Jobless rate hits 16-year high; Update: CBO letter
posted at 11:20 am on February 6, 2009 by Ed Morrissey
Share on Facebook | printer-friendly
The economy lost almost 600,000 jobs in January, accelerating the increase in unemployment to a 16-year high of 7.6%. The news exceeded analyst projections, but apparently not by much, as the stock market advanced this morning despite the bad news:
The U.S. economy lost another 598,000 jobs in January, a larger than expected decline that highlighted a weak global economy and the pressure building on companies to cut costs and payrolls.
It is the largest one-month job loss since December of 1974, and pushed the unemployment rate to 7.6 percent, from 7.2 percent in December.
That is the highest unemployment rate since the fall of 1992, with 11.6 million people out of work — and would have gone even higher except for a slight decline in the number of people looking for work, itself a possible sign of economic weakness as people become discouraged from job-hunting. …
The figures released on Friday indicate broad weakness in the labor market, with losses spread throughout the economy. Manufacturing companies dropped 207,000 jobs — a more than 1.5 percent decline from the prior month — and construction firms shed 111,000. The service sector — long a stable source of job growth and touted as the country’s economic strength — lost 279,000 jobs, including 42,000 positions in the financial sector and 45,000 among retailers.
A service economy will take big hits in a recession. People will still need to buy goods, such as food and clothing, but services can get postponed or put off altogether. When manufacturing and construction rebound, services will eventually follow.
This report will put pressure on Congress to act, but probably in the worst possible way. The government plans to seize capital in order to spend it when we need to keep capital in the markets to create jobs and businesses. They will panic and pass the Porkulus Bill in the Senate without any heed to the CBO’s analysis that shows the net ten-year effect of the bill would be to depress GDP, not stimulate it.
FDR said, “The only thing we have to fear is fear itself.” Barack Obama and the Democrats say, “THE SKY IS FALLING! THE SKY IS FALLING!” This is the time to act wisely, not in a panic. Speaking of which, Wall Street indicators at the time I write this show all green. The Dow is up 125 points, S&P up 11, and the NASDAQ up 22. It looks like the only people panicking are Harry Reid, Nancy Pelosi, and President Obama.
Addendum: You have to love the Washington Post’s idea of balance. Here’s the final paragraph:
Overall, Friday’s report is “yet one more demonstration of the fact that the rug has been pulled out from under working families in this country and it underscores the urgency of passing an effective stimulus package that matches the scope of the problem,” said Heidi Shierholz, an economist with the Economic Policy Institute, a liberal economic think tank.
The response from Heritage, Cato, or some other fiscal-conservative think tank? They don’t provide one. At least the WaPo properly identified the EPI.
Update: Some in the comments think that the CBO figures have been discredited. Read the letter yourself, emphasis mine:
At your request, the Congressional Budget Office (CBO) has conducted an analysis of the macroeconomic impact of the Inouye-Baucus amendment in the nature of a substitute to H.R. 1. CBO estimates that this Senate legislation would raise output and lower unemployment for several years, with effects broadly similar to those of H.R. 1 as introduced. In the longer run, the legislation would result in a slight decrease in gross domestic product (GDP) compared with CBO’s baseline economic forecast. …
Most of the budgetary effects of the Senate legislation occur over the next few years. Even if the fiscal stimulus persisted, however, the short-run effects on output that operate by increasing demand for goods and services would eventually fade away. In the long run, the economy produces close to its potential output on average, and that potential level is determined by the stock of productive capital, the supply of labor, and productivity. Short-run stimulative policies can affect long-run output by influencing those three factors, although such effects would generally be smaller than the short-run impact of those policies on demand.
In contrast to its positive near-term macroeconomic effects, the Senate legislation would reduce output slightly in the long run, CBO estimates, as would other similar proposals. The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth as government bonds rather than in a form that can be used to finance private investment, the increased debt would tend to reduce the stock of productive capital. In economic parlance, the debt would “crowd out” private investment.
And the more we spend now, the less capital we will have later, which will reduce production in the long run.
You must be logged in to post a comment.
Blowback
Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.
Trackbacks/Pings
Trackback URL
Comments
Comment pages: « Previous 1 2
It’s the end of the world and I feel fine.
Neo on February 6, 2009 at 3:28 PM
Well, the desire to interfere in what the state wants, surely cuts across party lines, for example the last administration’s refusal to allow states dictate their own EPA standards.
peter_griffin on February 6, 2009 at 3:43 PM
What a load you are.
Top 3 states by unemployment last I checked were MI, RI and CA- all blue
Chuck Schick on February 6, 2009 at 3:57 PM
Wonder if somebody in the Govt. is fudging the unemployment numbers to make it look worse that it is….
albill on February 6, 2009 at 4:03 PM
If I remember correctly the unemployment rate in the late 70’s and the early 80’s was higher than this by far. And there was high inflation as well as high interest rates. I do not remember people being so freaked about it. They knew there were problems, but they did not maintain a decade of hysterics.
