"So be it"

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Yesterday, I wrote about my prediction for an "official" double-dip recession. One of the points I covered was the release by the Commerce Department of the second quarter GDP figures (along with the downward revision of the figures for the first quarter 2011 back to before the start of the Great Recession/Lesser Depression.)

Today, I have seen a couple of articles pointing out that the (lack of) government spending at all levels has been a large factor in the "disappointing" GDP figures. First up is this blog post from yesterday's Washington Post with the title "GDP Shocker: ‘Much of the drag was government’:

So what was the problem?

Government, according to Faucher. “The major drag came from government, on both the federal and state and local sides. Government subtracted 1.2 percentage points from growth in the first quarter, with the federal government accounting for about two-thirds of that,” he said.

Hoocoudanode, right?

Bloomberg reported it this way:

Spending and investment by state and local governments shrank at a 3.4 percent annual rate in the second quarter, matching the decline in the first three months of 2011, the U.S. Commerce Department said today. The fourth consecutive drop is the longest such slump since the government began compiling quarterly data in 1947.

The U.S. economy expanded at a less-than-forecast 1.3 percent annual rate, the Commerce Department said. State and local governments accounted for a 0.41 percentage point drag, the same as the first quarter, as governors and mayors adjusted to lower revenue by cutting employees and services.

Peterr over at Firedoglake has this post today pointing out the problems of folks at all levels when they have too much month left at the end of the money compounded by worry that Social Security checks may not be forthcoming in August. But this little nugget really says it all for me:

When even the Chamber of Commerce is telling Congress to worry about the economy, you know that the GOP has gone way off the deep end. OSK-Deutsche Bank economists concur, as do the folks at Macroeconomic Advisors

Now I do have to ask how many folks remember the response of Speaker of the House Boehner way back in February when it was pointed out to him that cutting jobs could hurt the economy:

So be it.

You really should be careful of what you ask for Mr Speaker.

And because I can:

The (Official) Double Dip Moves Closer

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Back about six weeks ago, I predicted that the economy was headed for an official "double-dip" recession. Today's Commerce Department report on the economy showed the second quarter of 2011 GDP growth at 1.3% but also reported a downward revision to the 1st quarter GDP from 1.9% to .4%. This is after the original 1st quarter numbers had been revised upwards slightly from 1.8% back in June.

The economy grew at a 1.3 percent annual pace in the second quarter after expanding just 0.4 percent in the first three months of the year. First-quarter growth was revised from the previously reported 1.9 percent increase.

While the recovery stepped-up in the second quarter, economists had expected a stronger 1.9 percent reading.

Fourth-quarter [2010] growth was revised to a 2.3 percent rate from 3.1 percent.

Now, I have been using the phrase "officially a double-dip" because for the millions of people among the long term un and underemployed, we've never left the Great Recession/Lesser Depression. It has been all one long scene of watching our unemployment run out, our savings and retirement plans get cashed in and spent while trying to survive and keep a roof over our heads. And this is not just limited to those folks covered by the official un and underemployment lists but includes the new college graduates from the last few years trying to find employment in their fields. It also includes the folks who gave up and filed for Social Security if they were eligible, just to have some money coming in. It includes all the folks who are now considered "independent contractors" or "self-employed."

Dispatches From the Economic War Frontlines

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The weekly report of Initial Unemployment Claims is out today (via Reuters):

Initial claims for state unemployment benefits dropped 24,000 to a seasonally adjusted 398,000, the Labor Department said.

Economists polled by Reuters had forecast claims falling to 415,000. The prior week's figure was revised up to 422,000 from the previously reported 418,000.

I do hope the Beltway Village Idiots Pundits, Politicians, and Courtiers don't make too much of this news however. The 400K figure does seem to be a magic line for most but my guess/prediction is that after revision (which may or may not be reported), it will wind up back over 400K for the week. The upward revision of the numbers from the week before has seemingly become a staple on the reporting of this metric.

While the DeeCee folks do their Debt Ceiling/Deficit/Austerity Danse Macabre, there have been a few reports in the TradMed to remind the clueless of the realities being faced by millions of people who are not cocooned within the fog of life in the Beltway. Not that these articles penetrate the consciousness of most Villagers, given how they seem to always like to double down on the policy while "improving the messaging," but we can still hope they might see the light at some point, if only to protect their careers.

