Friday's Jobs Report: Unemployment Bumps 10%? 14 comments
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The economy continues to bleed jobs, even as GDP rebounds. Employment may be a lagging indicator, but job losses should have abated by now even if a lot of new jobs are not being added.
Coming off a deep recession, GDP growth should have been much stronger than the 3.5 percent recorded in the third quarter. A poorly conceived and badly executed stimulus package and the failure to correct structural problems that caused the Great Recession are holding down growth. Consequently, the economy is not creating jobs, and certainly not creating good paying, full-time jobs with benefits.
Friday, the Labor Department will report employment data for October. In September, the economy lost 263,000 jobs, and the consensus forecast is for another 175,000 jobs lost in October.
Unemployment was 9.8 percent in September, and professional forecasters expect it to increase to 9.9 percent for October, though 10 percent is surely possible and likely for November.
Unemployment would have already pierced 10 percent had not so many adults quit looking for work and left the labor force in recent months. Also, many adults have been forced to accept part-time work, but would prefer and need full time employment.
Factoring in adults that have left the labor force and those who work part time but would prefer full-time jobs, the unemployment rate is greater than 18 percent.
From December 2007 through September 2009, the economy lost 7.2 million jobs. The recession has wiped out all the jobs created in the private sector over the last decade.
Unemployment claims continue to exceed 500,000 each week, indicating the bleeding will not end soon.
Construction and manufacturing shed 1.7 and 2.1 million jobs, respectively, as the credit market meltdown and trade deficit wrecked havoc on residential construction and manufacturing. Layoffs spread to commercial construction, finance, retail sales, and other sectors.
The economy expanded 3.5 percent in the third quarter, but 0.9 percent of that was cash for clunkers, 0.5 percent was the tax credit for new home buyers, and a slower pace of inventory liquidation accounted for 1.0 percent. Sustainable growth was only about 1.0 percent. Economists expect that sustainable growth to improve to 2.0 to 2.5 percent in the fourth quarter but that is not enough to pull down unemployment.
Consumer spending, residential construction and technology sales did post some gains, but in the fourth quarter additional bounce is not expected from those segments, except perhaps in technology sales. Technology and materials sales should benefit from stronger growth in China and elsewhere in Asia.
In 2010 and 2011, the stimulus package should raise GDP by about 2.5 percentage points and add about 3 million temporary jobs. That pales in comparison to the 8 million jobs that will be lost by the time the recession is over, and begs the question of what happens after the stimulus money is spent.
With productivity growing at least two percent a year and the working aged population increasing one percent a year, GDP growth must exceed three percent to bring down unemployment. Hence, unemployment will exceed 10 percent in 2010 and stay there for the foreseeable future.
Unless President Obama addresses the structural problems that caused the recession—balance sheet issues at the banks and huge trade deficits on oil and with China—the recovery will not be strong enough to bring down the unemployment rate.
Regional banks labor under the weight of commercial real estate failures. Unable to effectively access Wall Street capital markets, regional banks are short on funds to loan to worthy small and medium sized businesses.
The TARP was intended to create a bad bank mechanism to sweep troubled assets off the books of the banks, much like the Resolution Trust during the Savings and Loan Crisis of the early 1990s. Instead, President Obama and the Federal Reserve have focused on boosting the profitability and bonus pools at the largest Wall Street banks and left to the wolves the regional banks and the businesses that rely on them for credit . Already, 115 of these banks have failed, while the Treasury and Federal Reserve prop up Bank of America and Citigroup.
During the economic expansion from 2001 to 2007, the trade deficit increased from about one percent of GDP to more than five percent—nearly all of this was oil from the Middle East and consumer goods from China. The former was caused mostly by higher prices and the latter by China’s persistent export subsidies and manipulation of currency markets to keep its yuan and products on overseas markets artificially cheap.
Trade deficit required Americans to spend a dollar and five cents for every dollar they earned to create enough demand for all the goods and services produced in the United States. Americans spent more than they earned by borrowing on their homes and credit cards, while Middle East oil exporters and China supplied the funds through New York financial houses. When the bubble burst, the banks and economy collapsed.
Going forward, as the stimulus package pushes up government and consumer spending, the trade deficits on oil and with China will grow. This tax on demand for U.S. made goods and services will limit jobs creation.
Consequently, as the economy expands, businesses will struggle to find enough capital, and the trade deficits will create a shortage of demand for U.S.-made goods and services and new layoffs will begin once the stimulus spending ends. Unemployment could easily rise to 15 percent, and depression like conditions will become commonplace in many parts of the country.
