Across-the-board cuts in state spending are all but certain this year despite $540 million in federal aid approved by Congress earlier this week.
Gov. Chris Gregoire said Thursday that tax collections in June and July were about $125 million below projections.
And she expects the state revenue forecast next month will predict more declines ahead.
Underpinning the gloom: Nearly two-thirds of Americans believe the economy has yet to hit bottom, a sharply higher percentage than the 53% who felt that way in January.
The sour national mood appears all-encompassing and is dragging down ratings for the GOP too, suggesting voters above all are disenchanted with the political establishment in Washington. Just 24% express positive feelings about the Republican Party, a new low in the 21-year history of the Journal’s survey. Democrats are only slightly more popular, but also near an all-time low.
The results likely foreshadow a poor showing in November’s mid-term for Democrats, whose leaders had hoped the public would grow more optimistic about the economy and, as a result, more supportive of the party agenda. Now, despite the weak Republican numbers, the survey shows frustrated voters on the left are less interested than impassioned voters on the right to in the election.
The sales momentum that had been slowly lifting local home sales came to a jarring halt in July, raising questions about the long-awaited recovery of the real estate market.
Monthly home sales data released Tuesday show that 643 area homes sold during July, a striking drop-off from the 1,022 transactions recorded in June.
Small business owners became more downbeat in July as expectations of weaker economic growth in the second half of the year reinforced a reluctance to hire, according to a survey published on Tuesday.
The National Federation of Independent Business (NFIB) said its optimism index fell 0.9 point to 88.1 in July.
“Virtually all of the decline was due to weaker expectations for business conditions six months from now,” said William Dunkleberg, the group’s chief economist.
Baby Boomers approaching retirement age are in for a rude awakening.
Many want to keep working, knowing that they likely will live well into their 80s and 90s, stay healthier than previous generations and need more cash to keep paying the bills.
However, for Boomers ”” those 79 million Americans born from 1946 through 1964 ”” “the new retirement reality may be a messy proposition,” says Alicia Munnell, director of the Center for Retirement Research at Boston College.
Jobs are scarce and many employers aren’t willing to hire older workers. Boomers who do land jobs often must settle for ones that are less fulfilling than desired.
That the Great Recession could then bring hope for a major recalibration ”” a resetting of all the clocks ”” is not surprising. Unfortunately, though, it’s not happening in any meaningful way. The poor are getting poorer, and the rich, despite stock-market setbacks, are still comparatively rich. The most devastating losses in household wealth over the past two years have been suffered by the middle class. And families are fraying at the seams. The Pew poll showed nearly half of people who had been unemployed for more than six months saying their family relationships had become strained, and a New York Times/CBS poll of unemployed adults last winter found about 40 percent saying they believed their joblessness was causing behavioral change in their children.
Parents who have jobs are working longer hours than ever. Mothers are taking shorter maternity leaves. The birth rate is on the decline. The divorce rate is declining, too ”” it’s too expensive for people to break up their households ”” but that’s not necessarily a family-friendly thing, as a report from the Council on Contemporary Families noted in April: “We know from the experience of the Great Depression of the 1930s that divorce rates can fall while family conflict and domestic violence rates rise.”
What came out of the combined experience of the Great Depression and World War II ”” broad measures of quality-of-life equalization like a sharply progressive tax policy with rates on the wealthy unimaginable today, the G.I. Bill, government-subsidized home mortgages for veterans ”” permitted the easier, less-frenzied middle class family life that older Americans remember from the 1950s and ’60s and that younger Americans dream of. In other words, it wasn’t individual families that reformed themselves after the crucible of the Depression. It was our society.
The Labor Department numbers released Friday also showed that the private sector hired only 31,000 workers in June, revised down from 83,000. May’s numbers were raised slightly to show 51,000 net new jobs, up from 33,000.
“We’ve definitely seen a one, two month ”” in some cases three month ”” drop in the economic data,” Brian Wesbury, chief economist at First Trust in Chicago, told NPR.
Wesbury said that while the numbers are disappointing, he doesn’t think the nation is heading toward a double-dip recession. “There are other pieces [of data] that have begun to turn,” he said.
Standard & Poor’s chief economist David Wyss agreed. “I think we’re seeing a half-speed recovery,” he told NPR.
There’s a class war coming to the world of government pensions.
The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide.
The have-nots are taxpayers who don’t have generous pensions. Their 401(k)s or individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks.
At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying.
Earlier this week, a crucial index of manufacturing showed that growth had slipped slightly in July, chain stores reported anemic increases in sales and unemployment claims rose above the level usual for this stage of a recovery. On the more positive side, auto sales increased 5.1 percent in July compared with a year earlier, although from a very low base.
For now, companies appear nervous about expanding their payrolls. “Businesses just don’t want to hire,” said Allen Sinai, chief global economist at Decision Economics. “Workers are too costly and it’s very easy to substitute technology for labor.”
He added that with corporate earnings rising partly on the back of cost-cutting, employers are reluctant to give up profits. “So while corporate earnings were spectacular,” Mr. Sinai said, “the job market just stinks.”
With the American economic recovery hanging in the balance, private employers added 71,000 jobs in July, up from a downwardly revised 31,000 in June but below the consensus forecast of 90,000. The unemployment rate stayed steady at 9.5 percent.
Over all, the nation lost 131,000 jobs in July, but those losses came as 143,000 Census Bureau workers left their temporary posts, the Labor Department said. June’s number was revised dramatically downward to a total loss of 221,000 jobs. The Department of Labor originally reported that the nation lost 125,000 jobs in June.
Figures released last week confirmed that the United States economy slowed down in the spring, and the Department of Labor’s monthly statistical snapshot of hiring pointed toward a stall in hiring this summer, as employers failed to add jobs at the rate they were earlier this year.
It is a very disappointing report–but alas one that is not surprising. Read it all–KSH.
For the past two years, we’ve been scarred and scared, imprisoned in our fears and an awful economy. We lived beyond our means. We paid the price.
This recession has been a terrible and wrathful one. In the fourth quarter of 2008, GDP fell a staggering 6.8%.
But the way things have been going over the past month suggests we may finally be stepping out of the prison gates and back into the glaring sunlight.
Could it be that America is free at last?
Facing eviction from her Tennessee apartment after several months of unpaid rent, Alexandra Jarrin packed up whatever she could fit into her two-door coupe recently and drove out of town.
Ms. Jarrin, 49, wound up at a motel here, putting down $260 she had managed to scrape together from friends and from selling her living room set, enough for a weeklong stay. It was essentially all the money she had left after her unemployment benefits expired in March. Now she is facing a previously unimaginable situation for a woman who, not that long ago, had a corporate job near New York City and was enrolled in a graduate business school, whose sticker is still emblazoned on her back windshield.
“Barring a miracle, I’m going to be in my car,” she said.
While the support to economic activity from stimulative fiscal policies and firms’ restocking of their inventories will diminish over time, rising demand from households and businesses should help sustain growth. In particular, in the household sector, growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions. In the business sector, investment in equipment and software has been increasing rapidly, in part as a result of the deferral of capital outlays during the downturn and the need of many businesses to replace aging equipment. At the same time, rising U.S. exports, reflecting the expansion of the global economy and the recovery of world trade, have helped foster growth in the U.S. manufacturing sector.
To be sure, notable restraints on the recovery persist. The housing market has remained weak, with the overhang of vacant or foreclosed houses weighing on home prices and new construction. Similarly, poor economic fundamentals and tight credit are holding back investment in nonresidential structures, such as office buildings, hotels, and shopping malls.
Importantly, the slow recovery in the labor market and the attendant uncertainty about job prospects are weighing on household confidence and spending….
In between the statistical data, the dour outlook for state budgets, and the declaration that the longest recession since World War II is at least technically over, Federal Reserve Chairman Ben Bernanke talked Monday of how the South has come a long way in educating its residents and transforming its economy.
Bernanke could speak with a degree of authority on the topic, having attended public schools in tiny Dillon, where he also worked for three summers at the famous South of the Border tourist attraction.
“When I attended public schools in South Carolina in the 1960s, measures of per-pupil spending, years of schooling, and student achievement in the South lagged significantly behind other parts of the country,” the Fed chief said in a speech at the Southern Legislative Conference in Charleston. “Since then, those indicators have changed, very much for the better.”
Personal consumption rose at an annual rate of only 1.6 percent in the second quarter, and consumer spending appears to have softened as the quarter progressed.
“The problem is it looks like the consumer was really weakening in June, so you’re starting the third quarter in a position of weakness,” said David Shulman, senior economist at the UCLA Anderson Forecast. “The components of this report are ugly.”
Meanwhile, a number of factors that boosted economic growth starting last summer are about to run their course.
The second-quarter GDP number, soft though it was, received a one-time boost from businesses building up their inventories (contributing 1.05 percentage points of growth) and federal government spending (0.7 percentage points), both of which are likely to fade. Growth was also supported by a burst of residential investment (adding 0.6 percentage points) — caused by home builders’ rushing to finish projects to take advantage of a home-buyer tax credit — that probably will turn negative in future quarters.
Cheap labour has built China’s economic miracle. Its manufacturing workers toil for a small fraction of the cost of their American or German competitors. At the bottom of the heap, a “floating population” of about 130m migrants work in China’s boomtowns, taking home 1,348 yuan a month on average last year. That is a mere $197, little more than one-twentieth of the average monthly wage in America. But it is 17% more than the year before. As China’s economy has bounced back, wages have followed suit. On the coasts, where its exporting factories are clustered, bosses are short of workers, and workers short of patience. A spate of strikes has thrown a spanner into the workshop of the world.
