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In the year plus that I have been writing about the economy and life as one of the long term un and underemployed, I’ve mentioned a few times how difficult it is to catalog all of the stupidity, cupidity, and overall cluelessness of the Beltway Village
Idiots Politicians, Pundits, and Courtiers (here, here, here, and here for example). A few weeks ago, I predicted that we will have a “double-dip” recession, even though reality for many millions is we have been in a depression and there has been no recovery that would be necessary for there to be a “double-dip” in the first place. Nevertheless, over the weekend, there were a few articles premised on how the deficit/debt is the worst thing going on right now in the economy. This one from CNN yesterday (July 4) starts things off:
CNNMoney surveyed 27 economists and asked them to choose from a list of possible threats facing the economy. What scares them most? A sovereign debt default by a European country such as Greece. More than half of those surveyed ranked it as one of their top two concerns, with 10 choosing it as their number one worry.
Relatively few of the economists surveyed were worried about the other risks they had to choose from — a slowdown among emerging economies such as China, or budget cutting by federal, state and local governments.
“Austerity is a short-term risk, but will help long-term,” said David Wyss, former chief economist at Standard & Poor’s, now visiting fellow at Brown University. “The odds of too big a budget cut seems small.”
My bold and there we have it. What’s a little austerity to those who have no fear of the consequences of that austerity. Given the propensity of economists polled by news organizations to be wildly and incredibly wrong in their predictions while then expressing their continual “surprise” at being wrong, I think we can safely say that the budget cuts that are coming will be both too big and soon followed by economists chanting “Hoocoudanode?” when the negative impact becomes obvious even to the most obtuse of the Beltway Villagers.
“It sounds as if the package is going to be all spending cuts with a few symbolic revenue increases,” said Isabel Sawhill, an economist who studies fiscal issues at the Brookings Institution and worked in the Clinton administration.
Sawhill said the cuts are likely to be focused on non-security discretionary spending, a small section of the budget that includes funding for food inspectors, the FBI and education grants, among many other programs and services people associate with government.
Meanwhile,, last Thursday (June 30), the NY Times Economix had this from labor reporter Stephen Greenhouse:
Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.
The study, “The ‘Jobless and Wageless Recovery’ From the Great Recession of 2007-2009,” (pdf) said it was “unprecedented” for American workers to receive such a tiny share of national income growth during a recovery.
According to the study, between the second quarter of 2009, when the recovery began, and the fourth quarter of 2010, national income rose by $528 billion, with $464 billion of that growth going to pretax corporate profits, while just $7 billion went to aggregate wages and salaries, after accounting for inflation.
The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades, the study found.
Nice to have some empirical evidence to back up the anecdotal evidence so many of us have experienced first hand.
As a companion of a sorts, the Washington Post and Bloomberg each have this Bloomberg article up from Sunday, although with differing headlines. While Bloomberg’s headline is, “Payrolls in U.S. Probably Rose at Pace That Failed to Reduce Jobless Rate” the Washington Post headline is just a tad bit misleading to say the least (as the cheerleader paper of record I guess it is to be expected though), “Employment Probably Increased in June: U.S. Economy Preview.” From the article itself:
Employers in the U.S. probably expanded payrolls at a pace that failed to reduce the unemployment rate in June as companies sought to contain costs amid slower growth, economists said a report may show this week.
Payrolls climbed by 100,000 workers after a 54,000 increase in May that was the smallest in eight months, according to the median forecast of economists surveyed by Bloomberg News ahead of Labor Department data due July 8. The jobless rate held at 9.1 percent. Another report may show growth in services cooled.
The Labor Department employment report will also show private payrolls, which exclude government agencies, increased by 125,000 after rising 83,000 in May, according to the survey median.
Now this article is phrased as definitive but it actually is speculative as the BLS Jobs Report for June for the entire economy will be issued Friday (July 8) while the ADP report on private sector jobs will be released tomorrow (July 6). My guess is that the private sector jobs (the ADP number) will be in the 50K range while the overall economy will be 20K to 25K max. The layoffs in the states with their new budgets will be starting to come in and the weekly Initial Unemployment Claims Report is still running well over 425K per week. I hope I am wrong in my predictions. I don’t think I will be off very much. Unlike the economists who keep getting polled against all evidence of their errors.
And because I can:
Cross posted from Just A Small Town Country Boy