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The jobs market looks grim:

Unemployment rose in 43 states last month
The Associated Press
Friday, January 22, 2010

WASHINGTON -- Unemployment rates rose in 43 states last month, the government said Friday...Analysts said the report showed the economy is recovering at too weak a pace to generate consistent job creation.

"A lot of states that had started to add jobs (in November) gave up those gains in December," said Sophia Koropeckyj, managing director at Moody's Economy.com.

Nationally, more than 600,000 people left the labor force in December, according to government data. The large exodus from the labor force indicates that "unemployment is a lot worse than the numbers suggest," Koropeckyj said.

The economy grew at a 2.2 percent annual rate in last year's third quarter, after declining for four straight quarters during the recession. Many economists estimate that growth accelerated to more than 4 percent in the October-December quarter. But that's still sluggish by the standards of many previous recoveries.

And growth could slow in the first half of this year as temporary factors, such as government stimulus spending and inventory restocking, fade.

Many states saw sharp drops in restaurant, hotel and other leisure employment, a sign that consumers are still holding back on their spending. Nationwide, the United States lost 25,000 leisure and hospitality jobs in December.

The rates are seasonally adjusted, which means they are altered to account for seasonal jobs.

My comment: This is a slow recovery after a severe recession. A large tax cut, e.g. $5,000 per worker, a year ago would've strengthened household and bank balance sheets, and then spur consumption through higher income and lower unemployment, to clear the market of excess goods, for a strong recovery.

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Revival in US GDP Growth Unlikely to Budge the Fed
25 Jan 2010

The initial look at fourth-quarter gross domestic product comes on Friday, and economists polled by Reuters are expecting it to show the economy advanced at a 4.5 percent clip.

Beneath the veneer, however, the recovery still looks fragile. A 4.5 percent annualized rate of growth would be the strongest since the first quarter of 2006, but the economic drivers look very different.

Back then, before the financial mess made borrowing costlier and scarcer, consumers and businesses were busy buying expensive items such as cars and office buildings. Final sales, a closely watched measure of the economy that strips out the impact of inventories, rose at a 5.9 percent rate.

In the latest quarter, the lion's share of growth likely came from changes in business inventories. Economists in the Reuters poll think final sales rose at a modest 1.6 percent pace.

David Rosenberg, chief economist with money manager Gluskin Sheff, said the Case-Shiller data in particular "looms very large." He thinks home prices may fall another 10-15 percent this year because of a huge supply of unsold homes.

"Few are braced for such a prospect," he said.

Rosenberg pointed out there were 2 million U.S. homes vacant and for sale, 3.4 million that were vacant but off the market, and 3.5 million occupied but listed for sale.

"So we have a supply, both potential and actual, of over 9 million homes nationwide," he said. "That is a huge overhang."

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http://1.bp.blogspot.com/_otfwl2zc6Qc/S0YWgrvGjDI/AAAAAAAAMYA/bmjhzzCRZMY/s1600-h/claims.jpg

http://finance.yahoo.com/news/Economists-worry-economy-wont-cnnm-1886255353.html?x=0&sec=topStories&pos=3&asset=&ccode=

sethstorm said...

That initial number is misleading in that it ignores the existing base of unemployed. It only says that there's been a slowing loss, not necessarily a gain.

I want to see a recovery as much as you want to demonstrate one, but I'm not wanting one that's statistical and thus jobless. When the unemployment numbers like the U-6 go down in an honest (read: people actually getting permanent jobs) way, then I might be inclined to say that there is a recovery.

PeakTrader said...

Unemployment Claims is a leading employment indicator. It's been moving in the direction of a recovery, and indicates the U.S. is on the verge of net job creation.

However, I heard, the timing and extension of unemployment benefits may dump a large supply of labor into the economy sometime in 2010 when unemployment benefits expire.

Will economic growth be fast enough?:

USATODAY 1.3 million to lose jobless benefits by year's end
9/3/2009

These are the most unfortunate of America's 14.5 million jobless: the ones whose benefits are drying up — in some cases after a record 18 months of government support.

With savings depleted and job opportunities scarce, people .... are living with relatives and borrowing cash from friends. They are even skipping meals. Through it all, they are trying to stay positive through exercise and prayer.

Donald Money has already moved in with his elderly parents, stopped going to the movies and started using less of his prescription medication so it will last longer. Money and others like him are scrambling to find work before the government safety net is taken away.

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PeakTrader: Obama's response to the financial and economic crisis has been almost all wrong. One of the most prosperous eras was 1995-00 when the U.S. had a moderate President and a conservative Congress. A Marxist President and a liberal Congress has been a poor combination.

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Will New Jobs Bill Create Jobs? Republicans Say No
Written by Steven Yates
Tuesday, 05 January 2010

Where do the kinds of jobs that will grow the economy come from? Can the federal government simply create them through more spending? We are about to find out — yet again.

