collapsing under the weight of staggering debts.

Over the course of this debate, evidence has gradually piled up that, however well-intentioned they might be, the “Austerians” were wrong. Japan, for example, has continued to increase its debt-to-GDP ratio well beyond the supposed collapse threshold, and its interest rates have remained stubbornly low. More notably, in Europe, countries that embraced (or were forced to adopt) austerity, like the U.K. and Greece, have endured multiple recessions (and, in the case of Greece, a depression)…So the empirical evidence increasingly favored the Nobel-prize winning Paul Krugman and the other economists and politicians arguing that governments could continue to spend aggressively until economic health was restored.

And then, last week, a startling discovery obliterated one of the key premises upon which the whole austerity movement was based.

An academic paper that found that a ratio of 90%-debt-to-GDP was a threshold above which countries experienced slow or no economic growth was found to contain an arithmetic calculation error.

Once the error was corrected, the “90% debt-to-GDP threshold” instantly disappeared. Higher government debt levels still correlated with slower economic growth, but the relationship was not nearly as pronounced. And there was no dangerous point-of-no-return that countries had to avoid exceeding at all costs.

The discovery of this simple math error eliminated one of the key “facts” upon which the austerity movement was based…

The argument is over. Paul Krugman has won. The only question now is whether the folks who have been arguing that we have no choice but to cut government spending while the economy is still weak will be big enough to admit that.

Between Congressional Republicans blind to the failure of their ideology and their candyass Blue Dog Democrat counterparts there still is a struggle to enforce austerity upon our limping economy. The so-called sequester is an example of their success at reducing the number of employed in our country.

Most Congress-critters are as ignorant as the average American and don’t know that something similar happened as Keynesian reforms were having a comparable success during the Great Depression. Politicians and pundits forced austere reversals to the reforms in place in the mid-1930’s and started the whole country on the way back down to the depths of economic despair. Only the dramatic need to prepare for the war against Fascism around the world reversed the start of a second depression.

But, stupidity seems to still be part of the job description for conservative politicians. We’ll get to see who prevails over the next few years. Not that any pundits will be joining folks at the unemployment office. There’s always a job for reactionary ideologues in corporate America.

Japan takes a step forward

For three years economic policy throughout the advanced world has been paralyzed, despite high unemployment, by a dismal orthodoxy. Every suggestion of action to create jobs has been shot down with warnings of dire consequences. If we spend more, the Very Serious People say, the bond markets will punish us. If we print more money, inflation will soar. Nothing should be done because nothing can be done, except ever harsher austerity, which will someday, somehow, be rewarded.

But now it seems that one major nation is breaking ranks — and that nation is, of all places, Japan.

This isn’t the maverick we were looking for. In Japan governments come and governments go, but nothing ever seems to change — indeed, Shinzo Abe, the new prime minister, has had the job before, and his party’s victory was widely seen as the return of the “dinosaurs” who misruled the country for decades. Furthermore, Japan, with its huge government debt and aging population, was supposed to have even less room for maneuver than other advanced countries.

But Mr. Abe returned to office pledging to end Japan’s long economic stagnation, and he has already taken steps orthodoxy says we mustn’t take. And the early indications are that it’s going pretty well…

…While getting out of a prolonged slump turns out to be very difficult, that’s mainly because it’s hard getting policy makers to accept the need for bold action. That is, the problem is mainly political and intellectual, rather than strictly economic. For the risks of action are much smaller than the Very Serious People want you to believe…

Enter Mr. Abe, who has been pressuring the Bank of Japan into seeking higher inflation — in effect, helping to inflate away part of the government’s debt — and has also just announced a large new program of fiscal stimulus. How have the market gods responded?

The answer is, it’s all good. Market measures of expected inflation, which were negative not long ago — the market was expecting deflation to continue — have now moved well into positive territory. But government borrowing costs have hardly changed at all; given the prospect of moderate inflation, this means that Japan’s fiscal outlook has actually improved sharply…

Whatever his motives, Mr. Abe is breaking with a bad orthodoxy. And if he succeeds, something remarkable may be about to happen: Japan, which pioneered the economics of stagnation, may also end up showing the rest of us the way out.

