Limited Good Economic News Won’t Last
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You might have seen some headlines from yesterday on the weekly report of Initial Unemployment claims about those claims “falling sharply” (Reuters headline phrase):
Applications for unemployment benefits fell by 37,000 to a seasonally adjusted 391,000 in the week ending September 24 from an upwardly revised 428,000 the prior week, the Labor Department said on Thursday.
My first prediction today is that the 391K figure first announced will be revised upwards when next week’s report comes out. My second prediction is whatever good news that can be wrung from this report will have a limited overall effect.
CNN’s report was a bit more circumspect with this:
The recent drop to 391,000 maked the lowest level since the week of April 2, when 385,000 new claims came in.
Still, economists cautioned against getting too excited about the better number. It’s just one week of data, and according to a government spokesman, seasonal adjustments could have impacted the calculation.
For the country overall, the unemployment rate is still at 9.1%…
Continuing claims — which include people filing for the second week or more of benefits — decreased by 20,000 to 3,729,000 in the week ended Sept. 17, the most recent data available.
That figure only includes people who are receiving benefits though, which typically run out after 99 weeks.
Including people who aren’t currently receiving those benefits, about 14 million people remain unemployed in the United States.
Nice of CNN to point out that the unemployment figure does include those folks who persist in looking for jobs without finding them, even after they have exhausted all benefits.
Bloomberg yesterday had a headline quote from The Benbernank that showcased his overall clueslessness:
Bernanke Says High U.S. Unemployment Poses ‘National Crisis’
And yes, the sky is blue, water is wet, ice is cold, etc. From the article itself:
“This unemployment situation we have, the jobs situation, is really a national crisis,” Bernanke said in response to questions after a speech yesterday in Cleveland. “We’ve had close to 10 percent unemployment now for a number of years and, of the people who are unemployed, about 45 percent have been unemployed for six months or more. This is unheard of.”
Bernanke’s speech reviewed the recommendations of John Williamson, an economist and senior fellow at the Peterson Institute for International Economics, a set of guidelines known as the Washington Consensus.
My bold. I think we just found the problem. Or at least one of the problems. Nothing good will usually come from the incestuous cess pool known as Washington and even less good if it is a “consensus.” It is probably why The Benbernank and the Fed are so abysmal at fulfililng the nominal Federal Reserve “mission.”
MSNBC had a couple of articles from John Schoen’s “The Bottom Line” blog yesterday that didn’t do much to inspire the confidence fairies. First up is this post on the “badly broken” US jobs machine:
Fresh data from the government Thursday showed the U.S. economy is barely keeping its head above water, with a growth rate that’s just too weak to help the 14 million American workers who can’t find a job.
The Commerce Department said the economy grew at a 1.3 percent pace in the spring, up from the previous estimate of a 1.0 percent growth rate. That’s the government’s third and final revision for the snapshot of gross domestic product, the total output of goods and services produced by businesses and property in the U.S.
Faced with the threat of ongoing layoffs and a tough time finding work, consumers are holding back on spending and cutting back on debt – a process economist call “deleveraging.” Those who have a job aren’t getting raises. Many households are struggling to make their monthly mortgage payment or fill up their car’s gas tank.
Most economists expect growth will pick up only slightly in the second half of this year and continue on its weak pace next year. The National Association for Business Economics predicts total growth for 2011 will be just 1.7 percent.
Schoen followed that post up with this one on “CEO mood”:
The CEOs of American’s biggest companies are not in a hiring mood – and more of them say they expect to announce layoffs in the coming months.
Responding to a survey by the Business Roundtable, only about one-third of chief executives of the largest U.S. companies said they expect to hire more workers in the next six months, down sharply from about half who said so three months ago. And about a quarter said they expected to have to cut U.S. jobs in the next six months, more than double the 11 percent who had forecast that in the second quarter.
The CEO’s surveyed also aren’t in much of a mood to spend more money on equipment. That business investment has been one of the main drivers of the growth in the economy this year. But only about a third said they plan to continue spending on machinery and computers. That’s down from nearly two thirds three months ago.
Despite their increased pessimism, the leaders of the nation’s biggest companies still think the economy will manage to dodge a recession. The group’s CEO Economic Outlook index – which dropped for a second consecutive quarter to 77.6, the lowest reading since the fourth quarter of 2009 – still held above 50, which indicates an outright economic contraction. The group’s average growth forecast pegs gross domestic product rising 1.8 percent this year, sharply lower than the 2.8 percent growth forecast in March
Oops. They may be too late in thinking we can avoid a “double-dip” if this article posted at CNN this morning is any indication:
NEW YORK (CNNMoney) — The U.S. economy is staring down another recession, according to a forecast from the Economic Cycle Research Institute.
“It’s either just begun, or it’s right in front of us,” said Lakshman Achuthan, the managing director of ECRI. “But at this point that’s a detail. The critical news is there’s no turning back. We are going to have a new recession.”
The ECRI produces widely-followed leading indicators which predict when the economy is moving between recession and expansion. Achuthan said all those indicators are now pointing to a new economic downturn in the immediate future.
His recession call puts him ahead of most other forecasters. A CNNMoney survey of economists this week pointed to a one-in-three chance of a new recession in the next six months. The most bearish predictions put the odds at 50-50.
Not sure if I fit in the category of “most other forecasters,” but I predicted the coming double-dip in this post back in early June with a follow-up in late July here. For what it’s worth, Nouriel Roubini also has the double-dip inevitably happening last week.
But not to worry. The governor of the state in which I reside says he is right on track to fulfill his job creation campaign promises. Oh wait, maybe not so fast on that one after all:
Gov. Rick Scott said this week that Florida is making progress attracting new business but changed his arithmetic on how many jobs the state must create to meet his No. 1 campaign pledge.
Scott made it clear as a candidate last year that his plan to create 700,000 jobs in seven years was in addition to the jobs Florida would generate by itself as it recovered from the recession. At the time, state economists predicted that would be about 1 million jobs.
But this week, the governor gave a different answer. “Your pledge was for 700,000 in addition to normal growth, wasn’t it?” Scott was asked during a meeting with the Sun Sentinel editorial board.
No, he replied, “700,000.”
The governor’s position hasn’t changed, said spokesman Lane Wright.
“The difference here is nobody knows what normal growth would be,” he said. “What Gov. Scott is saying is no matter what happens around us, Florida will create 700,000 jobs in seven years.”
Robert Jarvis, a constitutional law professor at Nova Southeastern University, said the governor is “walking back the story.”
Apparently, the only real way to get ahead in today’s economic world is to be an abject failure at the job of managing a company so that you get paid millions just to go away.
And because I can:
Cross posted from Just A Small Town Country Boy by Richard Taylor