Commentary Magazine


Topic: economy

The Jobs Report

The monthly jobs report is modestly good news for the economy. While the unemployment rate stayed at 6.7 percent, the economy created 192,000 new jobs and the job totals for January and February were upped by a combined 37,000. There was other good news too. Teenage unemployment declined from 21.4 percent to 20.9. But the unemployment rate for black teenagers (which tends to be volatile) rose from 32.4 to 36.1. That might reflect more black teenagers coming into the job market, looking for employment. The participation rate ticked up from 63 to 63.2 percent. But it’s still down from a year ago, when it was at 63.3.

The economy needs at least 250,000 new jobs a month to achieve a steady decline in the unemployment rate and we have had only three months with job creation that robust since the end of 2011. So the recovery remains sluggish.

The administration will undoubtedly be touting the fact that the economy now has more private-sector jobs (116.09 million) than at the former peak in January 2008, when there were 115.98 million private-sector jobs. But don’t look for the administration to take note that since January 2008, governments have shed a total of 535,000 jobs, so the national job total is still well below the pre-recession peak. It won’t make the point either that the civilian labor force is 2 million people larger than it was six years ago, and that the participation rate was then 66.2 percent as opposed to today’s 63.2 percent.

Read More

The monthly jobs report is modestly good news for the economy. While the unemployment rate stayed at 6.7 percent, the economy created 192,000 new jobs and the job totals for January and February were upped by a combined 37,000. There was other good news too. Teenage unemployment declined from 21.4 percent to 20.9. But the unemployment rate for black teenagers (which tends to be volatile) rose from 32.4 to 36.1. That might reflect more black teenagers coming into the job market, looking for employment. The participation rate ticked up from 63 to 63.2 percent. But it’s still down from a year ago, when it was at 63.3.

The economy needs at least 250,000 new jobs a month to achieve a steady decline in the unemployment rate and we have had only three months with job creation that robust since the end of 2011. So the recovery remains sluggish.

The administration will undoubtedly be touting the fact that the economy now has more private-sector jobs (116.09 million) than at the former peak in January 2008, when there were 115.98 million private-sector jobs. But don’t look for the administration to take note that since January 2008, governments have shed a total of 535,000 jobs, so the national job total is still well below the pre-recession peak. It won’t make the point either that the civilian labor force is 2 million people larger than it was six years ago, and that the participation rate was then 66.2 percent as opposed to today’s 63.2 percent.

All in all, the new jobs report displays an economy that is growing but hardly soaring. It’s not yet morning in America, to coin a phrase, but there is, perhaps, a hint of pink in the east.

Read Less

Unskilled Labor and the Minimum Wage

Like single-payer medical care, the minimum wage has one great advantage as a political idea: It can be explained on the back of a post card.  If employers are forced to pay a living wage then no one will live in poverty. For low-information voters (and the vast majority of political reporters) that’s all there is to it. Q.E.D.

No wonder liberal politicians have been advocating the minimum wage since the New Deal era. It’s been winning them favorable headlines and elections for eighty years.

But, again like single-payer, because it is a good political idea doesn’t mean that it’s a good economic one. It isn’t. A mandated minimum wage is utterly the wrong way to approach the problem of some people being unable to earn a decent living. Here’s why.

Read More

Like single-payer medical care, the minimum wage has one great advantage as a political idea: It can be explained on the back of a post card.  If employers are forced to pay a living wage then no one will live in poverty. For low-information voters (and the vast majority of political reporters) that’s all there is to it. Q.E.D.

No wonder liberal politicians have been advocating the minimum wage since the New Deal era. It’s been winning them favorable headlines and elections for eighty years.

But, again like single-payer, because it is a good political idea doesn’t mean that it’s a good economic one. It isn’t. A mandated minimum wage is utterly the wrong way to approach the problem of some people being unable to earn a decent living. Here’s why.

When we talk about the “U.S. economy” we are talking about the sum of all transactions that take place in the United States in a given time frame.  A transaction is nothing neither more nor less than, “an exchange of commodities between two parties that is to the benefit of both parties.” Each side of a transaction must value what it receives more than what it gives away or the transaction won’t take place. No one would willingly spend ten dollars to buy a five-dollar bill.

But a mandated minimum wage sometimes requires employers to do exactly that. No employer will willingly pay an employee X dollars an hour unless he is reasonably sure he will get more than X dollars worth of work from him. And workers just entering the marketplace are usually unskilled and therefore their labor isn’t worth much, especially as unskilled jobs are more and more being automated. In the 1940’s former Congressman Herman Badillo worked his way through high school and college by working as a pin-spotter in a bowling alley, as a dishwasher, and as an elevator boy. All three jobs are now extinct.

So a mandated minimum wage set at a level above what unskilled labor is worth has several pernicious economic effects.

First, it costs jobs. If we understand anything about economics, we understand that if you raise the price of a commodity there will be less demand for that commodity. That’s just as true of labor as it is of beef, cement, or automobiles. Teenage unemployment is currently at 20.7 percent (black teenage unemployment is at a horrendous 38 percent). Raising the minimum wage will increase that unemployment or the law of supply and demand is false. A job at a subpar wage is a lot better than no job at all. That’s especially true as very few full-time employees stay at the minimum wage they started at. Once they acquire some skills and become more valuable to the employer, they start getting raises. Raising the minimum wage just keeps them from getting on that all-important first rung of the ladder.

Second, it helps the wrong people. The typical minimum-wage earner is not a head of household or primary breadwinner. He’s a teenager flipping hamburgers or bagging groceries after school. Thirty-nine percent—well over a third—of minimum wage earners live in families with incomes at least three times the poverty level. The average family income of minimum wage earners is $48,000 a year.

Third, the people who need the help—heads of households—would be far better helped by the earned income tax credit, which is predicated on family income, not individual wages, with no economic disruption. In other words the EITC is a medicine with far fewer undesirable side effects than the minimum wage. One reason that politicians don’t like it is that it shows up on the federal books, adding to the deficit, which the minimum wage doesn’t.

Fourth, the reason the minimum wage is so strongly backed by labor unions (the prime lobbying force at work here) is that while few of their members earn the minimum wage, many of them contractually earn multiples of it. So raising the minimum wage for those earning $7.25 an hour bagging groceries also raises the wages of those earning, say, $29 an hour (plus benefits) as a skilled worker. In other words, raising the minimum wage tends to raise the price of labor across the wage-earning spectrum, reducing the demand for labor across that entire spectrum.

Fifth, raising the minimum wage will only accelerate the trend to robotics and automation replacing unskilled labor. Five years ago, the grocery store I often go to had fourteen checkout lines, all manned by clerks. Today it has fourteen checkout lines, six of them manned by computers. Jack up the minimum wage by 39 percent, as Obama wants to do, and do you think in a few years there might be only one line that’s manned by a minimum wage worker instead of a computer? I do.

The minimum wage is a classic example of a really lousy idea that, unexamined, sounds noble. It’s not, it’s economic poison.

Read Less

The Oil and Gas Boom Booms On

The domestic oil and gas boom is rolling on, with no end of positive effects for the American economy. At the official end of the recession, in June 2009, we pumped 158.266 million barrels of oil that month. In November 2013, we pumped 233.051 million barrels, a 47.2 percent increase. This has led directly to much less imported oil, a much improved balance of trade, and a less influential OPEC.