The hands of China’s workers have been strengthened by a new labour law, introduced in 2008, and by the more fundamental laws of demand and supply (see article). Workers are becoming harder to find and to keep. The country’s villages still contain perhaps 70m potential migrants. Other rural folk might be willing to work closer to home in the growing number of factories moving inland. But the supply of strong backs and nimble fingers is not infinite, even in China. The number of 15- to 29-year-olds will fall sharply from next year. And although their wages are increasing, their aspirations are rising even faster. They seem less willing to “eat bitterness”, as the Chinese put it, without complaint.
There is no more disputing it: the economic recovery in the United States has indeed slowed.
The nation’s economy has been growing for a year, with few new jobs to show for it. Now, with the government reporting a growth rate of just 2.4 percent in the second quarter and federal stimulus measures fading, the jobs outlook appears even more discouraging.
“Given how weak the labor market is, how long we’ve been without real growth, the rest of this year is probably still going to feel like a recession,” said Prajakta Bhide, a research analyst for the United States economy at Roubini Global Economics. “It’s still positive growth ”” rather than contraction ”” but it’s going to be very, very protracted.”
A 20-year-old Christian mobile phone shop manager in Florida stopped a would-be armed robber by preaching to him about Jesus.
Nayara Goncalves spent nearly five minutes persuading the man that he was doing the wrong thing.
The man eventually apologised, explained his gun was a replica and left the shop in Broward County.
“She was able to remain calm and keep him calm,” a sheriff’s office spokeswoman said.
The U.S. economic recovery will remain slow deep into next year, held back by shoppers reluctant to spend and employers hesitant to hire, according to an Associated Press survey of leading economists.
The latest quarterly AP Economy Survey shows economists have turned gloomier in the past three months. They foresee weaker growth and higher unemployment than they did before. As a result, the economists think the Federal Reserve will keep interest rates near zero until at least next spring.
Yet despite their expectation of slower growth, a majority of the 42 economists surveyed believe the recovery remains on track, raising hopes that the economy can avoid falling back into a “double-dip” recession.
….these macroeconomic arguments between policy-makers and intellectuals are blind to obstacles to growth faced on a micro level by real, live entrepreneurs and managers. Confronted with incredible uncertainty about the future business climate brought about by massive regulatory and tax changes, they are sitting on cash instead of investing in capital equipment and, especially, hiring new workers.
White House Chief of Staff Rahm Emanuel famously said never let a crisis go to waste. But the policy changes on health-care and financial services that have emerged from the current crisis, plus the largest tax increase in history that will hit Jan. 1 without Congressional action, are restraining companies, especially mid-to-small-sized ones.
Atlas didn’t shrug; he’s sitting on his hands””and his wallet.
That is the message heard repeatedly from entrepreneurs, their private-equity investors and their wealth managers. And it is becoming increasingly apparent, not so much in the parade of stronger-than-expected second-quarter earnings numbers from Standard & Poor’s 500 companies, but in regional Federal Reserve Bank reports.
Unemployment in America is a national crisis. It is also a local crisis. As individuals and families struggle to find work, make ends meet, and keep their homes amid an anemic economic recovery, they increasingly turn to local services for support. Local governments provide job training and assistance, transportation, support services for individuals and families in need, health care and education and afterschool programs that support working families. In many communities, local governments are also one of the primary employers….
The pain coursing through American families is all too real and no one seems to know what to do about it. A rigorous new analysis for the Rockefeller Foundation shows that Americans are more economically insecure now than they have been in a quarter of a century, and the trend lines suggest that things will only get worse.
Rampant joblessness and skyrocketing medical costs are among the biggest factors tearing at the very fabric of American economic life so painstakingly put together in the early post-World War II decades.
“Because of high unemployment, management is using its leverage to get more hours out of workers,” said Robert C. Pozen, a senior lecturer at Harvard Business School and the former president of Fidelity Investments. “What’s worrisome is that American business has gotten used to being a lot leaner, and it could take a while before they start hiring again.”
And some of those businesses, including Harley-Davidson, are preparing for a future where they can prosper even if sales do not recover. Harley’s goal is to permanently be in a position to generate strong profits on a lower revenue base.
In some ways, the ability to raise profits in the face of declining sales is a triumph of productivity that makes the United States more globally competitive. The problem is that companies are not investing those earnings, instead letting cash pile up to levels not reached in nearly half a century.
“As long as corporations are reinvesting, the economy can grow,” said Ethan Harris, chief economist at Bank of America Merrill Lynch. “But if they’re taking those profits and saving them, rather than buying new equipment, it hurts overall growth. The longer this goes on, the more you worry about income being diverted to a sector that’s not spending.”
So far, history be damned. The contrast between revived profits and stunted job growth is stunning. From late 2007 to late 2009, payroll employment dropped nearly 8.4 million. Since then, the economy has recovered a scant 11 percent of those lost jobs. Companies are doing much better than workers; that defines today’s economy….
“Businesses can’t cost-cut their way to consistent profit growth,” argues Zandi. “Eventually, they need to generate revenue growth that requires investment and hiring.” There are some favorable signs. Companies seem to have stepped up replacement of aging computers; this could create jobs. General Electric says its 2009 research and development budget of $3.3 billion was up 18 percent since 2006, and it is supporting new products, from batteries to solar films.
But it’s unclear whether corporate elites were so traumatized by the crisis that they’ve adopted a bunker mentality. That, as much as uncertainty over Obama administration policies, could be fearsome. What might appeal to individual firms — paring expenses to maximize profits, hoarding cash to protect against a future financial crisis, waiting to hire until sales improve — could, if adopted by most companies, sabotage a stronger recovery. If labor is cowed and capital is overcautious, the economy must suffer.
Watch….[as the following people speak] from New Orleans Roman Catholic Archbishop Gregory Aymond, Margaret Dubuisson of Catholic Charities of the New Orleans Archdiocese, and Rev. John Dee Jeffries, pastor of the First Baptist Church of Chalmette, discussing the spiritual toll of the oil spill crisis for people along the Gulf Coast.
The administration’s second assumption, meanwhile, is a matter of academic theories about the sizes of the relevant economic multipliers. Textbook Keynesian economics tells us that government-purchases multipliers are larger than tax-cut multipliers. And, as we have seen, the Obama administration’s economic team consulted these standard models in deciding that spending would be significantly more effective than tax cuts.
But a great deal of recent economic evidence calls that conclusion into question. In an ironic twist, one key piece comes from Christina Romer, who is now chair of Obama’s Council of Economic Advisers. About six months before she took the job, Romer teamed up with her husband and fellow Berkeley economist David Romer to write a paper (“The Macroeconomic Effects of Tax Changes”) that sought to measure the influence of tax policy on GDP. Crucial to the Romers’ method was their effort to identify changes in tax policy made during times of relative economic stability, and driven by a desire to influence economic behavior or activity (to encourage growth, say, or reduce a deficit), rather than those changes made in response to a recession or crisis. By studying such “exogenous” tax-policy changes, the Romers could be more confident that they were in fact measuring the effects of taxes and not those of extraneous conditions.
The Romers’ conclusion, which is at odds with most traditional Keynesian analysis, was that the tax multiplier was 3 ”” in other words, that every dollar spent on tax cuts would boost GDP by $3. This would mean that the tax multiplier is roughly three times larger than Obama’s advisors assumed it was during their policy simulations.
An alarm aboard the Deepwater Horizon oil rig that could have alerted workers to fire and explosive gas had been silenced before the 20 April explosion, a senior rig technician has said.
Mike Williams told a hearing that managers wanted warning sirens and lights silenced because they did want workers disturbed by false alarms.
He said the alarm had been partially shut off months before the blast.
Just as workers in the private sector participate in Social Security in addition to any pension plan at their companies, most states put their workers in the federal program along with providing a state pension.
Maine and a handful of others, however, have long been holdouts, relying solely on their state pension plans. In addition, most states have excluded some workers ”” often teachers, firefighters and police ”” from the national retirement system and its associated costs, 6.2 percent of payroll for the employer and an equal amount for the worker.
Now, Maine legislators have prepared a detailed plan for shifting state employees into Social Security and are considering whether to adopt it. They acknowledge it will not solve their problem in the short term but see long-term advantages.
“By this estimate, the Recovery Act has met the president’s goal of saving or creating 3.5 million jobs — two quarters earlier than anticipated,” Romer said with a straight face. (More than 2.5 million non-farm jobs have been lost since ARRA was enacted in February 2009, all of them in the private sector, according to the Bureau of Labor Statistics.)
How does the CEA arrive at these numbers? It uses two methods, Romer said. The first is a standard macroeconomic forecasting model that estimates the multiplier effect of fiscal policy. (The government’s spending is someone else’s income.) The second method is statistical, using previous relationships between GDP and employment to project future behavior.
These numbers might just as well have been pulled out of a hat. Recall that it was the same model and method the administration used in January 2009 to predict an unemployment rate of 7 percent in the fourth quarter of 2010 with the enactment of the fiscal stimulus and 8.8 percent without. The unemployment rate now stands at 9.5 percent.
Update: Michael Boskin chimes in on the same theme, calling them Obama’s Economic Fish Stories.
The Senate gave final approval Wednesday evening to legislation providing added unemployment benefits through November to millions of Americans who have been out of work for six months or more, ending a politically charged fight.