Commentary Magazine


Topic: GDP

The Jobs Report

The news is better this month, in that 175,000 jobs were created in February, up from January’s 129,000 and December’s dismal 84,000. Economists had been predicting 152,000 new jobs. But the unemployment rate ticked up a notch to 6.7 percent because while the labor force increased, so did the number of unemployed. Partly that is because more people have started looking for jobs, which is a good sign.

The number of long-term unemployed, out of work for more than half a year, has increased by 203,000 to 3.8 million. That’s 37 percent of total unemployment. Teenage unemployment went up for the second straight month, to 21.4 percent. Black unemployment went down a notch, to a still distressing 12 percent.

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The news is better this month, in that 175,000 jobs were created in February, up from January’s 129,000 and December’s dismal 84,000. Economists had been predicting 152,000 new jobs. But the unemployment rate ticked up a notch to 6.7 percent because while the labor force increased, so did the number of unemployed. Partly that is because more people have started looking for jobs, which is a good sign.

The number of long-term unemployed, out of work for more than half a year, has increased by 203,000 to 3.8 million. That’s 37 percent of total unemployment. Teenage unemployment went up for the second straight month, to 21.4 percent. Black unemployment went down a notch, to a still distressing 12 percent.

Economic growth has been slowing. GDP was growing at an annual rate of 4.1 percent in last year’s third quarter, but was only at 2.4 percent in the fourth quarter. Some forecasters expect GDP in this year’s first quarter (which ends March 31st) to be perhaps as little as 1.5 percent. If that turns out to be true and the trend continues, future jobs reports will not look good.

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Exaggerating the Shutdown’s Cost

The federal government of the United States, the largest fiscal entity on the planet, was shut for 16 days. What was the economic impact?

The mainstream media, of course, is always happy to report bad news that they can blame on Republicans. The New York Times, for instance, reported today “economists said that the intransigence of House Republicans would take a bite out of fourth-quarter growth, which will affect employment, business earnings and borrowing costs. The ripple from Washington will be felt around the globe.” The intransigence of Harry Reid and Barack Obama, apparently, had nothing to do with it.

To be sure there were costs. Hotel reservations in Washington, D.C., were down about 8.3 percent (but liquor sales, always robust in the District, were up about 3 percent.) Enterprises dependent on shuttered national parks, such as restaurants, hotels, and souvenir shops, certainly took a hit. Furloughed federal employees did not receive their salaries, and their travel and other expenses ceased.

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The federal government of the United States, the largest fiscal entity on the planet, was shut for 16 days. What was the economic impact?

The mainstream media, of course, is always happy to report bad news that they can blame on Republicans. The New York Times, for instance, reported today “economists said that the intransigence of House Republicans would take a bite out of fourth-quarter growth, which will affect employment, business earnings and borrowing costs. The ripple from Washington will be felt around the globe.” The intransigence of Harry Reid and Barack Obama, apparently, had nothing to do with it.

To be sure there were costs. Hotel reservations in Washington, D.C., were down about 8.3 percent (but liquor sales, always robust in the District, were up about 3 percent.) Enterprises dependent on shuttered national parks, such as restaurants, hotels, and souvenir shops, certainly took a hit. Furloughed federal employees did not receive their salaries, and their travel and other expenses ceased.

According to ABC News, Moody’s Analytics says that the shutdown cost $23 billion, or $1.4375 billion per day. The country’s GDP is about 46 billion a day. Standard and Poor’s, which had estimated 4th quarter growth at 3 percent, now says it will be closer to 2 percent. Others have different figures. IHS  Global Insight, according to NBC News, cut its 4th quarter GDP estimates from 2.2 percent growth to 1.6 percent growth. These figures, especially this early after the end of the shutdown, are guesstimates at best.

But the important point is how much of that lost GDP is lost forever? The trip to the Great Smoky Mountains National Park that was cancelled last week might well be rescheduled for next week, or next year. Government orders for goods and services were put on hold, but they will be ordered now that the shutdown is over. The furloughed federal workers will now be paid for the days they were idled.

The last shutdown, which lasted 17 days in 1995-96, caused a hit to the GDP in those quarters. But the next two quarters saw above average economic growth, so that the long-term economic growth was essentially unaffected. Indeed, the only real loss here in the long term may be the work product of the furloughed federal workers. But I’ll guess that the productivity of federal bureaucrats is not one of the wonders of the world.