But as Investor’s Business Daily points out, the economic benefits of the energy boom spread far beyond the oil industry into the economy as a whole. Jobs in the oil and gas fields are up about 40 percent since the end of the recession, and the ten states that are seeing substantially rising hydrocarbon production all have had job growth above the national average. And as IBD explains, “These jobs, moreover, are ‘sticky’ — anchored in the local economy and ranging from information services to training, health care, housing, education and related manufacturing.” North Dakota, battening on the rich oil resources of the Bakken Shield, has the lowest unemployment rate in the country.

And low-cost energy is attracting foreign investment. “The boom has also attracted a similar scale of new foreign direct investment,” IBD reports. “Because of low-cost energy abundance, 100 factories are set to come on line by 2017. When all are up and running, another $300 billion will be pumped into GDP and 1 million more jobs created.”

Read More

The domestic oil and gas boom is rolling on, with no end of positive effects for the American economy. At the official end of the recession, in June 2009, we pumped 158.266 million barrels of oil that month. In November 2013, we pumped 233.051 million barrels, a 47.2 percent increase. This has led directly to much less imported oil, a much improved balance of trade, and a less influential OPEC.

But as Investor’s Business Daily points out, the economic benefits of the energy boom spread far beyond the oil industry into the economy as a whole. Jobs in the oil and gas fields are up about 40 percent since the end of the recession, and the ten states that are seeing substantially rising hydrocarbon production all have had job growth above the national average. And as IBD explains, “These jobs, moreover, are ‘sticky’ — anchored in the local economy and ranging from information services to training, health care, housing, education and related manufacturing.” North Dakota, battening on the rich oil resources of the Bakken Shield, has the lowest unemployment rate in the country.

And low-cost energy is attracting foreign investment. “The boom has also attracted a similar scale of new foreign direct investment,” IBD reports. “Because of low-cost energy abundance, 100 factories are set to come on line by 2017. When all are up and running, another $300 billion will be pumped into GDP and 1 million more jobs created.”

The Obama administration, naturally, is taking entirely undeserved credit for this, for its policies have slowed the oil and gas boom to the extent possible. Other Democrats, with the president’s blessing, have also been impeding oil and gas drilling. While Pennsylvania has been exploiting the vast gas reserves of the Marcellus shale, Governor Andrew Cuomo in neighboring New York has decided to let deeply depressed upstate go on being deeply depressed rather than drill into the Marcellus shale and, Cuomo proclaims, risk ground water contamination. This is, of course, nonsense. Fracking began in 1947 and hundreds of thousands of wells have been drilled in the last 67 years using the technique. There has not been a single case of documented ground water contamination from any of those wells.

Domestically, President Obama has, at best, slow walked the best and most obvious means of increasing American economic prosperity and employment. Internationally, he has worked to limit his country’s influence and prestige. I can think of no other example in all human history of a head of state whose policies were designed to weaken the country he headed.

Read Less

Obama’s Priorities v. Those of the American People

President Obama has recently said that the trend of growing inequality is “certainly my highest priority.” He might be interested to know that it’s not the highest priority for the people he was voted to represent.

Not even close.

A new Gallup poll found the 10 most important issues facing the American people to be, in order, (1) unemployment/jobs; (2) economy in general; (3) government; (4) health care; (5) federal budget deficit/federal debt; (6) immigration/illegal aliens; (7) ethical/moral decline; (8) education; (9) lack of money; and (10) poverty/hunger/homelessness. Even among Democrats, income inequality doesn’t rate. Neither, by the way, does raising the minimum wage, climate change, and gun control–three other issues Mr. Obama has made central to his second-term agenda.

So why is the president talking about issues that the public has so little concern about?

Read More

President Obama has recently said that the trend of growing inequality is “certainly my highest priority.” He might be interested to know that it’s not the highest priority for the people he was voted to represent.

Not even close.

A new Gallup poll found the 10 most important issues facing the American people to be, in order, (1) unemployment/jobs; (2) economy in general; (3) government; (4) health care; (5) federal budget deficit/federal debt; (6) immigration/illegal aliens; (7) ethical/moral decline; (8) education; (9) lack of money; and (10) poverty/hunger/homelessness. Even among Democrats, income inequality doesn’t rate. Neither, by the way, does raising the minimum wage, climate change, and gun control–three other issues Mr. Obama has made central to his second-term agenda.

So why is the president talking about issues that the public has so little concern about?

Part of the explanation, I suspect, is that Mr. Obama really believes in his (progressive) agenda and feels more liberated in his second term to pursue it. But I also imagine that the president has very little to say that’s helpful to him or his party about unemployment and jobs, the economy in general, health care, and the debt. So Mr. Obama is turning to other issues, hoping to shift the American people’s focus from what they care about to what he cares about.

This effort is turning out to be a bust. The public is tuning the president out and turning him off. His words are like white noise, and he increasingly looks to be a lame duck–one day impotent, the next day irrelevant, drifting along in a world of his own. 

Mr. Obama seems to think that as a second-term president, he can talk about what he darn well pleases. Maybe. We’ll see what the voters think about that in November, when they get their chance to render their judgment on his second term. 

Read Less

An Old Idea, Still as Dumb as Ever

The New York Times has an op-ed this morning whose very title gives away its bias, “A New Way to Rein in Fat Cats.” “Fat cats,” of course, is a highly pejorative term designating people who have large incomes. In this case it refers not to people who inherited lots of money and spend their lives yacht racing and polo playing, not to Hollywood stars pulling down $20 million a picture, but specifically to corporate executives.

The author of this op-ed, Douglas K. Smith, wants to limit the compensation of the executives of corporations who do business with the federal government to 20 times the pay of its lowest-paid workers. If President Obama’s executive order requiring a minimum wage of $10.10 is issued, then the highest paid worker in a company paying someone the minimum wage would, assuming a forty-hour work week, earn $420,160. But CEO’s are not paid wages, they are paid a salary and they work far more than 40 hours a week. Like the president, they get 3 a.m. phone calls. They have to testify before Congress. They travel a lot. They make tough decisions that can cost or earn billions. It takes years of on-the-job training to be ready for the top job in a huge corporation. (If you’d like an example of what happens when an unqualified person tries to run a large organization, I refer you to 1600 Pennsylvania Avenue.)

Read More

The New York Times has an op-ed this morning whose very title gives away its bias, “A New Way to Rein in Fat Cats.” “Fat cats,” of course, is a highly pejorative term designating people who have large incomes. In this case it refers not to people who inherited lots of money and spend their lives yacht racing and polo playing, not to Hollywood stars pulling down $20 million a picture, but specifically to corporate executives.

The author of this op-ed, Douglas K. Smith, wants to limit the compensation of the executives of corporations who do business with the federal government to 20 times the pay of its lowest-paid workers. If President Obama’s executive order requiring a minimum wage of $10.10 is issued, then the highest paid worker in a company paying someone the minimum wage would, assuming a forty-hour work week, earn $420,160. But CEO’s are not paid wages, they are paid a salary and they work far more than 40 hours a week. Like the president, they get 3 a.m. phone calls. They have to testify before Congress. They travel a lot. They make tough decisions that can cost or earn billions. It takes years of on-the-job training to be ready for the top job in a huge corporation. (If you’d like an example of what happens when an unqualified person tries to run a large organization, I refer you to 1600 Pennsylvania Avenue.)

