Saturday, April 6, 2013
Is This a Bump on the Road or a Road to Recession?
The latest jobs reports from the Bureau of Labor Statistics was a bit of a cold shower for those hoping that the economy was finally spinning fast enough to produce real growth. After a brutal recession, we have had a painfully slow jobs recovery and are, in fact, still 3 million jobs below peak employment, which all the way back in January 2008 (if you are a conservatie, insert favorite barb about President Obama here.)
While the unemployment rate edged down to 7.6% from 7.7%, the entire drop was due to more people dropping out of the workforce, with workforce participation reaching its lowest level since the Carter administration. Only 88,000 jobs were created, far below the 200,000 that economists had been expecting just a few days before the report was released.
Some view this as evidence that the economy is slipping back into recession, while others view it as merely a statistical anomaly, and point to the much more robust job growth in February, when 268,000 jobs were created as evidence.
I view things somewhere in between. There is no evidence to me that the economy is headed back into recession. There has been no shock to our financial system, real estate is slowly on the mend and, every one of the past 29 months have seen positive job growth, with that number increasing to 36 months if you exclude the outlier of large hiring for temporary census workers in 2010 that led to large job reductions when those temporary jobs expired. Over that time period 5.9 million jobs have been created.
The counterbalance to those optimistic sounding statistics is that 8.7 million jobs were lost during the recession, so we aren't close to back to "normal" yet. Growth in both GDP and jobs has lagged substantially in this recovery versus prior recessions. The 1990-1991 recession saw a mere 1.6 million jobs lost and jobs were back at parity in less than 2 years.
Even the brutal 81-81 recession saw only 2.8 million jobs lost and those were recovered within a year of job growth resuming.
So, what we are stuck with is an economy that still has a huge hole that is being filled painfully slowly. Economists say it is likely that this month's slowing numbers do not yet include much impact from sequester spending cuts, since those impacts are largely not felt until April and beyond. It does include the headwinds from the tax increases that took effect at the first of the year.
If I had to guess, I would say that we have neither achieved "escape velocity" or fallen back into recession - we are just continuing to muddle along painfully slowly.
What Is Generational Theft?
An increasingly popular notion among conservatives is that we are stealing from future generations with today's deficit spending. The thinking is fairly straightforward - we are spending more money than we have and borrowing the rest, leaving future generations to pay the tab.
Liberal economist Paul Krugman has written a strong rebuke to this point of view. Krugman states that the conservative thinking misunderstands fundamentally what deficits are - that we are loaning money to ourselves and therefore not stealing from anyone.
Sorry, Paul, but your logic falls short. Much of today's deficit is financed with debt either sold to other countries (money we will surely have to pay back in the future) or with bond-buying from the Federal Reserve's latest Quantitative Easing program which is unsustainable if (or more like when) inflation begins to resurge.
We have to deal with the deficit and can't continue to assume that we can outspend our tax collections and borrow money at near-zero interest rates to cover the difference. The greatest risk of our debt is a crisis of confidence in the government's ability to service the debt, which would suddenly and without much warning drive up borrowing costs and set off a major recession.
Where Krugman is correct is that investment in high return government programs is warranted. Investments in infrastructure, education and science pay back in many multiples over future generations and should be continued. But these are a very small percentage of federal expenditures. The vast majority of federal money is spend on Defense and Entitlements. These are the areas that we need to reign in.
Have We Gone PC Mad or Was President Obama Out of Line?
President Obama, in a speech last week, called California Attorney General Kamala Harris "by far the best-looking Attorney General", a statement that provoked anger from portions of the left as well as the right (a somewhat ironic juxtaposition of the usual conservative orthodoxy about political correctness.)
So was he out of line? And if so, why? What is appropriate in the modern world and what is sexist?
I've often wondered the same thing in my own professional life. A couple of years ago, a colleague of mine who had, just a few months prior, had triplets, mentioned to me that she had just celebrated her 40th birthday. Amazed, as this woman didn't look a day over 32 and was in impeccable physical condition, I said, without thinking much about the professional implications, "you are 40 and just had 3 babies? You look amazing - you'd look great for 35 and no kids!" Perhaps sensing that I might be stepping near a line somewhere, I quickly added, "I really hope that wasn't inappropriate to say."
She turned to me and smiled, saying, "I'm pretty sure it is never inappropriate to tell a woman she looks amazing. Thanks."
So, aside from being factually incorrect (Pam Bondi of Florida is clearly the best-looking Attorney General in my opinion), was there anything wrong with what President Obama said?
It's very close to a very gray line, in my opinion. I don't agree with my friend that it is never inappropriate to talk about how good a woman looks, but that doesn't necessarily make President Obama wrong either.
My conversation, detailed above, was a private one, with words exchanged among two people who had a friendly relationship if not a friendship.
Had I instead said: "it's really nice to see someone with big boobs join this department" in a department meeting, I would CLEARLY be out of line.
What President Obama did was somewhere in between the two. By all accounts, he is friends with Kamala Harris. But the setting was public and the Attorney General was in a professional setting. It was probably best left unsaid or said in a private conversation. But it isn't far over the line.
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