Friday, July 03, 2009

Climbing Out Or Not

The vast wasteland that the U.S. economy has become hasn't given a lot of room for hope. Positive reports about the decrease in increases of unemployed numbers really just doesn't excite anyone. Telling statistics, instead, are about increased savings as workers prepare for a bleak future.

Dr. Krugman takes a page from Pres. Obama's own book, and urges a big boost for the economy before we lose more ground still.

... many members of my profession are playing a distinctly unhelpful role.

It has been a rude shock to see so many economists with good reputations recycling old fallacies — like the claim that any rise in government spending automatically displaces an equal amount of private spending, even when there is mass unemployment — and lending their names to grossly exaggerated claims about the evils of short-run budget deficits. (Right now the risks associated with additional debt are much less than the risks associated with failing to give the economy adequate support.)

Also, as in the 1930s, the opponents of action are peddling scare stories about inflation even as deflation looms.

So getting another round of stimulus will be difficult. But it’s essential.

Obama administration economists understand the stakes. Indeed, just a few weeks ago, Christina Romer, the chairwoman of the Council of Economic Advisers, published an article on the “lessons of 1937” — the year that F.D.R. gave in to the deficit and inflation hawks, with disastrous consequences both for the economy and for his political agenda.

The well-being of the country is at stake. The lesson has been learned before, and denial is not keeping the larder stocked in the nation's jobless households.

# Average workweek fell to a record low and weekly hours also fell. Aggregate hours fell including in the manufacturing sector. Average hourly earnings rose 2.7% y/y and weekly earnings rose only 0.9% y/y . The diffusion index fell indicating that more number of industries shed jobs. The unemployment duration rose to a record 17.9 weeks. Around 29% of the unemployment workers have been so for six months and over 52% of the unemployment workers have been so for three months. (U.S. Bureau of Labor Statistics)
# In the last two recessions though initial claims peaked just before the end of the recession, then stayed elevated for a long period following the recession - a jobless recovery'. There is a good chance this recovery will be very sluggish too and claims will remain elevated for some time. (Calculated Risk Blog)
# Firms are trying to maintain profit margins by cutting labor costs. Job losses and rise in unemployment rate will continue through 2010 with a slow start in hiring (jobless recovery). Firms will begin by hiring part-time and temporary workers first before hiring full-time workers.

With news like yesterday's, investors dumped more stocks. Without consumers, the economy is dead in the water.

The individual workers' vital place in the economy at last is being seen as the mainstay of a consumer economy by the general public as well as by the left. With job loss and salary shrinkage over the previous decade, we lost the impetus for growth. Returning to viability will take a long time, possibly another decade, to build back up.

The lessons may fail to sink in for the obstructionist element, which is a good way to tell which can be trusted with the country's future. The recent past has provided excellent, painful, object lessons in who not to trust.

Simple, dependable, test; anyone telling you taxes are the problem and the answer, are hyping fraud and aren't guarding your interests.

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Anonymous larry, dfh said...

As I've written here before, economics is a false science often used to justify political philosophy and policy. From what I've been reading lately:
- savings are not increasing, money is being spent paying down debt, that is for purchases previously made. It is not being left in the banks.
- we are in a situation where every dollar of new federal debt results in less than a dollar of new GDP. We are going into a hole out of which we will not be able to climb. The reason for this is that the debt we are incurring is going for wars, and to cover the bad bets of goldman sachs at the craps tables. This is unproductive debt, yet it's all the corrupt bastards in our govt. know how to do.
There are a few economists that care enough to write the truth, but the ones you'll see on tv are corrupt spokespeople for the thieves. Green fucking shoots, indeed.

5:20 PM  
Blogger Ruth said...

Funny you should mention it, the Sat. morning WSJReport is one of my favorite events, it's so hilariously swill. Any tv actor calling for tax breaks for business, the approved mantra, will get a boost. Nary a mention of the fact that the jobs supposed to result from those tax breaks did not occur, and will not.

1:32 AM  

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