So corporate CEOs may be overpaid, they may underachieve, but no one off the editorial pages of the Times can argue that they don’t work hard. Running a multi-billion-dollar organization is a very time-consuming, demanding, high-stress task that very, very few people have the skills and talents to handle.

So corporate CEOs are highly paid because market forces dictate that they be so. If someone has rare skills and talents that are in high demand, they will earn lots of money. For instance, there are only a handful of people in the country who can throw a baseball 60 feet 6 inches through a strike zone at 95 miles per hour. But Cliff Lee of the Philadelphia Phillies can. That’s why he was paid about $7,500 per pitch last season to do so.

So Mr. Smith’s bright idea is nothing more than a price-fixing scheme to stick it to a group that’s perennially unpopular on the left. I doubt he advocates that Cliff Lee be paid no more than 20 times what the janitors at Citizens Bank Park are paid. I equally doubt that President Obama’s Hollywood friends, who bankroll him so generously at $50,000-a-plate dinners, would be willing to settle for a lousy $400,000 a year in income. Private jets are expensive. So are $50,000-a-plate dinners.

Besides, this nonsense has been tried before. In 1993, Congress and President Clinton limited the deductibility of corporate executive salaries to $1 million. What happened? Nothing. Corporations quickly found ways around the salary cap in order to get the executive talent they felt they needed.

So the government can dictate price controls. The editorial board of the New York Times can write glowing editorials about “fairness.” And market forces will work their inevitable way regardless.

Read Less

The Jobs Report

Job creation slowed markedly in December, with only a dismal 74,000 jobs created last month, the worst monthly report in three years. Economists, notorious for their clouded crystal balls, had been predicting 200,000 new jobs, above the 2013 average of 182,000 per month.

They also predicted that the unemployment rate would remain steady at 7 percent. It didn’t, it fell a full three-tenths of a percent to 6.7. But that was only because the labor participation rate fell to 62.8 percent, down two-tenths. As has been happening all through the so-called recovery, improvement in the unemployment rate has been largely the result of a shrinking labor force, not a growing jobs market. The labor participation rate is the now lowest since the days of Jimmy Carter.

Read More

Job creation slowed markedly in December, with only a dismal 74,000 jobs created last month, the worst monthly report in three years. Economists, notorious for their clouded crystal balls, had been predicting 200,000 new jobs, above the 2013 average of 182,000 per month.

They also predicted that the unemployment rate would remain steady at 7 percent. It didn’t, it fell a full three-tenths of a percent to 6.7. But that was only because the labor participation rate fell to 62.8 percent, down two-tenths. As has been happening all through the so-called recovery, improvement in the unemployment rate has been largely the result of a shrinking labor force, not a growing jobs market. The labor participation rate is the now lowest since the days of Jimmy Carter.

Unemployment in hard-hit sectors showed little if any improvement. Teenage unemployment is at 20.3 percent (raising the minimum wage would make that worse, probably much worse, as teenagers make up a very large percentage of minimum-wage workers). Black unemployment was at 11.9 percent. People unemployed for more than 27 weeks stood at 3.9 million, 37.7 percent of total unemployment, up from 37.4 percent last month.

The question is how much longer President Obama can avoid major political damage from these numbers. The “recovery” began in June 2009, according to economists. According to millions of unemployed, under-employed, and dropouts from the labor force, it has yet to begin.

Read Less

The Jobs Report

The Bureau of Labor Statistics unemployment report for November came out at 8:30 this morning. The unemployment rate fell to 7 percent in November, its lowest rate since November 2008, as the country was plunging into the deep recession. Partly, however, that reflected the recall of federal workers who had been furloughed in the shutdown of October. The economy added 203,000 jobs last month, above the average of 180,000 per month for 2013 (but which, in turn, was below 2012’s average of 183,000).

Still, while the number of those unemployed less than five weeks declined by 300,000, those unemployed for more than 27 weeks remained essentially flat at 4.1 million. The labor force participation rate, which has been in decline throughout the recession and anemic recovery, rose from 62.8 percent to 63.0.

Read More

The Bureau of Labor Statistics unemployment report for November came out at 8:30 this morning. The unemployment rate fell to 7 percent in November, its lowest rate since November 2008, as the country was plunging into the deep recession. Partly, however, that reflected the recall of federal workers who had been furloughed in the shutdown of October. The economy added 203,000 jobs last month, above the average of 180,000 per month for 2013 (but which, in turn, was below 2012’s average of 183,000).

Still, while the number of those unemployed less than five weeks declined by 300,000, those unemployed for more than 27 weeks remained essentially flat at 4.1 million. The labor force participation rate, which has been in decline throughout the recession and anemic recovery, rose from 62.8 percent to 63.0.

These numbers might be good enough for the Federal Reserve to consider scaling back on its bond and mortgage purchases at the monthly meeting of its Open Market Committee later this month. That would account for the Dow being down about 70 points, as Wall Street likes the low interest rates that the Fed’s purchases have produced.

Meanwhile, the government on Thursday revised upwards its estimate of third-quarter GDP growth to 3.6 percent, the best showing since the first quarter of 2012. But much of that growth came by means of inventory growth rather than increased sales. So most economists expected fourth-quarter growth to be much more modest. The New York Times reports that Barclay’s has cut back its estimate of fourth-quarter growth to a mere 1.5 percent annual rate.

Overall, the news is moderately good. There is still no boom in sight, but at least things are moving in the right direction, if modestly.

Read Less

The Jobs Report

The new jobs report showed much stronger than expected job growth in October, up 203,000 when the forecast had been 120,000. The job growth for September and August were also revised upwards, giving an average for the three months of over 200,000, which is the number economists think is needed to bring unemployment down in the long term (the drop in unemployment in recent months was mostly due to people dropping out of the job market).

The unemployment rate actually ticked up last month, however, to 7.3 percent, but that was due to counting temporarily laid-off federal workers because of the shutdown early in the month.

Read More

The new jobs report showed much stronger than expected job growth in October, up 203,000 when the forecast had been 120,000. The job growth for September and August were also revised upwards, giving an average for the three months of over 200,000, which is the number economists think is needed to bring unemployment down in the long term (the drop in unemployment in recent months was mostly due to people dropping out of the job market).

The unemployment rate actually ticked up last month, however, to 7.3 percent, but that was due to counting temporarily laid-off federal workers because of the shutdown early in the month.

Markets immediately reflected the possibility that the Federal Reserve might now begin to scale back the stimulus. The yield on 10-year treasury bonds rose to 2.72 percent in early trading from last evening’s 2.60 percent. But it will take more than one month’s good news to induce the Fed to move more than slightly.

And the jobs report was by no means all good news. The participation rate (the percentage of working-age people in the labor force) continued to decline, now down to 62.8 percent from 63.2 last month. The unemployment rates for teenagers (22.2 percent) and blacks (13.1 percent) remain dismal. The rate for teenagers is likely to go up in the future, as several localities, such as the state of New Jersey, raised their minimum wages in the election on Tuesday. When the teenage (i.e. unskilled) unemployment rate is over 20 percent, increasing the price of unskilled labor is economic lunacy.