President Obama’s near term energy policies address mostly the more efficient use of domestic coal and natural gas and alternative energy sources to generate electricity, and will do little to quickly reduce oil imports. Increased mileage standards for cars and trucks will not have a meaningful impact on the value of oil imports for several years.
President Obama, like George Bush, emphasizes diplomacy to persuade China to stop subsidizing exports, undervaluing its currency through currency market manipulation and blocking imports. Treasury Secretary Geithner has downplayed the importance of China’s biggest unfair trade practice—the undervaluation of the yuan by some 40 percent. Diplomacy has failed for more than ten years, and now Secretary Geithner is assuming away the problem.
When Democrat Bill Clinton was in the White House, America enjoyed export growth and a trade-led economic expansion. Now that Democrat Obama is in the White House, Geithner says the Clinton prosperity was all a ruse—merely, premised on a shaky financial system.
Clinton got the banks working again, Obama subsidizes Wall Street bonuses. Clinton got American manufactures exporting again, Obama wants to shut them down with cap and trade.
Treasury Secretary Timothy Geithner has not explained how the Obama Administration can deliver jobs without taking on the trade deficit and in particular the high price of oil and Chinese mercantilism.
Numbers to Watch in Friday’s Release
Jobs Creation. October 2, the Labor Department reported the economy lost 263,000 payroll jobs in September. The government sector lost 53,000 jobs, and the private sector lost 316,000.
With a slow economic expansion, job losses will continue for several more months, and total losses will exceed 8 million before the hemorrhaging ends.
Unemployment. In September, the unemployment rate, as computed by the Labor Department, was 9.8 percent, and is expected to rise to at least 9.9 percent for October. According to my forecast, unemployment will peak at 10.3 percent late in 2010, and then stay there unless the economy heads down again.
Since 2001, more adults have chosen not to seek employment owing to worsening labor market conditions. If labor force participation today were at the same level as when President Bush took the helm, the unemployment rate would be about 13 percent. The difference is discouraged workers that have quit looking for work that the Labor Department does not count when computing the unemployment rate. Add in part-time workers who would prefer full-time employment, and the hidden unemployment rate is above 18 percent.
Construction. In September, construction lost 64,000 jobs. Since construction employment peaked in September 2006, the sector has lost 1.7 million jobs.
Retailing. Retail trade has shed 890,000 jobs since November 2007, and lost 39,000 jobs in October.
Finance and Insurance. During the economic expansion finance and insurance, along with technology sectors offered some of the best new job opportunities, outside of health care and technology-related activities. Since December 2007, finance and insurance has shed 360,000 jobs, and 9,000 in September alone.
Manufacturing. In September, manufacturing lost 51,000 jobs, and over the last 114 months manufacturing it has lost 5.6 million jobs. The dollar remains overvalued against the Chinese yuan and other Asian currencies, and the large trade deficit with China and other Asian exporters is a key factor pushing down U.S. manufacturing employment.
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- Bill Clinton was a moderate Democrat
- Bankruptcy Obama is a socialist
- We had Republican congress to veto spending (Check & balance)
- Liberal democrats Pelosi, Harry Reid, B.Frank run congress
- We had an economic windfall from Internet/Techonology
- We don't have a "2nd internet" invented or making easier
- We weren't in two wars, we were shrinking our military
- Even with Obama, we have 2 wars and are expanding our military
- We weren't in as much debt back then either...
- Interest rates better reflected reality...
In one of Ron Paul's recent interviews he brought up a great point...
"Conservatives, republicans or whoever stand for lower taxes, smaller government right? So how come when Bush was spending spending spending we didn't get as much protest? Were there tea parties when Bush was spending and putting us in a 400 billion dollar defecit? Granted Obama's is much worse, but still. People are reluctant to protest the political party they identify with, even if it goes against their beliefs. In reality, Republicans should have tea parties now, AND when Bush was in office.
The same thing for Democrats. Where are all the Prius driving anti-war protesters now? The left used to have countless protests, rallies, and demonstrations to end the wars. Now that they got their guy Obama, they quit because he's a democrat.
On Nov 05 09:04 AM John Galt wrote:
> < When Democrat Bill Clinton was in the White House, America enjoyed
> export growth and a trade-led economic expansion. >
>
> - Bill Clinton was a moderate Democrat
> - Bankruptcy Obama is a socialist
>
> - We had Republican congress to veto spending (Check & balance)
>
> - Liberal democrats Pelosi, Harry Reid, B.Frank run congress
>
> - We had an economic windfall from Internet/Techonology
> - We don't have a "2nd internet" invented or making easier
>
> - We weren't in two wars, we were shrinking our military
> - Even with Obama, we have 2 wars and are expanding our military
>
>
> - We weren't in as much debt back then either...