Terrye on February 6, 2009 at 5:33 PM
The market advanced because the economy is purging itself, ala Peter Schiff, of its excess capacity. We need to produce, not spend. (DRILL!)
The fools in DC have not saved us yet; let’s hope they keep arguing and never do.
PattyJ on February 6, 2009 at 5:35 PM
Deathtowhatever:
You do not know what you are talking about. Oklahoma is the reddest state out there and the last time I checked their unemployment rate was about 4%.
As far as education is concerned, I might live in the sticks but the majority of the kids who go to highschool here actually graduate which is more than can be said for kids in blue state inner cities.
Terrye on February 6, 2009 at 5:36 PM
I work with a guy who thinks everyone else is outta work. That’s how bad it is!
RalphyBoy on February 6, 2009 at 7:47 PM
Dear Ed,
This figure is much too high. Most probably it’s a couple points lower when you exlude “white construction workers,” and, according to Democrat Robert Reich, they shouldn’t count. Remember, testifying in front of Congress, he said: “No White Construction Workers.”
http://sweetness-light.com/archive/reich-no-white-male-construction-workers
Dr. Charles G. Waugh on February 6, 2009 at 10:33 PM
Notice how the lobless rate increased more as “O” Dumbo Ears became the front runner??
The whole thing is a Damn O Crap scam.
Soros planned it for a long time and finaly got a bleeading heart Lib. in charge.
Rick007 on February 7, 2009 at 9:31 AM
Don’t know if you will see this. I had to leave the computer and didn’t get back until now and want to respond to your answer to me.
Health care: It is not the government’s responsibility to see that people get health care. When the government does get involved, as it has in insidious ways over the years, the costs rise and the care declines. If you do not know the story of Ben Carson, look him up. He is a renowned neurosurgeon who quit using insurance and medicaid as compensation for his services. But, he knew that many people who need his help could not pay his fees. So, what did he do? He instituted a program whereby private funds help defray the costs for those who could not pay and has been successfully practicing his medicine and is able to help those who need it but cannot pay. There are others who have done similar things. Private people solving a problem that government does not. Not to mention the fact that the government and insurance companies deny treatments they deem too costly or for those they deem unworthy.
Housing: Good one and another typical lib red herring. The FHA is a successful program to help responsible people buy their first home. What I referred to however, was the section 8 program that has those dependent on the government living in hovels and ghettos over run with crime. Obama’s Chicago slums are the best illustration of the failure of government help. Catholic Charities on the other hand help people get into clean and affordable housing. Many other private and religious groups do the same. Let us also not forget the current situation where government decided that everyone should own a home, regardless of the ability to pay.
Food: The food stamp program is rampant with fraud and has not alleviated hunger in the least. School breakfast and lunch programs are fairly successful, but again there is huge fraud in it. On the other hand, food banks, which take in donations of food and money oversee the actual distribution of food to people who are hungry. These are private organizations and are enormously successful at getting needed food to hungry people without the fraud.
Education: Anyone who thinks the federal government has done anything but destroy education is living in denial. Talk about waste and fraud! The numbers so often given for education regarding the per pupil spending are never broken down to show how little actually gets into the classroom. Last night I heard of a program started by a teacher from the Bronx. It’s a website where teachers can post a list of necessities and “wish list” for their classrooms. Private citizens and organizations can view these lists and donate through the website, directly to the teachers. This is an example of the private sector stepping up to fill the gap in government run education.
Your assessment of the type of society I wish for couldn’t be more wrong and it exemplifies the wrong headed perception liberals have of conservatives. On the contrary, what you describe is actually a result of socialist liberal policies.
The standard of living improves when people are assured that they will reap the rewards of their hard work, when ambition and innovation is not stifled by complacency brought on by a nanny state that by its very existence lulls people into inaction and tells them they cannot succeed on their own.
Third world countries are the way they are because the government has control of resources, commerce, education, food, and housing.
You articulate here some good principles. Everyone in America should be equal before the law, but judges and legislators allow their personal opinions and prejudices to influence their decisions. A true meritocracy allows people to succeed and to fail without regards to their status at birth. Few people think that they have gotten where they are without others. And most people do feel a sense of responsibility to help truly needy people. But, the confiscation of income and the redistribution propagated by the government have dulled that sense of responsibility. You look to government to create a Utopia which doesn’t and cannot ever exist.
So, I put this before you. Americans are the most generous people on this earth. Private charity in this country is greater than anywhere and that is true even under the onerous tax structure we bear. Imagine what would be given and how much more effective it would be without it! In any realm of life, government fails and private entity succeeds.
Here is my core principle: Liberal socialists believe that they can create the perfect society by force from the top down through government intervention. Conservatives believe that a good society is created from the bottom up through individual success and responsibility. Liberals see the end result as something to be imposed. Conservatives see the end result as something that is achieved.
Jvette on February 7, 2009 at 1:34 PM
Comment pages: « Previous 1 2