The broader measure of unemployment, which includes discouraged job seekers and those involuntarily working part time, increased last month from 13.6 percent to 13.8 percent. It is only when this rate begins to decline substantially month-over-month that we can say we are, finally, on the way up.

Read Less

The Jobs Report

Thanks to the government shutdown, the jobs report, due out October 4, only came out today. Next month’s will be late as well, coming out on November 8 instead of November 1.

The economy added 148,000 jobs last month and the unemployment rate fell by a tick, to 7.2 percent. These numbers will, of course, be touted as good news by the administration, but it’s basically more of the same: slow job grow and an unemployment rate more affected by people dropping out of the work force than by growth. In the last year of “recovery” the unemployment rate has fallen only from 7.8 percent to 7.2 percent, while the participation rate (the percentage of adults in the workforce) declined from 63.6 to 63.2.

Read More

Thanks to the government shutdown, the jobs report, due out October 4, only came out today. Next month’s will be late as well, coming out on November 8 instead of November 1.

The economy added 148,000 jobs last month and the unemployment rate fell by a tick, to 7.2 percent. These numbers will, of course, be touted as good news by the administration, but it’s basically more of the same: slow job grow and an unemployment rate more affected by people dropping out of the work force than by growth. In the last year of “recovery” the unemployment rate has fallen only from 7.8 percent to 7.2 percent, while the participation rate (the percentage of adults in the workforce) declined from 63.6 to 63.2.

The number of jobs created in September was below expectations (economists were expecting about 185,000 jobs created) and way below the average for the last year (193,000). And the unemployment rate for teenagers (21.4 percent) and blacks (12.9) remain dismal. The unemployment rate for those 18-29, many of them just entering the workforce, is 15.9 percent, a tremendous headwind for somebody with a necessarily short résumé.

The broader measure of unemployment, which includes discouraged workers and those working part time who want full-time jobs, is 13.6 percent.

Altogether, the numbers are depressing if not indicative of a depression.

Read Less

The Fed Stands Pat on the Stimulus

In a bit of a surprise, the Federal Reserve’s Open Market Committee voted 11-1 to continue its program of buying $85 billion worth of federal and mortgage bonds in order to continue stimulating the economy. It had announced in June that it would begin cutting back on these purchases by the end of the year and many expected it to begin doing so today. 

Both Paul Krugman who wrote earlier this week, “Memo to the Fed: Please don’t do it” and the financial markets, which love low interest rates, are happy. The S&P 500 index hit a new high on the news.

By buying these bonds, the Fed is, in effect, creating money, almost $1 trillion a year in new money. Since the financial meltdown in 2008, the Fed has created many trillions of dollars trying to stabilize the economy and then revive it. At some point it will have to begin to reduce and then reverse its bond purchases and get that money back into its capacious vaults lest a virulent inflation break out.

Read More

In a bit of a surprise, the Federal Reserve’s Open Market Committee voted 11-1 to continue its program of buying $85 billion worth of federal and mortgage bonds in order to continue stimulating the economy. It had announced in June that it would begin cutting back on these purchases by the end of the year and many expected it to begin doing so today. 

Both Paul Krugman who wrote earlier this week, “Memo to the Fed: Please don’t do it” and the financial markets, which love low interest rates, are happy. The S&P 500 index hit a new high on the news.

By buying these bonds, the Fed is, in effect, creating money, almost $1 trillion a year in new money. Since the financial meltdown in 2008, the Fed has created many trillions of dollars trying to stabilize the economy and then revive it. At some point it will have to begin to reduce and then reverse its bond purchases and get that money back into its capacious vaults lest a virulent inflation break out.

The timing will be tricky, to put it mildly. Too quickly and it could throw the economy back into recession. Too slowly and we could be back to the 1970’s, with double-digit inflation.

Let’s hope they get it right.

Read Less

Too Bad ObamaCare Works as Intended

Year after year, Forbes magazine places Wegmans Food Markets high on its “100 Best Companies to Work For” list, usually in the top five in the country. The supermarkets are based in Rochester, New York, a region that has been hit hard by economic stagnation, with downsizing at several companies (like Xerox and Kodak) that were once the biggest employers in the region. Wegmans has been a refuge for many employees, drawn to its generous salaries, bonuses, and benefits package. Last year Forbes cited its low turnover rate (3.4 percent last year) as a factor in why the supermarkets are such popular places to work. Despite the critical role that the supermarket chain plays in the local economy, Wegmans became a less coveted place to work this summer when it was announced that some part-time workers’ health benefits would be cut thanks to ObamaCare, and earlier this week it was announced that Trader Joe’s would do the same.

I’ve discussed the impact of ObamaCare on businesses quite a few times on this blog: on the restaurant industry, on individual small businesses, and on young people and part-time workers. This summer two stories emerged from two supermarket chains, Wegmans and Trader Joe’s, which have been held up by many on the left as shining examples of “responsible” corporate behavior. Their workers are paid highly (liberals describe it as “fairly”) and are rewarded with coveted and expensive perks like health insurance coverage. According to the Huffington Post, a number of part-time workers interviewed at Trader Joe’s worked there just to receive the subsidized insurance. Now that the insurance will have to be purchased on the ObamaCare exchanges market, workers are understandably wary of how far their budgets will be stretched in order to maintain the coverage they had before the president swooped in to make their insurance more “affordable.”

Read More

Year after year, Forbes magazine places Wegmans Food Markets high on its “100 Best Companies to Work For” list, usually in the top five in the country. The supermarkets are based in Rochester, New York, a region that has been hit hard by economic stagnation, with downsizing at several companies (like Xerox and Kodak) that were once the biggest employers in the region. Wegmans has been a refuge for many employees, drawn to its generous salaries, bonuses, and benefits package. Last year Forbes cited its low turnover rate (3.4 percent last year) as a factor in why the supermarkets are such popular places to work. Despite the critical role that the supermarket chain plays in the local economy, Wegmans became a less coveted place to work this summer when it was announced that some part-time workers’ health benefits would be cut thanks to ObamaCare, and earlier this week it was announced that Trader Joe’s would do the same.

I’ve discussed the impact of ObamaCare on businesses quite a few times on this blog: on the restaurant industry, on individual small businesses, and on young people and part-time workers. This summer two stories emerged from two supermarket chains, Wegmans and Trader Joe’s, which have been held up by many on the left as shining examples of “responsible” corporate behavior. Their workers are paid highly (liberals describe it as “fairly”) and are rewarded with coveted and expensive perks like health insurance coverage. According to the Huffington Post, a number of part-time workers interviewed at Trader Joe’s worked there just to receive the subsidized insurance. Now that the insurance will have to be purchased on the ObamaCare exchanges market, workers are understandably wary of how far their budgets will be stretched in order to maintain the coverage they had before the president swooped in to make their insurance more “affordable.”

The latest liberal spin from ThinkProgress posits that the fact that more people are being pushed onto ObamaCare exchanges proves that the law is working as intended. Sadly, that’s not untrue. When the president stood in front of crowds of nervous Americans, he assured them that if they liked their insurance they’d be able to keep it. Conservatives expressed doubt. Conservatives knew then, as we know now, that it was a baldfaced lie. It was never the intention of the law to keep Americans on their own privately obtained health insurance plans. The few people who read the bill beforehand knew that, and human resources departments nationwide are coming to the same conclusion. It is prohibitively expensive to continue to provide the coverage mandated by the law, which is why we hear stories every day of workers being pushed to part-time status, and why many previously fortunate part-timers are losing the coverage they once enjoyed.

