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The Initial Unemployment Claims report for last week is out and guess what? The Economists are surprised. And water is wet and the sky is blue. From Reuters:
The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, according to a report on Thursday that could reinforce fears the labor market recovery has stalled.Note how the reporter managed to skim right over how the report from last week got revised upwards from 422K to 426K.
Initial claims for state jobless benefits increased 1,000 to 427,000, the Labor Department said. However, economists polled by Reuters had forecast claims dropping to 415,000 from a previously reported count of 422,000.
Point of fact however, this report is not even close to being the best example of Beltway Village
Our first contender for the Cluelessness Award of the week goes to Philadelphia Fed President Charles Plosser (via Bloomberg):
Philadelphia Federal Reserve Bank President Charles Plosser warned of inflation pressures from record stimulus, while saying unemployment will probably fall to between 7 percent and 7.5 percent by the end of next year.There appears to be no evidence of any of this, mind you. I am also wondering just where that "record stimulus" wound up as it sure as hell didn't result in jobs that might have made that "disappointing" 9.1 percent unemployment rate a little less disappointing. If this speech by Plosser was meant to reinforce The Benbernank's speech Tuesday in Atlanta, all it does is reinforce just how out-of-touch the Federal Reserve is with the reality faced by millions of Americans. USA Today has this article today pointing out that in order for inflation to be the big problem Plosser seems to see, you need rising wages. Nope, it seems only CEO wages are allowed to rise.
The economy will probably grow at a 3 percent to 3.5 percent rate for the rest of this year and next, and unemployment is likely to fall from a “disappointing” 9.1 percent level as of May to about 8.5 percent by December, Plosser said.
Next up is this opinion piece at Politico from Hyatt Hotels heir Penny Pritzker:
The United States faces a daunting workforce challenge. But it’s also a dramatic opportunity. As our country continues its slow climb out of a recession, we’re suffering from a paradox: Unemployment remains high, yet many businesses report that they can’t find the workers they need.Now I, for one, find it extremely offensive to be lectured by someone who was born on 3rd base and has no clue about how the world is operating for folks who are un and underemployed about how we just need to "learn better skills." Fortunately, Dean Baker back in February has already done rebuttals of Pritzker here and here. From the first Baker piece:
One problem is that we have a skills gap. And it’s large and growing. While millions of Americans are actively looking for work, the reality is that many lack the skills needed to fill current openings. The U.S. could be three million skilled workers short as soon as next year.
Driving this trend is the combination of a changing economy and an aging workforce. Our economy’s fasting-growing sectors include high-tech manufacturing, health care and new energy. Yet many in the skilled trades either lack these skills, or are retiring without a younger generation trained to fill their open slots.
The anecdotal evidence from employers suggests that the problem is that people who run businesses don't understand basic economics. It presents comments from one employer who complains that he can't find workers for jobs that pay $15 an hour. This is not a very good wage. It would be difficult for someone to support themselves and their children on a job paying $15 an hour ($30,000 a year). If the company president understood economics, then he would raise wages enough so that the jobs were attractive to workers who have the necessary skills.Yet, many employers want folks to support themselves and raise families on minimum wage jobs that pay less than half of that $15 an hour.
If the economy were actually suffering from a problem of structural unemployment, then we should be seeing substantial sectors of the economy, either by region or occupation, where wages are rising rapidly. We don't see this. There is no major industry or occupational grouping where there is evidence of large pay increases. We should also see big increases in average weekly hours, as firms try to work their existing workforce harder due to the unavailability of additional workers. We don't see this either.
And from the second Baker article:
Most news outlets have given considerable space in recent weeks to the argument that the U.S. economy suffers from structural unemployment. This means that the reason that people are unemployed is that they lack the skills necessary for the available jobs. This contrasts with the idea that the unemployment is primarily cyclical, which means that it is the result of a lack of demand in the economy. This issue is central to our understanding of the economy since it effectively raises the question of whether we blame unemployed workers for lacking the skills needed to get a job or we blame policymakers for lacking the skills needed to run the economy.McClatchy weighs in on the Prtizker side with this article proclaiming:
If the "new normal" means a full employment rate of 7 percent, that suggests a wide mismatch between available jobs and the skills that unemployed workers possess — construction workers lost jobs and don't qualify for ones in the booming health-services sector, for example. Economists call this a structural shift in the workforce, and a growing body of research increasingly suggests that's what's happening now.Fareed Zakaria at the Washington Post though points out that there are a lot of reasons and things that the government could be doing to attack the un and underemployment problems:
We’re in a new world for the American worker. Technological change and globalization allow companies to get more output with fewer workers. Emerging markets provide millions of skilled workers who can produce the same products at a fraction of the price that Americans can. The Bureau of Labor Statistics notes that from 1947 till 2000, productivity growth was correlated with employment growth. Since 2000, they have diverged. Productivity has risen while employment has fallen. The Nobel Prize-winning economist Michael Spence has concluded that in America, growth and employment will diverge in the future.Austan Goolsbee, soon to be former chair of President Obama's Council of Economic Advisers, seems to be of the mind that if he says something loud enough, it will be true. Via HuffPo:
In fact, we could enact some measures that would spur job creation, many with a limited effect on the deficit. Most immediately, Washington needs to find ways to employ the millions of workers whose jobs disappeared with the housing bust. The simplest way to help them, and the country, would be to create a national infrastructure bank to repair and rebuild America’s infrastructure — which is in a shambles and ranks 23rd globally, according to the World Economic Forum — down from sixth only a decade ago.
The United States builds infrastructure in a remarkably socialist manner; the government funds, builds and operates almost all American infrastructure. In many countries in Europe and Asia, the private sector plays a large role in financing and operation of roads, highways, railroads and airports, as well as other public resources. An infrastructure bank would create a mechanism by which such private-sector participation would become possible here as well. Yes, some public money would be involved, mostly through issuing bonds, but with interest rates at historic lows, this is the time to rebuild. Such projects, with huge long-term payoffs, could genuinely be called investments, not expenditures.
On the heels of the latest government snapshot of the labor market, which showed the economy gaining a paltry number of jobs in May while the unemployment rate climbed to 9.1 percent, Goolsbee pushed back with vehemence at the suggestion that the current state of play amounts to a crisis. He insisted that the economy is improving, even if there is still a slog to come.No Mr Goolsbee, you have a panic because it is far more than six months worth of data. And as I pointed out the other day, you can't claim that things are going great with 1M new private sector jobs at the same time you are losing thousands of public sector jobs. The total economy includes both public sector and private sector. Oh wait, you're an economist, so maybe you don't know better.
"We do not have a sense of panic from one month’s jobs numbers, nor should we be having a sense of panic in general," Goolsbee said, speaking to a gathering of personal finance writers and editors at the White House on Wednesday. "Over the last six months, we have had added a million jobs in the private sector, which the president’s the first to say 'That’s not enough. We’ve got to do more, and get that higher.' But I really do not think that you take a variable series like the monthly job numbers, you don’t want to overreact to one month’s numbers that are different from what has been the trend."
I can't even begin to imagine the world George Will inhabits with this type of fantasy piece.
And because I can: