Unfortunately, Another Correct Prediction

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Ho hum. Here we are once again. The weekly report of Initial Unemployment Claims is out, jobless claims for last week are up "more than expected," the figures from last week's report have been revised upwards again, economists are surprised and water is wet. Via Reuters:

New claims for unemployment benefits rose more than expected last week, a government report showed on Thursday, suggesting little improvement in the labor market this month after employment stumbled in May.

Initial claims for state unemployment benefits climbed 9,000 to a seasonally adjusted 429,000, the Labor Department said. The prior week's figure was revised up to 420,000.

Economists polled by Reuters had forecast claims to edge up to 415,000 from a previously reported count of 414,000.

For what it's worth, I called last week that the numbers would most likely be revised upwards to 420K:

Just as they did last week, the reporter just brushes right on by how the figures for the week before had been revised upwards. Last week it was reported as 427K now revised up to 430K - the week before it had originally been reported as 422K but then revised up to 426K. I would not be surprised if next week's report revised this week's numbers upwards again, closer to the original figure from the economists of 420K.

At least this week, the reporter actually manages to provide last week's original numbers as well as the revised numbers. While the economists actually were (belatedly) correct with the numbers last week, I do not think we will see a revision downwards from 429K to 415K when the numbers are reported next week.

So what is happening to help ease the problems? More political posturing of course. It's almost as if the Beltway Village Idiots politicians and pundits were anticipating the bad news yesterday and trying to get out ahead of it as a PR move. I wonder how many jobs could be created if the idiots politicians spent their time trying to actually fix problems with the economy instead of the messaging about the economy.

Apparently the most we can expect is to see the Democrats claim the Republicans are purposely tanking things in order to see President Obama lose in 2012. The Benbernank and Federal Reserve are basically no help. Even though the first point of the Fed Mission is "pursuit of maximum employment," they seem to have reached the point of throwing up their hands and giving up (via NY Times):

And at the end of June, the Federal Reserve finished its work and rested.

...snip...

As growth has sputtered this year, economists have pointed to higher oil prices, the Japanese earthquake, bad weather, a lack of confidence. The unifying theme was that spending and investment would surge as these temporary impediments subsided. The Fed’s latest forecast, however, reflects the surprising weight of deeper and more intractable problems, including unsustainable public and private debts, the wreckage of the housing market and trade imbalances.

Roughly 25 million Americans were unable to find full-time work in May, and the central bank projects that most of those people will remain unemployed for years to come.

I do like the title of this guest blog post at NakedCapitalism:

Bernanke Is Either Not Very Bright or Not Very Honest. He Admits He Doesn’t Know Why We Have a Weak Economy … But He’s the One Who Weakened It

I vote for All of the Above. Not very bright AND not very honest. It seems about the only thing the Benbernank can do is caution the Deficit Hawks against cutting spending too abruptly (via McClatchy):

The Federal Reserve on Wednesday again dialed back its projections for U.S. economic growth, foreseeing slower growth this year and next than it had forecast previously, and Chairman Ben Bernanke implored Congress to avoid steep spending cuts anytime soon that would further slow recovery.

Economist Simon Johnson in the NY Times Economix blog also seems to favor the "let's not be precipitous in cutting spending" camp:

The Joint Economic Committee of Congress held a hearing on Tuesday to discuss whether such spending cuts would be contractionary or expansionary for the economy in the short run. After taking part as a witness at the hearing, I conclude that large immediate spending cuts would tend to slow the economy.

The general presumption is that fiscal contraction — cutting spending or raising taxes, or both — will immediately slow the economy relative to the growth it would have had otherwise. (Of course, some lawmakers and candidates call for cutting spending and cutting taxes, too. This would not lower the deficit, and, most likely, in the short term it would also lower growth, because the spending cuts will be more contractionary than the tax cuts are expansionary, in part for the reasons discussed below.)

Meanwhile, the Congressional Budget Office issued a report predicting "...a European-style crisis unless policymakers take action on the federal deficit..." Dire words, right? Well, only if you miss the last para of that NY Times article:

Those projections are based on the assumption that tax cuts from the Bush administration are extended and that other current policies, like maintaining doctors’ fees under Medicare, are continued as well.

Gee, I wonder how much could be saved by stopping all the wars of choice in the Middle East to go along with ending the Bush/Obama Tax Cuts?

And because I can: