In his Earth Day speech on Wednesday, Barack Obama claimed that Porkulus and its tax breaks for weatherization and residential energy efficiency had set off a “rush” to hire construction workers to make homes more energy efficient. Yesterday, his Labor Department begged to differ. They adjusted the numbers announced earlier this month on jobless claims upward, past analysts’ expectations, and the analysts predicted that unemployment would rise for the next 12 months into double digits:
Worse-than-expected news on unemployment and home sales Thursday dampened optimism that a broad economic recovery might be near.
Many analysts don’t expect the housing slide to show signs of stabilizing until the second half of this year. They said layoffs may be at their high point, but that the jobless rate, already at a 25-year high, will keep rising until the middle of 2010.
The Labor Department reported Thursday that initial claims for unemployment compensation rose to a seasonally adjusted 640,000 last week, up from a revised 613,000 the previous week. That was slightly more than analysts’ expectations of 635,000.
Meanwhile, the National Association of Realtors said sales of existing homes fell 3 percent in March to a seasonally adjusted annual rate of 4.57 million units, with February revised down to 4.71 million units. Sales had been expected to fall to an annual rate of 4.7 million units, according to Thomson Reuters.
If sales of existing houses dropped, new starts will drop as well. One of the problems left over from the housing bubble collapse is an excess of inventory, as there are now more homes than buyers. Foreclosures make the problem worse, although those have been mainly concentrated in specific areas where the subprime lending created the most inflation of housing prices — California, Las Vegas, and Florida.
Porkulus has not reversed the loss of jobs, nor has it created a “rush” to hire construction workers. Government programs for weatherization will not create massive stimulus to the economy, mainly because they require people to spend money they may not have rather than simply cut their taxes on the front end to get the money to them. The Obama tax cut of $13 per week will not stimulate that kind of spending. Until people feel secure about their jobs and their businesses, they will cut back on expenditures and reserve their cash for potential setbacks.
Unfortunately, we’ve committed to the $787 billion price tag, and we’re not likely to get any short-term stimulus out of it, as these numbers show pretty clearly. What we will get is long-term debt that will hinder long-term growth. Obama claimed that the benefits of the stimulus in the short run would compensate for that, but with unemployment expected to rise above 10% over the next year, his gamble looks like snake eyes now.