Jobs, the Economy, and Climate Change

http://www.nytimes.com/2009/10/04/weekinreview/04norris.html?_r=1&emc=eta1

Thanks to my followers whose comments on my "Global Cooling" post brought a smile! I believe the "polar bears" are safe, at least for another century. I believe that President Obama had opportunities to fly to Copenhagen twice this year: once was to promote Chicago as an Olympic venue, and once coming up to talk "climate" with the G-20 countries. His first trip was probably one he should not have made (see Goerge Will on that) but his second one might be time well spent if he pays attention to the "economics" of climate (here, he could probably use a "tutorial" from Bjorn Lomberg and the Copenhagen Consensus*).

Specifically, what does global climate mitigation do for worldwide economic growth? While I could be wrong, I believe it was the Bill Clinton presidential campaign that coined the phrase: "It's the economy stupid!" Well, right now, it's "jobs stupid!" The Great Recession has brought the world the curse of massive unemployment (and/or underemployment). So, raising prices and taxes to pay for various cap and trade schemes will help economic growth (which usually correlates with "jobs") how?

If we use the Floyd Norris summary (NY Times, 10/4/09 attached) of employment decline (click on his chart), with current revisions, 8 million jobs have been lost since December, 2007 in the U.S. If I could summarize for a moment: the most recent monthly BLS unemployment report showed 263,000 jobs lost which, while a slight blip up from the prior month, is part of a significant trend down from the early months of the year when roughly 700,000 jobs per month were disappearing. This would be consistent with the economic consensus that GDP growth is returning. Some experts are now predicting that the 2% per quarter GDP growth predicted by the WSJ Economist Survey will be exceeded by 1 to 1.5% for coming quarters. That's the good news. Now, how long will it take the U.S. economy to re-employ the 8 million unemployed from the most recent estimates? Remember, the 263,000 referred to above is less jobs lost. For this economy to function properly, between 100,000 and 150,000 net jobs have to be "created" each month.

The lagging indicator that is so problematic is unemployment. What's interesting with current economic thinking is that those same people who think that GDP has the possibility of growing at 3 to 3.5% over coming quarters also think that "employers" overdid it with layoffs as the Great Recession initiated. If that is the case, then it is possible that an economic comeback will be faster and stronger than was anticipated by economists previously. So, if there is "good news" in the "bad news", that's it.

While the potential for GDP growth over coming quarters is that it will be higher than anticipated, I know of no economists that think unemployment will be under 9.5 to 10% (average) for 2010. Attacking unemployment is the near term priority problem for the U.S. economy, NOT climate change.

If I could refer back to President Obama (and his economic "team") for a moment, the "economic stimulus" was proposed (the $787 billion, or, that plus all the other programs that add up to significantly more money) by the administration in conjunction with an "estimate" that implementation of said stimulus would keep unemployment below 8%. What happened to that?

Just speculating here, China's commitment to renewable energy (already declared and backed up by "incentives") will probably do more for worldwide climate improvement than all the cap and trade programs Europe and North America can create in the coming years.

And, if George Friedman is right about "The Next 100 Years", new energy technologies will mitigate climate problems even further.




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* Interestingly enough, for those who may be unaware, the Copenhagen Consensus Center has, and continues to address the economics of what would do the most good for the most people in the world - in 2008, their blue ribbon panel of economists, including 5 Nobel laureates, weighed what would be the top priorities in the world if $75 billion was put on the table for distribution by cost/benefit rank (#1 to #30). Number1 was a $60 million expenditure for providing vitamin A and zinc that would help some 112 million children in sub-Saharan Africa and South Asia. Number 30 was global climate mitigation (of any kind): $800 billion (a reasonable estimate of what it would take to install current cap and trade schemes worldwide) could, over 100 years, reduce temperature increases by 0.4 degrees Fahrenheit by the end of this century. Putting the rich world's political cause du jour, global warming, ahead of poverty, disease and economic growth (Jobs!) is, at best, foolish!