Full-time workers aren’t safe from ObamaCare’s grasp either. Companies and universities, big and small, have announced that they can no longer provide the generous plans they once offered to families of full-time workers either. Several large companies like the United Parcel Service have announced that the spouses of their employees that can obtain insurance elsewhere will now be required to do so. Many of these spouses, along with these part-time workers, will now find themselves without coverage or navigating the ObamaCare exchanges in the new year. The exchanges, it seems, will be far less affordable than the plans they were on, despite the promise that ObamaCare would be the “Affordable Care Act.”

Among conservatives there are a few famous, perhaps infamous, phrases that the sponsors and authors of ObamaCare uttered during their push to pass the bill into law. One of the most well-known was Nancy Pelosi’s statement that Congress would have to pass the bill in order to find out what was in it. The text of the bill has been available for several years now. As deadlines have approached Americans are seeing first-hand just how much the contents of the law will impact them and their families. It’s no wonder there has been, according to Politicoa “sharp increase” in opposition to the health-care law compared to earlier this year. 

Read Less

The Jobs Numbers

The Obama “recovery” continues in the latest jobs report. The economy added 169,000 jobs last month, but jobs for June and July were revised downwards by 72,000. The unemployment rate fell by a notch to 7.3 percent. But that was only because 310,000 people left the labor force. The participation rate (the percentage of working-age people in the labor force) dropped to 63.2 percent, the lowest since August of 1978.

Underemployment, people with part-time jobs who want full-time ones, continues to be a major problem, with 40 percent of part-time workers unable to find full-time employment.

Read More

The Obama “recovery” continues in the latest jobs report. The economy added 169,000 jobs last month, but jobs for June and July were revised downwards by 72,000. The unemployment rate fell by a notch to 7.3 percent. But that was only because 310,000 people left the labor force. The participation rate (the percentage of working-age people in the labor force) dropped to 63.2 percent, the lowest since August of 1978.

Underemployment, people with part-time jobs who want full-time ones, continues to be a major problem, with 40 percent of part-time workers unable to find full-time employment.

And most of the jobs created so far this year (848,000—a dismal number in itself) have been part-time jobs. The percentage of those jobs that were part-time was either 96 percent, 63 percent, or 59 percent, depending on how you interpret the Bureau of Labor Statistics data. If you would like to induce a headache, you can follow the arguments among professional economists for which number is correct here. But, regardless, even the lowest number, 59 percent, is dreadful. Prosperity is not built on part-time jobs.

How many of these part-time jobs are due to current economic conditions and how many are due to the impending implementation of Obamacare is anyone’s guess.

Read Less

Wanted: A Republican Governing Agenda

The New York Times reports on a study issued yesterday by two former Census Bureau officials. The study shows that although median annual household income rose to $52,100 in June, from its recent low of $50,700 in August 2011, it remained $2,400 lower—a 4.4 percent decline—than in June 2009, when the recession ended.

According to the Times:

Since the end of the recession … household income has declined for all but a few population groups. Some of the largest percentage declines occurred for groups whose income was already well below the median, like African-Americans, Southerners, people who did not attend college, and households headed by people under age 25.

“Groups with low incomes tended to have steeper declines in income,” said Gordon W. Green Jr., who wrote the report with John F. Coder, a colleague at Sentier Research, which specializes in analyzing household economic data.

Households headed by people ages 65 to 74 were the only group in the study that experienced a statistically significant increase in post-recession income, helped perhaps by the decision of some older workers to remain in the work force or re-enter it.

There are several things to make of these findings, the first of which is that we’ve seen a decline in median income in the aftermath of a recession. During a recovery. That’s a fairly remarkable (and discouraging) development.

Read More

The New York Times reports on a study issued yesterday by two former Census Bureau officials. The study shows that although median annual household income rose to $52,100 in June, from its recent low of $50,700 in August 2011, it remained $2,400 lower—a 4.4 percent decline—than in June 2009, when the recession ended.

According to the Times:

Since the end of the recession … household income has declined for all but a few population groups. Some of the largest percentage declines occurred for groups whose income was already well below the median, like African-Americans, Southerners, people who did not attend college, and households headed by people under age 25.

“Groups with low incomes tended to have steeper declines in income,” said Gordon W. Green Jr., who wrote the report with John F. Coder, a colleague at Sentier Research, which specializes in analyzing household economic data.

Households headed by people ages 65 to 74 were the only group in the study that experienced a statistically significant increase in post-recession income, helped perhaps by the decision of some older workers to remain in the work force or re-enter it.

There are several things to make of these findings, the first of which is that we’ve seen a decline in median income in the aftermath of a recession. During a recovery. That’s a fairly remarkable (and discouraging) development.

As for President Obama’s response to all this, a recent editorial by the Wall Street Journal gets it quite right: “For four and a half years, Mr. Obama has focused his policies on reducing inequality rather than increasing growth. The predictable result has been more inequality and less growth… The core problem has been Mr. Obama’s focus on spreading the wealth rather than creating it.”

Mr. Obama, then, is not only not up to confronting the problems of this era; he is exacerbating them. But even those of us who are critics of the president should admit that the problems afflicting the American economy–including (but not exclusive to) wage stagnation among the middle class, less social mobility among the lower class, and increased inequality–predate the Obama presidency. They are complex and defy simplistic partisan explanations.

Depending on which trend we’re talking about, they are rooted in deep cultural shifts (including a weakening marriage culture), globalization and advances in technology (which have moved us toward an economy that favors skilled over unskilled labor), a decline in workforce participation rates, rising health care costs, educational mediocrity (and downright awful education for the underclass), the structure of our entitlement programs (our transfer payments are increasingly regressive and benefit households headed by older adults, who tend to be wealthier than young adults), a byzantine tax code, and slow growth (the post-2008 recession growth rate has been roughly 2 percent).

In the face of America’s deep cultural and structural problems, assembling an agenda–including a comprehensive social-capital agenda that equips Americans, especially poor Americans, with the skills, values and habits that will allow them to succeed in a modern, free society–is a hugely complicated task. It will require a thoroughgoing reform agenda focused on entitlements, education, immigration, our financial system, and our tax code. A lot of good work is being done by policy experts and public intellectuals, by governors, and some members of Congress. (At a later date I’ll lay out what I think would constitute the broad outlines of an agenda, but for starters it might be worth reading thisthis, and this.)

For the most part, however, Republicans and conservatives sound out of touch, their solutions stale, as if they fail to take into account new circumstances. And it is no wonder that Republican policies seem stale; they are very nearly identical to those offered up by the party more than 30 years ago. I’ve argued before that “For Republicans to design an agenda that applies to the conditions of 1980 is as if Ronald Reagan designed his agenda for conditions that existed in the Truman years.” It doesn’t help, of course, that prominent Republicans occupy their time pursuing tactics that are unworkable and qualify as primal screams (e.g., threatening to shut down the government unless the Affordable Care Act is defunded).

The public is in the process of concluding that President Obama and the Democratic Party, the embodiments of reactionary liberalism, are intellectually bankrupt. They are overmatched by events. This affords an opening for Republicans to put forward a positive governing vision. The elements of a conservative reform agenda certainly exist. But for the GOP to win over new hearts and minds will require the party to embrace that agenda more fully than it has; to overcome some old (bad) habits, to put a new frame on events, and to convince the public that they are the party of modernization, reform, and renewal.

It still has some distance to go. 

Read Less

The Jobs Report

The July jobs report came in from the Bureau of Labor Statistics this morning. There were 162,000 jobs created last month and the unemployment rate fell from 7.6 to 7.4 percent. That’s the lowest unemployment rate since December 2008, the month before Barack Obama became president. That will, undoubtedly, be tomorrow’s headline in the Obama media.

But the civilian participation rate and the employment-population ratio both went down and lag behind where they were a year ago. Unemployment among groups such as blacks (12.5 percent) and teenagers (20.3) remains dismal. The unemployment rate among black teenagers is a horrendous 41.6 percent. In other words, more than two in every five teenage blacks who want a job can’t find one.

Read More

The July jobs report came in from the Bureau of Labor Statistics this morning. There were 162,000 jobs created last month and the unemployment rate fell from 7.6 to 7.4 percent. That’s the lowest unemployment rate since December 2008, the month before Barack Obama became president. That will, undoubtedly, be tomorrow’s headline in the Obama media.

But the civilian participation rate and the employment-population ratio both went down and lag behind where they were a year ago. Unemployment among groups such as blacks (12.5 percent) and teenagers (20.3) remains dismal. The unemployment rate among black teenagers is a horrendous 41.6 percent. In other words, more than two in every five teenage blacks who want a job can’t find one.

People working part-time who would rather be working full-time has shrunk in the last year by a grand total of 3,000 people, from 8,104,000 to 8,101,000. This is probably an effect of the mandate in ObamaCare to insure full-time workers if they number over 50, but part-time workers working less than 30 hours a week don’t count.

In the three years and nine months after unemployment hit its peak in the 1981-82 recession, in December 1982, unemployment shrank by 35 percent. Since unemployment peaked in June 2009, it has shrunk by only 26 percent, and if you take the number of people working part-time who would rather be working full-time, it’s much worse than that.

All in all, the Obama nonrecovery proceeds apace.

Read Less

The President’s Economic Speech

White House advisor Dan Pfeiffer billed the president’s speech today at Knox College in Galesburg, Illinois, as a big deal. As he said on the White House website, “I just finished reading the draft of a speech the President plans to deliver on Wednesday, and I want to explain why it’s one worth checking out.”

Well, it didn’t amount to much. To be sure, it is the first of a series of speeches (he’ll be giving another one later today in Missouri) that will deal with the economy, but it contained no new proposals and lot of the same old the-rich-aren’t-paying-their-fair-share rhetoric.

Read More

White House advisor Dan Pfeiffer billed the president’s speech today at Knox College in Galesburg, Illinois, as a big deal. As he said on the White House website, “I just finished reading the draft of a speech the President plans to deliver on Wednesday, and I want to explain why it’s one worth checking out.”

Well, it didn’t amount to much. To be sure, it is the first of a series of speeches (he’ll be giving another one later today in Missouri) that will deal with the economy, but it contained no new proposals and lot of the same old the-rich-aren’t-paying-their-fair-share rhetoric.

As always, it’s everyone’s fault but his. “We’ve seen a sizable group of Republican lawmakers suggest they wouldn’t vote to pay the very bills that Congress rang up–a fiasco that harmed a fragile recovery in 2011, and one we can’t afford to repeat.  Then, rather than reduce our deficits with a scalpel–by cutting programs we don’t need, fixing ones we do, and making government more efficient–this same group has insisted on leaving in place a meat cleaver called the sequester that has cost jobs, harmed growth, hurt our military, and gutted investments in American education and scientific and medical research that we need to make this country a magnet for good jobs.”

The sequester, of course, was an idea that came out of the White House and it was the White House that refused to turn it into a “scalpel,” expecting public pressure to force the Republicans’ hands. That proved a political miscalculation.

The next few speeches might have more substance and perhaps—dare we hope?—some new ideas. But I wouldn’t bet on it.

Read Less

ObamaCare and Unintended Consequences

The Patient Protection and Affordable Care Act, also known as ObamaCare, should be the feather in the cap of the Obama administration. Instead, two years after its passage, the Obama administration is begging professional sports leagues like the NFL and MLB to help promote a signature feature of the law: exchanges. The Health and Human Services Department is leading the outreach to the leagues in an effort to spread the word about how fans could sign up. The Washington Post explains why the demographic is so desirable for HHS: 

A partnership with well-known athletes and sports teams could provide a significant boost as officials ramp up efforts to encourage enrollment among a demographic crucial to the success of the health law — healthy young males.

Millions of people with health problems are expected to jump at the chance to sign up for coverage that will begin Jan. 1; insurers will no longer be allowed to reject them. To offset the cost of those potentially costly customers, officials say, millions of young and healthy people need to enroll in health plans.

Are young people really this gullible? Will they really sign up in droves to pay for the healthcare coverage of their fellow Americans with their own meager paychecks, already stretched thin by student loans and households disproportionately affected by the recession? The Wall Street Journal explains just how losing a proposition buying into healthcare exchanges would be for the average healthy young American:

Read More

The Patient Protection and Affordable Care Act, also known as ObamaCare, should be the feather in the cap of the Obama administration. Instead, two years after its passage, the Obama administration is begging professional sports leagues like the NFL and MLB to help promote a signature feature of the law: exchanges. The Health and Human Services Department is leading the outreach to the leagues in an effort to spread the word about how fans could sign up. The Washington Post explains why the demographic is so desirable for HHS: 

A partnership with well-known athletes and sports teams could provide a significant boost as officials ramp up efforts to encourage enrollment among a demographic crucial to the success of the health law — healthy young males.

Millions of people with health problems are expected to jump at the chance to sign up for coverage that will begin Jan. 1; insurers will no longer be allowed to reject them. To offset the cost of those potentially costly customers, officials say, millions of young and healthy people need to enroll in health plans.

Are young people really this gullible? Will they really sign up in droves to pay for the healthcare coverage of their fellow Americans with their own meager paychecks, already stretched thin by student loans and households disproportionately affected by the recession? The Wall Street Journal explains just how losing a proposition buying into healthcare exchanges would be for the average healthy young American:

Mr. Alito pointed out that young, healthy adults today spend an average of $854 a year on health care. ObamaCare would require them to buy insurance policies expected to cost roughly $5,800. The law, then, isn’t just asking them to pay for “the services that they are going to consume,” he continued. “The mandate is forcing these people to provide a huge subsidy to the insurance companies . . . to subsidize services that will be received by somebody else.”

Since he puts it that way, why would they sign up for ObamaCare, especially since the alleged penalties will be negligible and likely unenforced?

National Review’s Jonah Goldberg explained why, as a demographic, young people were among the most obligated to follow through with the promise of ObamaCare: 

In two consecutive elections, you’ve carried Barack Obama to victory. When he said, “We are the ones we’ve been waiting for,” he basically meant you. You voted for Obama by a margin of 66 percent to 32 percent in 2008, and, despite a horrendous economy for people your age, by nearly that much again in 2012.  

Whenever curmudgeons like yours truly suggested that young people were getting caught up in a fad or that Obama was simply buying votes at the expense of taxpayers, you’d have a fit. You’d insist that millennials are not only informed, but eager to make sacrifices for the greater good.

