Re: OT ~ A Good Analysis of the Economy

A good, clear and spot-on analysis, Carl. I'd already read it, but thanks
for posting it for the illiterati reading here...(;-o)!

I thought one of the most salient points was: "At 6.1%, the jobless rate
climbed from 5.7%, thanks in part to a surge in the size of the labor force
[school's out!] and an expansion of federal jobless benefits."

I wonder if anyone else reading here will grasp the significance of those
issues. Probably not. There's way too much hay to be made by endlessly
trumpeting empty promises and pointing to imaginary outcomes. Sad, that...

Dusty

"Carl A." <chainfl@xxxxxxxxx> wrote in message
news:1Exwk.23881$bx1.2914@xxxxxxxxxxxxxxxxxxxxxxxxx
REVIEW & OUTLOOK


The Jobless Jump
September 6, 2008; Page A10
Friday's jobs report for August was dismal by any measure, with payrolls
falling by 84,000, and another 58,000 jobs lost in downward revisions for
June and July. Private sector job losses were even higher at 101,000 for
the month, and overall job losses for 2008 now stand at about 600,000.

The cries of recession are naturally back in four-part political harmony,
though those predictions have been wrong so far. We've been hearing that
the economy is "already in recession" for at least a year, but there's
only been one quarter of negative growth -- a reduction in GDP of 0.2% in
the fourth quarter of 2007. The economy has been growing since, albeit too
modestly to keep anyone happy.

The August job losses also need to be put into the context of the eight
million new jobs created after the Bush tax cuts passed in May 2003
through 2007. At 6.1%, the jobless rate climbed from 5.7%, thanks in part
to a surge in the size of the labor force and an expansion of federal
jobless benefits. In September of 1996, when Bill Clinton was running for
re-election, the jobless rate wasn't much lower at 5.5%.

If you're looking for silver linings, such as they are, average hourly
earnings are still rising and have climbed at a 4.3% annual rate in the
last quarter. Productivity growth has also been stronger than expected,
which paradoxically hurts job creation as cautious companies squeeze out
more efficiencies rather than add labor costs. The percentage of private
companies adding jobs also popped up -- to 48.9% -- which is the highest
in many months. So the economy seems to be muddling along, rather than
slipping into recession. Given the magnitude of both the housing slump and
the credit write-offs on Wall Street, the fact that the U.S. economy has
avoided a downturn so far can only be called remarkable.

The bad news is that there isn't much reason for businesses to start
taking more risks. The credit crunch is continuing, amid uncertainty over
the banking system and housing market. The Treasury's plan for a taxpayer
backstop of Fannie Mae and Freddie Mac was supposed to reassure markets,
but instead the uncertainty over the fate of the mortgage giants has so
far only contributed to higher mortgage rates. Mark that down as another
Beltway triumph.

Political uncertainty is also a negative, with the policy risks for 2009
still unknown. A Democratic sweep in November all but guarantees a huge
tax increase, which won't restore animal spirits. Meanwhile, the jobless
numbers will likely cause the Federal Reserve to maintain negative real
interest rates even longer than it already has. This means greater risk of
future inflation, and with it further declines in real incomes.

Amid this news, we couldn't help but notice yesterday's White House press
release declaring that "the bipartisan economic growth package that
President Bush signed into law is having its intended effect." The
argument is that the economy would be worse were it not for the $150
billion in tax rebate checks. Thanks for the very small favor. The checks
goosed consumer spending for a few months but without any permanent change
to the incentives to work or invest.

As a political matter, any rebate impact is wearing off just as the fall
election campaign begins. Most voters want to know where the economy is
headed now, rather than that it could have been worse in the summer.
Yesterday, Barack Obama was naturally blaming Republicans for the job
losses, even though the failed "stimulus" was also his idea. He even wants
to do it all over again.

Memo to Republicans: This is what happens when you settle for political
stimulus gimmicks rather than tax cuts that are immediate, permanent and
at the margin. Memo to John McCain: You'll need a better argument than
"these are tough times" and "I'll fight for your future."

--------------------------------------------------------------------------------------------------------------

It bothers me that in all the discussions of unemployment we don't
consider the basic law of supply and demand.

Let's face it -- there is no demand for unskilled, uneducated, high priced
labor. There is no demand for people who lack a work ethic. There is no
demand for people who won't go to where the jobs are. There is no demand
for people who expect employers to provide welfare. There is no demand for
workers who cost more and are less trained than comparable workers in
India or China. But that's what there is plenty of supply of.

There is a huge demand for workers with basic skills -- can read
blueprints, now how to use a micrometer, understand that an assembly line
can't function if half the workers show up late for work or not at all,
workers who don't live in states like New York or Michigan which tax
businesses into noncompetitiveness and bury them under regulations and
bureaucratic interference.

Until we stop ignoring the basic supply/demand law, the economy will go
downhill.
--
Carl A. in FL
Obama's tax plan simplified: If you rob Peter to pay Paul,
you'll be surprised how many friends you have named Paul.

Jesus said that it's easier for a camel to go through the eye of a
needle than for a rich person to enter heaven.
Unlike John McCain's, Obambi's tax policy will make it easier
for rich people to go to heaven. . .
No wonder the wealthy Nancy Pelosi considers him to be
a gift from Above.









.

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