I’m not familiar enough with the political side of Japan’s culture to understand what inhibited the administration immediately preceding Abe’s from implementing the sort of Keynesian reforms most modern economists understand and endorse. I presume they hadn’t confidence in their authority – perhaps parliamentary opposition was infected with the same demagogue’s disease as our own Congress, e.g., self destructive class loyalties.

Regardless. Change is already perceptible. Both the business community and working class families have a bit more hope. Shinzo Abe’s party is as capable of screwing up reform as any other assembly of conservatives; so, the jury will be out for a while.

The process is worth a wry smile from this side of the Pacific since neither party parked next to the Potomac has sufficient courage or understanding to try the same.

Unemployment falls in 41 states in September

Unemployment rates fell in 41 states and the District of Columbia last month, reflecting a sharp drop in the nation’s jobless rate just weeks before the presidential election…

Among key swing states in the presidential race, the jobless rate declined in nine, was unchanged in two and increased in one.

The national unemployment rate was 7.8% in September. That was down from 8.1% in August and 9% in September 2011.

The 12 presidential battleground states are Colorado, Florida, Iowa, Michigan, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Pennsylvania, Virginia and Wisconsin.

Nevada and Iowa posted the largest declines, with the jobless rate falling to 11.8% from 12.1% in Nevada, and to 5.2% from 5.5% in Iowa…

Overall, Nevada continued to have the highest unemployment rate, at 11.8%, followed by Rhode Island, at 10.5%, and California’s 10.2%. North Dakota, which is benefiting from an oil boom, continued to have the lowest rate at 3%.

Among regions, unemployment was highest in the West last month and lowest in the Midwest.

None of which will be acknowledged by the Party-formerly-known-as-Republican.

Our right-wing ideologues are committed to the same policies that produced the Great Recession. Though many American voters have little or no comprehension of the enormity of this economic disaster – or what has been needed to climb back out from the bottom – Republicans can no more admit to the gradual success of the Obama administration at turning things round than their own responsibility for the disaster they caused.

BTW – unemployment in Santa Fe County where I live is now down to 4.8%. Though our Republican governor tried her best to follow the Republican Party-line by laying off 5000 government employees.

U.S. housing recovery on track — even if it doesn’t feel like it in your neck of the prairie

These are rent-to-own homes in Albuquerque

Housing starts fell in May from a 3-1/2 year high, although permits to build new homes rose sharply, suggesting a nascent housing recovery remains on track.

The Commerce Department said on Tuesday that groundbreaking on new homes dropped last month to an annual rate of 708,000 units, falling short of analysts’ expectations…However, upward revisions to data for March and April put starts above 700,000 for five straight months, a first since 2008.

This highlights a big turn of events that is under way: while the broader U.S. economy appears to be losing steam, housing is gaining traction and has become a relative bright spot. Despite a sharp slowdown in hiring, home prices appear to be stabilizing and homebuilder sentiment has risen to a five-year high…

The decline in starts in May was entirely due to a 21.3 percent drop in groundbreaking for multi-family buildings, a volatile reading that is prone to substantial revisions…Starts for single-family homes, which account for most of the market, increased 3.2 percent.

In another positive sign, new building permits jumped 7.9 percent in May to a 780,000-unit pace. That was the highest since September 2008 and well above analysts’ forecasts…

Many economists now predict home building will add to economic growth this year for the first time since 2005.

All news the Republicans hate to hear.

Housing construction – even multi-family buildings – ain’t exactly rocket science. Folks who’ve been working construction for decades are among the hardest hit by the Great Recession. Courtesy of unqualified mortgages and manipulation in buying and selling [mostly selling] mortgage-based derivatives.

Most economists agree this is the last significant portion of the United States economy needed to begin to climb out of the hole we were dropped into by supply-side dribble-down money-lovers. If this continues at any sort of steady rate, the broader economy will benefit. Employment will continue to benefit.

Even if you agree as I do that Republican attempts to cripple minimal Keynesian remedies have held back the tortured climb from the worst economic disaster in 80 years – they are working well enough to have a measurable effect in almost every state, every urban center.