Well, here’s your chance to prove it: Fork over whatever it costs to buy the best health insurance you can under Obamacare.

Given the average American’s cognitive dissonance when it comes to voting and politicians, it’s unlikely that any young Americans will make the connection between their voting behavior and their subsequent responsibility to their fellow Americans who, by growing margins, find themselves supporting a repeal of the law. Unfortunately for Obama, even with the positive publicity paid for by your tax dollars, it’s unlikely that the bill will become anything but less popular as more provisions slowly come into effect. Already Americans are increasingly worried that the quality of care that their families receive will be negatively impacted by the legislation. Soon, they can start adding another worry about the law and its impact on their family: shorter work hours as another provision of ObamaCare comes into effect. A local paper in Toledo, Ohio describes the impact for an ordinary Ohioan: 

We talked to the owner of the restaurant Shane Beukre.  He said any business with 50 or more employees will have to offer insurance to workers with 30 or more hours a week.  If he does not do that, he gets fined $2,000 per employee. 

Beukre told us he’s cutting some people down to under 30 hours to help with costs to his business and the workers. 

As it is explained in the new law, under ObamaCare, everyone must have insurance.  So, the next step for workers is to get a plan through expanded Medicaid or through state or federal exchanges that will give them options on plans.  If a plan is not offered through their employer, workers could get a subsidy to help with insurance costs. 

It might be cheaper for individual people to have hours cut and pay less for insurance, but [employee Jeff] Vernon said he’ll lose more than $400 a month with fewer hours and paying for health insurance.

“That leaves me $27.50 for two weeks to live off of,” said Vernon.

The story was the same in Indiana, with local congressmen explaining why they planned to support a bill that would raise the threshold for what constitutes a full-time employee from 30-hours to 40. Indiana Congressman Larry Bucshon told a local paper:

“It’s a big problem,” Bucshon said. “I think ultimately you’ll see members of Congress like myself try to address things like the 30- hour definition of a work week.”

He believes it will be a bipartisan effort. “People recognize this is an impending storm,” Bucshon said.

Unless it’s addressed, “We’ll become a nation of part-time employees,” the congressman said. There are many other issues associated with the Affordable Care Act that need to be addressed.

Even long after the bill was passed, we’re still finding out “what is in it” (in the words of Nancy Pelosi). Congress doesn’t have the time to write, debate and pass a bill for every unintended consequence that befalls Americans due to the original 2,700 page law. The mess that is ObamaCare cannot be undone by piecemeal legislation like what Congressman Bucshon has proposed. The only solution is total repeal and a return to the drawing board, before the most damaging effects of ObamaCare become real for struggling Americans.

Read Less

The Right Climate to Torpedo the Economy?

You might think that with a historically weak recovery and, as John Steele Gordon wrote this morning, worries about the Federal Reserve’s actions affecting the stock market, this is a time when President Obama would be focusing like a laser beam on the economy. But you’d be wrong about that. As Ross Douthat noted yesterday in the New York Times, the administration’s second term priorities are at odds with those of the public. Instead of dealing with health care costs and entitlement reform (the issues most Americans consider the highest priorities), the president spent the start of his term hyperventilating about gun control. After switching to immigration reform for a while (something that I think is worth doing but is certainly not as important as cleaning up the mess that ObamaCare is about to create or reforming entitlements), tomorrow he will perform another pivot and unveil a major plan to lessen the effects of climate change in a speech at Georgetown University.

As he said over the weekend in a video released by the White House, it will include far-reaching measures that will introduce new limits on carbon dioxide emissions from power plants among other unspecified ideas that will largely be put into force by executive order rather than legislation. In one fell swoop, Obama will not only gratify his liberal base by pandering to their obsessions, he will also undertake a vast expansion of executive power in which the executive branch will assume near dictatorial proportions under the rubric of regulation. Whatever one may think about the science behind this plan—and there is very little sign that the president is operating on anything but on the basis of his ideological biases—there is no question that any plan that will hamper power production on this scale will have a deleterious impact on the chances that the country can sustain its economic recovery by raising the costs of energy and killing jobs. That he will do so in a manner that ought to set off alarm bells about the separation of powers and will generate a blizzard of lawsuits that could tie up his plan for years only illustrates the poor judgment being exhibited by the president.

Read More

You might think that with a historically weak recovery and, as John Steele Gordon wrote this morning, worries about the Federal Reserve’s actions affecting the stock market, this is a time when President Obama would be focusing like a laser beam on the economy. But you’d be wrong about that. As Ross Douthat noted yesterday in the New York Times, the administration’s second term priorities are at odds with those of the public. Instead of dealing with health care costs and entitlement reform (the issues most Americans consider the highest priorities), the president spent the start of his term hyperventilating about gun control. After switching to immigration reform for a while (something that I think is worth doing but is certainly not as important as cleaning up the mess that ObamaCare is about to create or reforming entitlements), tomorrow he will perform another pivot and unveil a major plan to lessen the effects of climate change in a speech at Georgetown University.

As he said over the weekend in a video released by the White House, it will include far-reaching measures that will introduce new limits on carbon dioxide emissions from power plants among other unspecified ideas that will largely be put into force by executive order rather than legislation. In one fell swoop, Obama will not only gratify his liberal base by pandering to their obsessions, he will also undertake a vast expansion of executive power in which the executive branch will assume near dictatorial proportions under the rubric of regulation. Whatever one may think about the science behind this plan—and there is very little sign that the president is operating on anything but on the basis of his ideological biases—there is no question that any plan that will hamper power production on this scale will have a deleterious impact on the chances that the country can sustain its economic recovery by raising the costs of energy and killing jobs. That he will do so in a manner that ought to set off alarm bells about the separation of powers and will generate a blizzard of lawsuits that could tie up his plan for years only illustrates the poor judgment being exhibited by the president.

Obama signaled that he would prioritize his beliefs about the climate in his second inaugural speech, so no one should be surprised by his decision to gamble his dwindling supply of political capital on an issue that is liable to hurt rather than help the economy. The president will, of course, argue that his green plan is good for the economy in the long run and tout his belief that more regulations will help transform the country and create jobs in industries that provide alternatives to the burning of fossil fuels. But the country has already been down this road in the first term as Obama’s stimulus boondoggle provided cash for Solyndra and other “green” corporations that proved to be cash cows for the president’s major contributors but a disaster to the taxpayers that were fleeced to bolster companies that couldn’t stand on their own.

The administration’s defense of this decision to bypass Congress will be to claim that the legislative branch has failed to act. But there is a reason why both Republicans and Democrats have been reluctant to implement the sort of Christmas tree of regulations that will be presented tomorrow: it is likely to hurt an already skittish economy. The high-minded gloss of idealism and gloom and doom predictions about our future that fuel the president’s climate push will be used by liberals to dismiss objections about the impact on the economy of this project. But Obama and his cheerleaders in the liberal media—who have been urging him to usurp power in this manner to further the global warming agenda for years—the danger that adding on new layers of federal regulations to an industry already sinking under the weight of government rules is real.

It should also be noted that given the anger on Capitol Hill and among the electorate about a trio of scandals that center on abuse of government power, the notion that the president would seek to govern on his own in this manner is curious. One would think the administration would be wary of feeding suspicions about extra-constitutional usurpation of power right now. But, like worries about the economy, concerns about the Constitution are always going to run second to ideology in the Obama White House.

