A couple of stories coming across the wires, tonight, on our nation's unemployment fiasco; just in time for a read by all of those travelling to the White House for tomorrow's "Job's Summit."
(h/t to Calculated Risk)
"Goldman Sachs 2011 forecast would be an absolute disaster for Dems."
(h/t to Mish Shedlock over at his Global Economic Analysis Blog, and the Charlotte Observer)
"24 States Borrow Money To Pay Unemployment Benefits"
File this under: "No S**t!"
Goldman Sachs 2011 forecast would be an absolute disaster for Dems
James Pethokoukis
December 2nd, 2009
This would be New Normal with extreme prejudice. Bad for Democratic incumbents in the 2010 congressional midterms, but it should make the White House political team nervous as well for 2012. If Goldman Sachs is right, of course. Here is the firm's 2011 forecast:
Pethokoukis quotes from Goldman's forecast...
The key features of our 2011 outlook: (1) a strengthening in growth from 2.1% on average in 2010 to 2.4% in 2011, with real GDP rising at an above-potential 3-1⁄2% pace in late 2011; (2) a peaking in unemployment in mid-2011 at about 103⁄4%; (3) extremely low inflation - close to zero on a core basis during 2011; and (4) a continuation of the Fed's (near) zero interest rate policy (ZIRP) throughout 2011.
That said we see risks that could upset these markets. On the one hand, we might be underestimating the vigor of the economic recovery, and therefore the pressures for Fed tightening. In addition, surging asset prices and worries about a "bubble" could prompt Fed officials to tighten before such a move seems warranted on real-economy grounds. On the other hand, the economy (and the markets) could struggle under the weight of credit restraint for small businesses, weakness in commercial real estate markets, or fiscal tightening, especially by state and local governments.
And, back to Pethokoukis...
The implications? I hardly know where to begin: a) with unemployment rising all next year, a GOP blowout in 2010; b) certainly more job creation packages; c) no capandtrade; d) increased anti-Wall Street/Fed sentiment; e) third party prez candidate in 2012; an Obama challenger in 2012 (Dean?). But who really knows. This would be like a technological singularity where seeing beyond the event is pretty much impossible. Such a Long Recession (essentially) would be so contrary to American expecatations -- such a slow-mo, psychological shock -- that it would be a full-out system perturbation equivalent to 9-11 or the Iraq War.
Then again, Pethokoukis is a bit of a winger. That being said, this is a straight-up story about Goldman's forecast, nonetheless.
Then, yet again, in order to get to mid-2011, we have to make it through 2010; meanwhile, state budgets are getting abso-freakin'-lutely obliterated. From the Charlotte Observer: "Jobless claims put state in debt."
Jobless claims put state in debt
N.C. not sure how it will repay $1.4 billion it has borrowed from the federal government.
By David Ranii
Posted: Tuesday, Dec. 01, 2009 In Print: Wednesday, Dec. 02, 2009
RALEIGH--North Carolina's high unemployment rate has stuck the state with $1.4 billion in debt--money that officials don't know how they'll pay back.
It gets worse. The debt is still rising. The problem is that with about 500,000 people out of work, the state has more unemployment claims than it can pay. So it has been borrowing from the federal government since February, sometimes as much as $20 million a day.
The tally will rise to at least $2 billion by the end of the year, said David Clegg, deputy chairman and chief operating officer of the N.C. Employment Security Commission. Next year, depending on the economy, could add another $2 billion to the tab, he said.
For purposes of comparison, the state budget for the current fiscal year is $19 billion.
"It's way beyond precedent," Clegg said. During the last recession, the state borrowed a piddling-by-comparison $270 million for its unemployment insurance trust fund.
This time, only five states have borrowed more than North Carolina. Altogether, seven states have borrowed more than $1 billion each - more than $15 billion collectively - to shore up their unemployment insurance systems, according to the U.S. Department of Labor. A total of 24 states plus the Virgin Islands have borrowed money from the federal government.
--SNIP--
"I would love to hear some U.S. Department of Labor official explain how they expect the states to pay billions of dollars from an employee base which is, at best, 20 percent smaller than it was before the recession started," Clegg said.
From Mish Shedlock (see link at top of this diary)...
24 States Borrow Money To Pay Unemployment Benefits
Mish Shedlock
Global Economic Analysis Blog
Wednesday, December 02, 2009
....For purposes of comparison, the state budget for the current fiscal year is $19 billion. Let's do the math. The state budget is $19 billion. Potentially $4 billion will be borrowed to pay unemployment benefits. In other words the state is borrowing an amount equal to 21% of its total budget just to pay unemployment benefits. Wow....
The ugliness we've witnessed in 2009 was prologue, IMHO.