http://economix.blogs.nytimes.com/2012/12/14/the-trade-off-between-economic-growth-and-deficit-reduction/?ref=business
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"No leader, however great, can long continue unless he wins victories" (Bernard Law Montgomery)
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Laura Tyson is a professor at the Haas School of Business at UC Berkeley, and served as chairwoman of the Council of Economic Advisers during President Bill Clinton's administration.
Her perspective on this "recovery" from the deepest recession since the Great Depression is that the "pace" is frustratingly slow. Since 2010, annual growth of gross domestic product has averaged about 2.1%. This is less than half the pace of previous recoveries since WW II.
Tyson points out that most economists see weak aggregate demand as the primary reason for this weak GDP growth. Growth in the two components of private demand - consumption and residential investment - has been especially slow.
Residential investment is still depressed as a result of overbuilding during the 2004-2008 housing boom. Business investment has been slow because of lackluster customer demand and weak sales prospects.
So, the cutbacks to spending into the economy implied by doing nothing about the "fiscal cliff" (ie. letting it happen) would have large negative effects on demand, output and employment. There would be 3.4 million fewer jobs by the end of 2013 if Congress allows the "fiscal cliff" to happen.
So, Tyson is another voice, along with Krugman and Buffet, for spending into a weak recovery or we could just watch a recession return.
According to the Dallas Fed's forecast released yesterday, Texas job growth will continue in 2013 but at a slightly slower pace than for this year. According to the report, "Energy, exports and construction have driven Texas employment above its pre-recession level in 2012..." but that employment has slowed lately. Low natural gas prices have led to a decline in well permits and drilling.
The weak global economy has hurt Texas exports to China and the European Union. But Texas construction jobs lead the U.S. in growth: 46,900 jobs in the 12 months thru October. Last month, existing home sales were up 29% FROM A YEAR EARLIER! That can only be good news - no qualifiers.
What looms large in the background here is big business which has been sitting on (by various measures) at least $2 trillion in cash since 2010. CEOs that have been interviewed by those with "access" have continuously said that they're reluctant to invest in the U.S. because of the uncertain economic environment. That involves regulation, taxation and various combinations thereof.
Let's see what happens when the smoke clears.
Merry XMAS and Happy Holidays!
Friday, December 14, 2012
Thursday, December 13, 2012
Skills That Don't Pay the Bills II
http://economix.blogs.nytimes.com/2012/12/07/comparing-recessions-and-recoveries-2/
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"Where success is concerned, people are not measured in inches, or pounds, or college degrees, or family background; they are measured by the size of their thinking." (David Schwartz)
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One of the guest commentators at yesterday's "DealBook" (NY Times) business conference in Manhattan was Paul Krugman. I'm always interested in what he has to say so I listened in. Aside from the usual issues about the "fiscal cliff," China, etc., Krugman mentioned Adam Davidson's commentary in the New York Times Magazine on the hue and cry about "skilled jobs."
As I quoted Davidson in my prior post:
"Deep Thoughts"
(1) There is no skills gap.
(2) Who wants to operate a highly sophisticated machine for $10 per hour?
(3) Not a lot of people.
(4) As a result, there is going to be a skills gap.
Krugman's point was that, of course, there's going to be a "skills gap" if you're going to pay $10 per hour for skilled people. Krugman pointed out yesterday, as he did in his column last week, that "...there is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now - except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused."
Krugman is much more concerned about "mass unemployment." While he accepts that there has been some progress on this issue over the past year, he points out that long-term unemployment remains at levels not see since the Great Depression: "...as of October, 4.9 million Americans had been unemployed for more than six months, and 3.6 million had been out of work for more than a year."
I keep track of the overall unemployment picture by following Catherine Rampell's recession trend lines (see her post attached): Job Changes in Recent Recessions/Recoveries, as a Share of Employment at Previous Peak. That's a long title but a picture is worth a thousand words as the old saying says. Her color trend lines depicting the 5 previous recessions/recoveries versus the recession that initiated in 2007 make it easy to see where we "aren't." As she points out, for the 26th straight month, the country has added jobs: 146,000 nonfarm payroll jobs in November but employment still has a long way to go before returning to pre-recession levels: "Getting the economy to 5% unemployment within two years - a return to the rate that prevailed when the recession began - would require job growth of closer to 270,000 per month."
Rampell goes on to point out: "There are now 12 million workers looking for work who cannot find it. The tally of those who are "underemployed" - that is, adding in those workers who are part time but want to be employed full time, and workers who want to work but are not looking - is an even larger 22.7 million."
While Rampell's 2007-present trend line is headed back up toward where it started, if you project the "slope" of it, just by "eye," (and, of course, I'm going off her chart) my guess is that it doesn't return to its start point until 2014 to 2017.
Maybe this is one of the reasons why the Fed has announced that it plans to hold short-term interest rates near zero as long as the unemployment rate remains above 6.5%.
***************
"Where success is concerned, people are not measured in inches, or pounds, or college degrees, or family background; they are measured by the size of their thinking." (David Schwartz)
***************
One of the guest commentators at yesterday's "DealBook" (NY Times) business conference in Manhattan was Paul Krugman. I'm always interested in what he has to say so I listened in. Aside from the usual issues about the "fiscal cliff," China, etc., Krugman mentioned Adam Davidson's commentary in the New York Times Magazine on the hue and cry about "skilled jobs."
As I quoted Davidson in my prior post:
"Deep Thoughts"
(1) There is no skills gap.
(2) Who wants to operate a highly sophisticated machine for $10 per hour?
(3) Not a lot of people.
(4) As a result, there is going to be a skills gap.
Krugman's point was that, of course, there's going to be a "skills gap" if you're going to pay $10 per hour for skilled people. Krugman pointed out yesterday, as he did in his column last week, that "...there is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now - except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused."
Krugman is much more concerned about "mass unemployment." While he accepts that there has been some progress on this issue over the past year, he points out that long-term unemployment remains at levels not see since the Great Depression: "...as of October, 4.9 million Americans had been unemployed for more than six months, and 3.6 million had been out of work for more than a year."
I keep track of the overall unemployment picture by following Catherine Rampell's recession trend lines (see her post attached): Job Changes in Recent Recessions/Recoveries, as a Share of Employment at Previous Peak. That's a long title but a picture is worth a thousand words as the old saying says. Her color trend lines depicting the 5 previous recessions/recoveries versus the recession that initiated in 2007 make it easy to see where we "aren't." As she points out, for the 26th straight month, the country has added jobs: 146,000 nonfarm payroll jobs in November but employment still has a long way to go before returning to pre-recession levels: "Getting the economy to 5% unemployment within two years - a return to the rate that prevailed when the recession began - would require job growth of closer to 270,000 per month."
Rampell goes on to point out: "There are now 12 million workers looking for work who cannot find it. The tally of those who are "underemployed" - that is, adding in those workers who are part time but want to be employed full time, and workers who want to work but are not looking - is an even larger 22.7 million."
While Rampell's 2007-present trend line is headed back up toward where it started, if you project the "slope" of it, just by "eye," (and, of course, I'm going off her chart) my guess is that it doesn't return to its start point until 2014 to 2017.
Maybe this is one of the reasons why the Fed has announced that it plans to hold short-term interest rates near zero as long as the unemployment rate remains above 6.5%.
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