Last fall, congressional Democrats authored a new jobs bill, entitled the Jobs For Main Street Act (H.R. 2847). They attached it to last month’s $174 billion spending package. This effort follows in the wake of the $787 billion economic recovery plan passed earlier last year.

Democrats argue that the bill establishes job prospects in a number of areas: infrastructure and public sector spending ($75 billion), construction (tens of thousands of new jobs), 5,500 new police officers, 25,000 new Americorps members, 250,000 jobs for disadvantaged youth, and 14,000 jobs for park and forestry workers.

Few of these will lead to stable, long-term work in the private sector, i.e., work that will not increase the government's spiraling indebtedness. President Obama had proposed tax credits for small businesses that create jobs. This measure is absent from the version of the bill that the House passed — narrowly, 217–212, without a single Republican vote.

Republicans note that much of the money appropriated in the new bill is not intended to create jobs. For example, $41 billion is set aside to extend unemployment benefits for six months. Another $12.3 billion aims to extend health insurance subsidies to those who have lost their jobs. Yet another $23.5 billion assists states to cover Medicaid costs. Twenty three billion is set aside for education, and $2.8 billion goes for clean water and environmental restoration projects.

Thus they scoff at the new measure. “Why don’t we just put everybody in the United States on the federal government payroll and call it a day?” quipped Congressman Jerry Lewis (R-Calif.) sarcastically.

Republicans contend, using government figures current as of September 30 that show that only 9 percent of the $27.5 billion set aside for highways in the first stimulus bill had been spent, that the money in the bill won't go where it's intended anyway. "Why is [the money] still here [in Washington] if it was designed to create jobs?” asked Eric Cantor (R-Va.), the second-ranked Republican in the House.

Only $1.7 billion of the $39 billion in the new bill directed to the Transportation and Housing and Urban Development will be spent before next October.

The Senate will take up the bill later this month or possibly in February. On their plate in the meantime is a vote that would once again raise the government’s total debt ceiling — to $12.4 trillion.

Government expenditure, whether to create jobs or for other purposes, only adds to this debt. Defenders of last year’s stimulus package contend that it saved a lot of jobs, and that employment was 600,000 to 1.6 million higher in the third quarter of 2009 because of the Economic Stimulus Act. They do not tell us that most were federal government jobs — for which taxpayers foot the bill, or that the jobs will be bankrolled through the fiat-money creation machine.

http://www.thenewamerican.com/index.php/economy/commentary-mainmenu-43/2698-will-new-jobs-bill-create-jobs-republicans-say-no

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U.S. Consumer: Still Busy Saving
Jan 22, 2010

The trouble with the recovery is that it has so far been supported almost entirely by government stimulus. Whether it is lending by state-owned banks in China or a cash-for-clunkers programme in the US or lower excise duties and low interest rates boosting automobile sales in India, economists are holding their breath wondering whether the private sector will take over when the government starts withdrawing its stimulus measures. Nobody expects the US consumer to re-assume his role of Titan holding up the world economy. He has already started to spend less and save more. But how much more will he save? That’s the question that IMF economists Jaewoo Lee, Paul Rabanal and Damiano Sandri attempt to answer in their IMF Staff Position Note on US Consumption after the 2008 Crisis.

The authors point out the crucial role the US consumer plays in the world economy. They write: “If US private-sector demand remains at a subdued level, global economic growth will be less vigorous than otherwise, and the distribution of current account balances will need a realignment—a smaller deficit in the US will have to be matched by smaller surpluses or larger deficits in other countries.”

US household consumption has already declined, with consumption as a percentage of income declining from the pre-crisis high of 95% to 92% in 2009. US household wealth has fallen sharply as a result of the crisis and credit availability has tightened. The US potential growth rate too has been revised downwards as a result of the crisis, from 3% in the late 1990s to about 2% over the medium term.

After running a series of simulations, the researchers conclude, “We expect the US consumption to remain at a relatively subdued level over the next several years, with the household saving rate settling at 5–7% of disposable personal income, somewhat above the 2009 saving rate of nearly 5%. Though the estimate is subject to a sizable statistical uncertainty, it is supported by several alternative estimates and simulation analysis. Compared to the pre-crisis years (2003–07), the estimated changes in saving and consumption imply a decrease in the US private sector demand of 2–3.75 percentage points of GDP (gross domestic product)—close to a half of the US current account deficit at its peak. This will have substantial effects on global economic development after the current crisis.”

In short, other countries will have to adjust accordingly, most importantly export-driven economies such as China, Japan and Germany.

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http://www.econbrowser.com/archives/2009/01/forecasted_gdp.html

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Housing Prices

http://globaleconomicanalysis.blogspot.com/2010/01/housing-bubble-comparison-us-uk-canada.html

http://www.clevelandfed.org/research/commentary/2009/0909.cfm