Jobs Numbers Continue to Stagnate While DeeCee Fiddles

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Well today's (Thursday, July 21) report of Initial Unemployment Claims from last week is out and once again, the numbers show little improvement (via Reuters):

Separately, initial claims for state unemployment benefits increased 10,000 to 418,000, the Labor Department said, above economists' expectations for a rise to 410,000.

The Reuters article is a revision of their initial report which had noted that last week's number had once again been revised upwards, from the originally reported 405K to 408K. At least they didn't say the "economists are surprised" for once.

Buried way down at the bottom of the Reuters article are these little nuggets of information:

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 50,000 to 3.70 million in the week ended July 9.

The number of Americans on emergency unemployment benefits declined 80,133 to 3.15 million in the week ended July 2, the latest week for which data is available.

A total of 7.33 million people were claiming unemployment benefits during that period under all programs, down 159,000 from the prior week.

My bold. My guess is that the "decline" in folks receiving extended (emergency) benefits is most likely due to people aging out of the system. The so-called "99ers." And please note that bolded piece once again. "A total of 7.33 million people were claiming unemployment benefits during that period..." The government officially recognizes at least 14M unemployed and 25M to 30M un and underemployed so this means that roughly half the people who are officially acknowledged as unemployed are not collecting any Unemployment compensation at this time.

Meanwhile, all the elected Neros in the Beltway Village continue to fiddle about with the "Grand Bargain" even when the DFHs at place like Bloomberg point out that whatever the results of massive budget cuts may be, creating jobs will not be one of them:

Advocates of reduced federal spending say shrinking the U.S. government would boost the economy and create jobs. They are wrong, according to Wall Street economists -- at least for the short term.

House Republican leaders, including Speaker John Boehner, urge spending cuts to lift employer confidence and increase investment and hiring. President Barack Obama, who signed into law a stimulus program now valued at $830 billion, has echoed the Republican assertions in recent comments, even as he has resisted cuts as deep and fast as they want.

Professional forecasters beg to differ. Fiscal retrenchment could subtract 1.5 percentage points to 2 percentage points from growth in 2012, a drag that will make it difficult to reduce 9.2 percent unemployment, say economists at Bank of America Merrill Lynch, JPMorgan Chase & Co. and Deutsche Bank AG.

I'm usually not one to take the predictions of Wall St economists as some form of gospel but the only group of people with a worse record than Wall St economists on getting things correct on the economy do happen to be the Beltway Village Idiots Politicians, Pundits, and Courtiers.

There is one small piece of a bit of Good News/Bad News. It seems the K Street lobbyists are having to actually work a bit these days. That's the good news. The bad news? We have to hear them whine about it now. Outside of the Banksters and the executives of the Sirius Cybernetics Corp, I can't think of any group who has less cause to whine which probably means we will now see dozens of articles on how the poor misunderstood lobbyists are just really trying to help all the poor widows and orphans honest.

And because I can:

Mr Bernanke, Just What the Hell Are You Waiting For?

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Yesterday (Wednesday July 13), Federal Reserve Chair Ben Bernanke was once again before Congress, testifying on the economy. Buried way down in the Reuters coverage of the hearing was this little nugget:

After recovering from the steepest recession in generations beginning in the summer of 2009, the U.S. economy has lost momentum in recent months. Gross domestic product expanded just 1.9 percent in the first three months of the year, and the second quarter does not look to have been much better.

Bernanke held to the view that recent weakness was due in part to temporary factors like energy costs and the effects on global industry from Japan's earthquake and tsunami.

But he acknowledged the labor market remains weaker than the Fed would like.

The labor market also remains weaker than the 14M unemployed and the 25M - 30M un and underemployed would like as well. While part of the stated Fed mission is "pursuit of maximum employment," the actions of the Fed over these last few years seem to have been more along the lines of "we'll pretend to do something and maybe the miracle will occur." As far as Bernanke's "...view that recent weakness was due in part to temporary factors...," as I've stated before, there are always "temporary factors" that are going to have an effect on life. It is part of life and should be part of his work to be anticipating and dealing with those "temporary factors" as they occur rather than using them as an excuse.