> - Interest rates better reflected reality...
>
> In one of Ron Paul's recent interviews he brought up a great point...
>
> "Conservatives, republicans or whoever stand for lower taxes, smaller
> government right? So how come when Bush was spending spending spending
> we didn't get as much protest? Were there tea parties when Bush
> was spending and putting us in a 400 billion dollar defecit? Granted
> Obama's is much worse, but still. People are reluctant to protest
> the political party they identify with, even if it goes against their
> beliefs. In reality, Republicans should have tea parties now, AND
> when Bush was in office.
>
> The same thing for Democrats. Where are all the Prius driving anti-war
> protesters now? The left used to have countless protests, rallies,
> and demonstrations to end the wars. Now that they got their guy
> Obama, they quit because he's a democrat.
Exceptionally well said in response to the ridiculous post prior. The whole 'Obama is a socialist' line of argument is an excuse to avoid actually thinking, generally resorted to by those who lack the necessary equipment to do so anyway. Most of the so-called socialistic responses to our financial crisis were initiated during the prior (i.e., Republican) administration, not to mention the fact that socialism and capitalism are shades of a spectrum rather than some sort of isolated ideals. To the simpletons, when the government promotes and protects an industry they refer to this as capitalism but when the government regulates that same industry then their efforts become socialism. All modern democracies are socialistic (on many, many levels) by definition, but I suppose when your psyche is locked in the Cold War and your thought patterns are corroded by Fox News then everything becomes black and white, either/or, good or evil. The government is evil! Corporations are good! Sarah Palin in 2012!
Hey wait a minute, maybe the world really is going to end in 2012. If she's elected, maybe it should.
I've never seen such a rousing defense of President Clinton:
"When Democrat Bill Clinton was in the White House, America enjoyed export growth and a trade-led economic expansion. Now that Democrat Obama is in the White House, Geithner says the Clinton prosperity was all a ruse—merely, premised on a shaky financial system.
Clinton got the banks working again, Obama subsidizes Wall Street bonuses. Clinton got American manufactures exporting again, Obama wants to shut them down with cap and trade."
Are we left with the conclusion that Clinton knew what he was doing and Obama doesn't?
On Nov 05 09:04 AM John Galt wrote:
> People are reluctant to protest
> the political party they identify with, even if it goes against their
> beliefs. In reality, Republicans should have tea parties now, AND
> when Bush was in office.
>
> The same thing for Democrats. Where are all the Prius driving anti-war
> protesters now? The left used to have countless protests, rallies,
> and demonstrations to end the wars. Now that they got their guy Obama,
> they quit because he's a democrat.
> I don't believe Bill Clinton was a moderate. But the times were moderate...so
> he had to be. Obama...the times he came in to were BANKRUPT. So that's
> what he is. I'm sure he would have rather come in after Greenspan
> started to take the 'enthusiasm' out of the markets in 2001 by raising
> interest rates. But since Greenspan didn't believe in short-circuiting
> irrational exuberance as much as he believe in fueling it, Obama
> inherited a sick economy, and a demented, criminal financial clique
> who felt they had the right to run the world. Blaming the bankrupt
> state of America on Obama is like blaming Jimmy Carter for losing
> the war in Vietnam.
Michael- You might want to read the comment you responded to again. Nobody "blamed" the economy on Obama. I don't think there are any people that believe Obama caused the crisis, but there are many people who don't like the medicine he's giving us. The characterization of Obama was that he is a socialist, and believes in redistribution of wealth as he sees fit. All of his actions support that thought.
Clinton's actions early on were more liberal, but his actions moved more towards the center to respond to voters...
Obama on the other hand is trying to shove more health care spending & cap and trade taxes down our throats when the only thing people care about is the economy.
Why not focus on the economy & jobs? Because his political party controls the entire government and he can pass whatever he wants. Right now that would be an expensive health care plan and carbon taxes.
Blaming only Bush without bringing in Barney Frank (Fannie Mae/ foreclosures) or Chris Dodds to share the blame of the economy demonstrates the true lack of understanding of the total situation.
I am tired of hearing that Bush was the root of all problems. What about your Senator or your US Representative? Do you even know who your US Rep is??
The comment that people do not protest the party they identify with is WAY off. Many people are not identifying with either party anymore. Somehow that fact is being lost on some people that think they know the pulse of the nation. You don't.
Both parties have had their fair share of bad policies, but if only one person has to bear the brunt of full responsibility based on your approach then Obama surpasses Bush at this point.
> Michael,
>
> Exceptionally well said in response to the ridiculous post prior.
> The whole 'Obama is a socialist' line of argument is an excuse to
> avoid actually thinking, generally resorted to by those who lack
> the necessary equipment to do so anyway. Most of the so-called socialistic
> responses to our financial crisis were initiated during the prior
> (i.e., Republican) administration, not to mention the fact that socialism
> and capitalism are shades of a spectrum rather than some sort of
> isolated ideals. To the simpletons, when the government promotes
> and protects an industry they refer to this as capitalism but when
> the government regulates that same industry then their efforts become
> socialism. All modern democracies are socialistic (on many, many
> levels) by definition, but I suppose when your psyche is locked in
> the Cold War and your thought patterns are corroded by Fox News then
> everything becomes black and white, either/or, good or evil. The
> government is evil! Corporations are good! Sarah Palin in 2012!
>
>
> Hey wait a minute, maybe the world really is going to end in 2012.
> If she's elected, maybe it should.
So basically you point out that somebody called your messiah Socialist, and you say "nu-uh", that's ridiculous.
Then you talk about "simpletons" who see as black/white, good/evil... while you infer fox news = bad.
There wasn't really that much protesting then, as there isn't now. Even when there was some gathering or march, the MSM mostly ignored it.
The young people of America did not rise up and do not protest these wars on the same sort of scale as happened with Vietnam.
After all, it's a volunteer army now. Hard to protest when you or your kid doesn't have to go and potentially die or suffer life-long injury unless they want to.
On Nov 05 11:56 AM thiazole wrote:
> This is all pretty off-topic, but the author did bring up politics,
> so I guess he should have expected the conversation to get political.
> In any even, I completely agree with you. When the left was protesting
> on the streets during the Bush administration, I always argued that
> it was nothing but politics to create civil unrest and get "their
> guy" into office. Now that they have succeeded, there are no longer
> any protests, because the protests were never about war (and the
> tea parties aren't really about taxes, either). The type of people
> who protest aren't economically driven - they are socially driven.
> All they care about are social issues, but they will use any popular
> issues (like war and taxes) as fodder for protest.
Wrong about Libs not protesting the war now that a democrat sits in the chair,,Cindy Sheehan was arrested about a month ago in front of the white house.They are giving The Dear Leader an earful.
www.cbsnews.com/blogs/...
On Nov 05 09:04 AM John Galt wrote:
> < When Democrat Bill Clinton was in the White House, America enjoyed
> export growth and a trade-led economic expansion. >
>
> - Bill Clinton was a moderate Democrat
> - Bankruptcy Obama is a socialist
>
> - We had Republican congress to veto spending (Check & balance)
>
> - Liberal democrats Pelosi, Harry Reid, B.Frank run congress
>
> - We had an economic windfall from Internet/Techonology
> - We don't have a "2nd internet" invented or making easier
>
> - We weren't in two wars, we were shrinking our military
> - Even with Obama, we have 2 wars and are expanding our military
>
>
> - We weren't in as much debt back then either...
> - Interest rates better reflected reality...
>
> In one of Ron Paul's recent interviews he brought up a great point...
>
> "Conservatives, republicans or whoever stand for lower taxes, smaller
> government right? So how come when Bush was spending spending spending
> we didn't get as much protest? Were there tea parties when Bush was
> spending and putting us in a 400 billion dollar defecit? Granted
> Obama's is much worse, but still. People are reluctant to protest
> the political party they identify with, even if it goes against their
> beliefs. In reality, Republicans should have tea parties now, AND
> when Bush was in office.
>
> The same thing for Democrats. Where are all the Prius driving anti-war
> protesters now? The left used to have countless protests, rallies,
> and demonstrations to end the wars. Now that they got their guy Obama,
> they quit because he's a democrat.
rinse and repeat
Clowns to left of me,
Jokers to the right...
We aren't getting out of this mess until the Government sticks it to China and calls them out on Currency Manipuilation.
None of the corrupt Good ol Boy CEO's are going to hire US workers when they can get Slave labor children for pennies on the dollar lower than US minimum wage.
The US worler is F'd. The only way GDP and Productivity have been increasing is based on the ability to pull in the offshore labor and profit.
Goldman Sachs has too much of a hand in the pocket of our treasury secretary, so he could care less about the US worker and more about the banks that make money by moving money from winner to loser. Especially more when the loser is the US worker.