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Next Recession Belongs to Obama, Not GOP

Democrats spent the 2012 presidential campaign successfully blaming George W. Bush for the country’s sluggish economy. But a week after President Obama’s second inaugural, they are still not taking responsibility for the country’s fiscal health. The White House responded to yesterday’s disturbing news that GDP declined for the first time since 2009 in predictable fashion: they blamed the bad numbers on Republicans. White House spokesman Jay Carney said the dip was the fault of “Congressional Republicans” who have tried to restrain the government’s out-of-control spending. Even though the president got his way in the fiscal cliff negotiations with the GOP, Carney said the threat of sequestration, which would mandate across-the-board spending cuts, is the real culprit for the downturn and that the “brinksmanship” by the House Republicans was victimizing the nation’s economy.

This was thin gruel even from a practiced spin master like Carney. The idea of sequestration, which will have a particularly devastating effect on defense, originated in the White House and not the GOP caucus before it was put into the 2011 deal on the debt ceiling. But while we must give Carney credit for his usual chutzpah, the idea that Republican efforts to face up to chronic fiscal problems via entitlement reforms is to blame is a particularly depressing example of the ideological dead end into which the administration has driven the economy. As John Steele Gordon wrote yesterday, there is no way of knowing yet whether yesterday’s GDP numbers are the harbinger of an Obama recession or merely a statistical anomaly, but the steadfast refusal of the White House to face up to the long-term threats is what could be driving the economy into the ditch.

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Democrats spent the 2012 presidential campaign successfully blaming George W. Bush for the country’s sluggish economy. But a week after President Obama’s second inaugural, they are still not taking responsibility for the country’s fiscal health. The White House responded to yesterday’s disturbing news that GDP declined for the first time since 2009 in predictable fashion: they blamed the bad numbers on Republicans. White House spokesman Jay Carney said the dip was the fault of “Congressional Republicans” who have tried to restrain the government’s out-of-control spending. Even though the president got his way in the fiscal cliff negotiations with the GOP, Carney said the threat of sequestration, which would mandate across-the-board spending cuts, is the real culprit for the downturn and that the “brinksmanship” by the House Republicans was victimizing the nation’s economy.

This was thin gruel even from a practiced spin master like Carney. The idea of sequestration, which will have a particularly devastating effect on defense, originated in the White House and not the GOP caucus before it was put into the 2011 deal on the debt ceiling. But while we must give Carney credit for his usual chutzpah, the idea that Republican efforts to face up to chronic fiscal problems via entitlement reforms is to blame is a particularly depressing example of the ideological dead end into which the administration has driven the economy. As John Steele Gordon wrote yesterday, there is no way of knowing yet whether yesterday’s GDP numbers are the harbinger of an Obama recession or merely a statistical anomaly, but the steadfast refusal of the White House to face up to the long-term threats is what could be driving the economy into the ditch.

What Carney failed to mention is that every business in America is worrying about the implications of the president’s signature legislative achievement. ObamaCare is about to go into effect and the fear that it will drive up health-care costs in a way that could sink even substantial companies is already having a powerful impact on job growth and investment. Add in worries about the mounting federal debt and the government’s spending problems—which, contrary to the assertion of Senator Mary Landrieu, is a grim reality and not the invention of FOX News analysts—as well as Democratic threats to raise taxes and you have the makings of a perfect storm that could well create another Great Recession.

It is true that the uncertainty over the future that is fueled by the standoffs over the debt ceiling hasn’t helped the economy. The president has succeeded in fooling much of the public into believing this is solely the work of Republican obstruction, but now that the House GOP has punted on the debt ceiling, it is going to be difficult for Carney to keep pretending that it is House Speaker John Boehner and the Tea Party, rather than the man in the Oval Office, who has the principal responsibility for what is going on.

If the next growth report shows a negative number, President Obama will find himself presiding over his own recession. He may try to pin it on the GOP, but in his fifth year in the White House, that is a trick that even a master like Jay Carney will have trouble pulling off. The next recession, which may already be starting, is the work of an administration that is prepared to saddle the country with more debt in order to realize their liberal fantasies of expanded government, not the last-ditch efforts of generally powerless Republicans trying to stave off impending disaster.

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