Economically, 'Good for Business' Is Usually Bad for People

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"Business Friendly Climate" is one of the buzz phrases we see and hear a bit more frequently these days. I guess it is a phrase that may have always been around to some extent but is not just limited to the business press. But what exactly does "Business Friendly Climate" actually mean? Googling the phrase brings up millions of pages of hits with apparently every state, city, and town in the country making the claim for themselves. President Obama says the US must become Business Friendly to create jobs. But to me, the more often I see and hear the phrases "business friendly" or "good for businesses," the more I become convinced that the end result will be something that is bad for humans and bad for living, breathing entities.

In case you are curious as to what precipitated this, it was a few articles the last week or so on both sides of the "it's good for business" divide. First up is this article from CNN on Tuesday, July 12 on businesses "fleeing" California:

Economists and Ethics: Is There an Effect On the Economy?

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Code of Ethics: A code of ethics is a set of guidelines which are designed to set out acceptable behaviors for members of a particular group, association, or profession. Many organizations govern themselves with a code of ethics, especially when they handle sensitive issues like investments, health care, or interactions with other cultures. In addition to setting a professional standard, a code of ethics can also increase confidence in an organization by showing outsiders that members of the organization are committed to following basic ethical guidelines in the course of doing their work.

I am not currently a member of the American Society for Quality (ASQ) but since I do consider myself a Quality Assurance professional, I have no problem adhering to the ASQ Code of Ethics. When I got my first QA position back in the early '80s, ASQ was known as the American Society for Quality control (ASQC) but the Code of Ethics was then as it is now. One of the many technical books I have read and used to help me in business is Ethics in Quality, which I found an interesting read, if only because the case studies used were not all black and white but showed the nuance of everyday life where sometimes there is no right or wrong answer nor are there always good choices available to folks.

The More Things Stay the Same

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Well, instead of being "surprised" by the June (lack of) Jobs Report, it seems the economists were "stunned" by the numbers (via Bloomberg):

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said he was “stunned” by today’s U.S. employment report.

He wasn’t the only one.

Not a single economist among 85 surveyed by Bloomberg News correctly forecast the 18,000 increase in payrolls in June reported by the Labor Department. Estimates ranged from a low of 60,000 to a high of 175,000. The median was 105,000 -- almost six times the actual number.

...snip...

It’s not unusual for payroll figures to fall outside of the range of economists’ forecasts. The same thing happened last month, as well as in October, November and December of last year.

That last paragraph should become a mantra for economists looking for excuses, but it most likely will not. As I've mentioned in earlier posts, there are always extraneous reasons for things happening within the economy. Like bad weather. And there will always be extraneous impacts that should be accounted for in any economic forecasting.

It Still Sux to be Correct

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Well, today's Jobs Report from the BLS for June 2011 is out and the news is not good. In this post from Tuesday (July 6), I had predicted:

My guess is that the private sector jobs (the ADP number) will be in the 50K range while the overall economy will be 20K to 25K max.

As I admitted in this post from yesterday (July 7), I was off fairly badly on my prediction for the ADP number. Unfortunately for the economy, I was a hell of a lot more accurate on the BLS number than the supposed expert economists (via Reuters):

U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dampening hopes the economy was on the cusp of regaining momentum after stumbling in recent months.

Nonfarm payrolls rose only 18,000, the weakest reading since September, the Labor Department said on Friday, well below economists' expectations for a 90,000 rise.

Many economists raised their forecasts on Thursday after a stronger-than-expected reading on U.S. private hiring from payrolls processor ADP, and they expected gains of anywhere between 125,000 and 175,000.

The unemployment rate climbed to 9.2 percent, the highest since December, from 9.1 percent in May.

The Very Serious People Missing the Interconnectedness of Everything

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As we see the various articles today about President Obama and the "grand bargain" being offered to get Republican votes for raising the debt ceiling, we also see further indications of the total cluelessness of so many of the folks who live inside of the beltway village.

A few weeks ago, I wrote this post explaining how good jobs would attack the so-called deficit problem. This is without addressing the $3.7T plus costs of our wars since 2001 nor that the cost of the Bush/Obama tax cuts are far larger contributors to the "problem."

The last few days, I have seen a couple of articles reinforcing for me that Pete Peterson and his acolytes are winning the battle. Just last Friday (July 1), Bloomberg had this article on the Government Accountability Office releasing a study (pdf) on how people are going to have to delay collecting Social Security and "buy an annuity" in order to pay for their retirements:

“The risk that retirees will outlive their assets is a growing challenge,” according to a study from the Government Accountability Office released today. Increased life expectancies and health-care costs coupled with declines in financial markets and home equity over the last few years have “intensified” workers’ concerns about how to manage their savings in retirement, the report said.

...snip...

“The risk that retirees will outlive their assets is a growing challenge,” according to a study from the Government Accountability Office released today. Increased life expectancies and health-care costs coupled with declines in financial markets and home equity over the last few years have “intensified” workers’ concerns about how to manage their savings in retirement, the report said.

Of course, the study does not and cannot explain how we are all supposed to be able to come up with the cash to buy an annuity nor does it explain how we're are supposed to find insurance companies that will actually be around to pay off on the annuities, even if we could afford them.

"Good News" but Not that Good.

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In this post I wrote Tuesday, I predicted that the ADP Jobs report for June would come in at around 50K private sector jobs versus the economists prediction of 100K. Well the report is out (via Reuters) and I was way wrong while the economists were also under:

Payrolls processor ADP said on Thursday private sector employment increased 157,000 after a modest 36,000 gain in May, and beating economists' expectations for a 68,000 rise.

The original report in May (as I quoted and linked to Reuters in this post) was actually at 38K jobs so 36K is a downward revision. For what it's worth, I do like when I am wrong on these points, especially when I'm wrong and the numbers come in far better than I thought.

Now 157K jobs sounds like something to cheer about and I guess in a way it is but we shouldn't get all giddy with excitement quite yet. After all, the economy needs to add 100K to 150K jobs each month just to absorb new folks coming into the work force each month so 157K jobs does not dent the long term un and underemployment numbers by much. Tomorrow's numbers from the BLS for June will include public sector as well as private sector and it is likely the public sector jobs lost will push the 157K number down significantly. And I'll say right now that July will be worse. How can I say that? Many states start their fiscal years on July 1 and the budget axes will be showing the results as Politico discusses here:

New budgets from 24 states will impose severe cuts, according to the Center on Budget and Policy Priorities.

To make ends meet, Arizona will drop Medicaid coverage for 130,000 childless adults. Michigan will slice public school funding by $470 per student. New York will reduce education aid by $1.3 billion. Wisconsin plans to chop into the Earned Income Tax Credit, which hurts household budgets of the working poor.

And Minnesota? Its government shut down after state lawmakers failed to pass a budget.

Those cuts can reverberate through the private sector, since contracts with vendors and payments to businesses also get slashed.

According to this article from Reuters on the Initial Unemployment Claims report for last week, the Minnesota shutdown is already hitting the numbers:

Beltway Economic Conventional Wisdom Assuring Economy Will Not Improve

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In the year plus that I have been writing about the economy and life as one of the long term un and underemployed, I've mentioned a few times how difficult it is to catalog all of the stupidity, cupidity, and overall cluelessness of the Beltway Village Idiots Politicians, Pundits, and Courtiers (here, here, here, and here for example). A few weeks ago, I predicted that we will have a "double-dip" recession, even though reality for many millions is we have been in a depression and there has been no recovery that would be necessary for there to be a "double-dip" in the first place. Nevertheless, over the weekend, there were a few articles premised on how the deficit/debt is the worst thing going on right now in the economy. This one from CNN yesterday (July 4) starts things off:

CNNMoney surveyed 27 economists and asked them to choose from a list of possible threats facing the economy. What scares them most? A sovereign debt default by a European country such as Greece. More than half of those surveyed ranked it as one of their top two concerns, with 10 choosing it as their number one worry.

...snip...

Relatively few of the economists surveyed were worried about the other risks they had to choose from -- a slowdown among emerging economies such as China, or budget cutting by federal, state and local governments.

"Austerity is a short-term risk, but will help long-term," said David Wyss, former chief economist at Standard & Poor's, now visiting fellow at Brown University. "The odds of too big a budget cut seems small."

My bold and there we have it. What's a little austerity to those who have no fear of the consequences of that austerity. Given the propensity of economists polled by news organizations to be wildly and incredibly wrong in their predictions while then expressing their continual "surprise" at being wrong, I think we can safely say that the budget cuts that are coming will be both too big and soon followed by economists chanting "Hoocoudanode?" when the negative impact becomes obvious even to the most obtuse of the Beltway Villagers.