Read Less

The Fed Hints

One major part of the job of the Federal Reserve is to keep the economy on an even keel, not booming too much nor going into recession. (The other major parts are to protect the banking system, and to prevent inflation.) So when the Great Recession hit in 2008, the Fed dropped the Fed Funds rate to near zero, which has the effect of lowering interest rates generally, hopefully stimulating the economy. It also began flooding the street with money through open-market operations, buying federal bonds, thus increasing the cash balances of banks, giving them more money to lend.

That’s the easy part of keeping the economy on an even keel. The tricky bit is when and how abruptly to reverse course. The balance sheet of the Fed has grown enormously in the last few years and at some point the money it has created has to be withdrawn from the economy, again by open-market operations, this time selling federal bonds. If that weren’t done, it’s possible a 1970s inflation could break out. But there is always strong political pressure to keep money cheap.

Read More

One major part of the job of the Federal Reserve is to keep the economy on an even keel, not booming too much nor going into recession. (The other major parts are to protect the banking system, and to prevent inflation.) So when the Great Recession hit in 2008, the Fed dropped the Fed Funds rate to near zero, which has the effect of lowering interest rates generally, hopefully stimulating the economy. It also began flooding the street with money through open-market operations, buying federal bonds, thus increasing the cash balances of banks, giving them more money to lend.

That’s the easy part of keeping the economy on an even keel. The tricky bit is when and how abruptly to reverse course. The balance sheet of the Fed has grown enormously in the last few years and at some point the money it has created has to be withdrawn from the economy, again by open-market operations, this time selling federal bonds. If that weren’t done, it’s possible a 1970s inflation could break out. But there is always strong political pressure to keep money cheap.

The economy has clearly been improving, with corporate profits up and housing prices now rising. Since most families’ net worth is concentrated in their homes, a rising housing market makes people feel richer. And that makes them more likely to go out and buy, pumping up the economy. To be sure, unemployment is stubbornly high, but it’s a lagging indicator, tending to recover more slowly than other economic indicators.

So Ben Bernanke, the chairman of the Federal Reserve, has begun to hint that the Fed’s quantitative easing is drawing to a close. It’s been buying $85 billion worth of federal bonds a month. The markets have been reacting badly to Bernanke’s Delphic pronouncements. The Dow was above 15,300 last Tuesday. Right now it’s below 14,700, a drop of four percent. With the prospect of interest rates rising, bonds have been declining as well.

But these are short-term flutters in the stock market. It is corporate profits that determine the movement of equities. As long as corporate profits are strong and growing, the market will not swoon. Rising interest rates, however, will cause bond prices to decline in proportion.

The Fed has an unenviable job right now. If it acts too slowly, inflation could set in. If it acts too quickly, the economy could be tipped back into recession. And those with a dog in the fight—which is practically every interest group in the country—will be pushing hard to get its way.

Read Less

The Jobs Report

There is little news in this morning’s jobs report from the Bureau of Labor Statistics. There were 175,000 jobs created in May, but the unemployment rate ticked up a notch to 7.6 percent. (The BLS euphemistically called the unemployment rate “essentially unchanged.” I doubt they would have used that phrase had it gone down a notch.)

The number of unemployed, 11.8 million, stayed the same, as did the number of long-term unemployed (over 27 weeks), at 4.4 million. The unemployment rate for teenagers (24.5 percent) and blacks (13.5) remained dismal. The rate for blacks actually went up, from 13.2 percent.

Read More

There is little news in this morning’s jobs report from the Bureau of Labor Statistics. There were 175,000 jobs created in May, but the unemployment rate ticked up a notch to 7.6 percent. (The BLS euphemistically called the unemployment rate “essentially unchanged.” I doubt they would have used that phrase had it gone down a notch.)

The number of unemployed, 11.8 million, stayed the same, as did the number of long-term unemployed (over 27 weeks), at 4.4 million. The unemployment rate for teenagers (24.5 percent) and blacks (13.5) remained dismal. The rate for blacks actually went up, from 13.2 percent.

The statistics also show, starkly, the importance of education, or at least education credentials. For people over 25 with less than a high school diploma, the unemployment rate is 11.1 percent. For those with a high school diploma but no more, it’s 7.4 percent. With some college, it’s 6.5 percent. For those with a college degree, it’s only 3.8 percent.

In all, President Obama continues to preside over the worst economic recovery since the Great Depression. As James Pethokoukis tweeted this morning, the Obama administration promised in January 2009 that, if the stimulus passed, the unemployment rate today would be just above five percent.

Read Less

Housing Makes a Comeback

The housing market, which was the epicenter of the recession that began in 2007, is bouncing back. The Wall Street Journal reports that housing prices in March were up 10.2 percent from a year earlier, the best such figure since 2006, when housing prices began to collapse. Home sales are also up from a year ago, by 9.7 percent, and houses are selling more quickly, according to an earlier Journal story.

This is good news for the economy as a whole, reflected in the fact that the Dow Jones Industrial Average hit a record high yesterday and yields on treasuries rose sharply (which, of course, causes bond prices to fall).

Read More

The housing market, which was the epicenter of the recession that began in 2007, is bouncing back. The Wall Street Journal reports that housing prices in March were up 10.2 percent from a year earlier, the best such figure since 2006, when housing prices began to collapse. Home sales are also up from a year ago, by 9.7 percent, and houses are selling more quickly, according to an earlier Journal story.

This is good news for the economy as a whole, reflected in the fact that the Dow Jones Industrial Average hit a record high yesterday and yields on treasuries rose sharply (which, of course, causes bond prices to fall).

For most families, their home is their biggest investment, so when housing prices are rising they feel richer. And people tend to increase spending when they’re feeling rich. That boosts the economy generally.

But while this is, certainly, good news, the economy is not yet booming by any means. Unemployment remains stubbornly high. The Federal Reserve continues to keep interest rates very low and is still injecting $85 billion a month into the economy by buying federal bonds and mortgaged-backed securities. Only when the Fed begins the very tricky task of paring down its balance sheet and letting interest rates rise back to more normal levels will we be able to say the Great Recession is well and truly over.

Read Less




Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor to our site, you are allowed 8 free articles this month.
This is your first of 8 free articles.

If you are already a digital subscriber, log in here »

Print subscriber? For free access to the website and iPad, register here »

To subscribe, click here to see our subscription offers »

Please note this is an advertisement skip this ad
Clearly, you have a passion for ideas.
Subscribe today for unlimited digital access to the publication that shapes the minds of the people who shape our world.
Get for just
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor, you are allowed 8 free articles.
This is your first article.
You have read of 8 free articles this month.
YOU HAVE READ 8 OF 8
FREE ARTICLES THIS MONTH.
for full access to
CommentaryMagazine.com
INCLUDES FULL ACCESS TO:
Digital subscriber?
Print subscriber? Get free access »
Call to subscribe: 1-800-829-6270
You can also subscribe
on your computer at
CommentaryMagazine.com.
LOG IN WITH YOUR
COMMENTARY MAGAZINE ID
Don't have a CommentaryMagazine.com log in?
CREATE A COMMENTARY
LOG IN ID
Enter you email address and password below. A confirmation email will be sent to the email address that you provide.