Krugman rarely disappoints, and his op-ed in Friday’s NY Times, “The Mistake of 2010,” is no exception. In it we learn that–at a time when our government should be focusing on job-creation–our bought-and-paid-for “representatives” in D.C. are about to push the reverse button (just as they did in 1937, when our country slipped into a nasty double-dip recession) on an abysmal economy that’s already moving sideways or, in most matters that count, backtracking into double-dip territory.
…Call it the mistake of 2010: a “pivot” away from jobs to other concerns, whose wrongheadedness has been highlighted by recent economic data.
To be sure, things could be worse — and there’s a strong chance that they will, indeed, get worse…
Bold type is diarist's emphasis.
… Somehow it became conventional wisdom that the deficit, not unemployment , was Public Enemy No. 1 — a conventional wisdom both reflected in and reinforced by a dramatic shift in news coverage away from unemployment and toward deficit concerns. Job creation effectively dropped off the agenda.
So, here we are, in the middle of 2011. How are things going?
Here’s how things are going, Paul…
(Diarist’s note: and this is from one of the most Wall Street-friendly media outlets, I might add.)
Economic Reports for May Show an Entrenched Slowdown
Reuters (via the NY Times)
June 2, 2011
The nation’s private companies hired far fewer workers than expected in May and output in the manufacturing sector slowed to its lowest level since 2009, according to new reports, raising concerns that the recovery was running out of steam.
Economists cut their forecasts for Friday’s closely watched United States payrolls report after private-sector job growth tumbled to just 38,000, its lowest level in eight months.
Losses in stocks and the value of the dollar accelerated after the Institute for Supply Management said its index of national factory activity fell to 53.5 in May from 60.4 the month before.
The reading missed economists’ expectations for 57.7.
New orders, a barometer of demand ahead, fell to 51.0 from 61.7 in April, the lowest since June 2009.
Bold type is diarist’s emphasis.
The lead in Thursday’s NY Times, “Employment Data May Be the Key to the President’s Job,” tells us that the winner of the 2012 presidential race might just be determined by those jobs statistics, too.
Employment Data May Be the Key to the President’s Job
BINYAMIN APPELBAUM
NEW YORK TIMES
JUNE 2, 2011
WASHINGTON — No American president since Franklin Delano Roosevelt has won a second term in office when the unemployment rate on Election Day topped 7.2 percent.
Seventeen months before the next election, it is increasingly clear that President Obama must defy that trend to keep his job.
Roughly 9 percent of Americans who want to go to work cannot find an employer. Companies are firing fewer people, but hiring remains anemic. And the vast majority of economic forecasters, including the president’s own advisers, predict only modest progress by November 2012.
The latest job numbers, due Friday, are expected to provide new cause for concern. Other indicators suggest the pace of growth is flagging. Weak manufacturing data, a gloomy reading on jobs in advance of Friday’s report and a drop in auto sales led the markets to their worst close since August.
But the grim reality of widespread unemployment is drawing little response from Washington…
If there’s one thing the 2010 midterms supposedly “re-taught” Democrats—which is something any political hack-in-training will also tell you–it’s that people vote their pocketbooks. Due to that reality and a few other inconvenient facts (about our economy now) that have nothing to do with President Reagan’s re-election effort in 1984, I find it a bit disconcerting when Appelbaum points out that a keystone of President Obama's re-election strategy in 2012 may be to mimic the efforts of President Reagan, and attempt to convince the public that this administration’s efforts to fix our nation’s unemployment nightmares are, indeed, working.
The truth is that there are just too many, ominously negative realities about our economy, today, which are far, far worse than anything that the public was experiencing in 1984.
Now, one may bloviate and wax poetic about current polls, but any armchair pundit with an IQ higher than the temperature on a cold Winter’s day will tell you that, up until the Summer of 2012, as far as next year’s election outcome is concerned, polling numbers, right now--other than supporting a campaign financing department’s p.r. efforts--really don’t mean much of anything. Nada. Zilch. Diddly.
Back to Krugman in Friday’s edition of the paper…
…the news has, indeed, been bad. As the stimulus has faded out, so have hopes of strong economic recovery. Yes, there has been some job creation — but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. And the latest numbers suggest that even this modest, inadequate job growth is sputtering out.
So, as I said, we have already repeated a version of the mistake of 1937, withdrawing fiscal support much too early and perpetuating high unemployment.
Yet worse things may soon happen…
Worse things are already happening, IMHO.
Reuters continues, mentioning: consensus forecasts are for another abysmal jobs report, referencing May’s Employment Situation Report by the Bureau of Labor Statistics, set to be announced Friday morning; and they note that U.S. “economic growth" [our nation’s gross domestic product, a/k/a “GDP”] is “at a 1.8 percent annual rate in the first quarter.”
That’s known as treading water, wherein stagnant job growth barely keeps pace with the population.
“This only adds fuel to the argument that the slowdown story is here in the U.S.,” said Tom Porcelli, chief United States economist at RBC Capital Markets in New York.
“This is exactly what we do not want when other significant data shows things are slowing down as well.”
Reuters ends the story with a fairly vague reference to our country’s housing market. So, let’s get a little more specific…as in: right now, the housing marketplace is worse than it was during the Great Depression.
In August 2009, I posted the following in a diary entitled: “When The Spin of Summer Belies The Fall.”
MORTGAGES, FORECLOSURES AND HOUSING
Yves tells us: "Foreclosures (are) set to rise." She reminds us that, contrary to the "happy news," there is no housing bounce; there is so much inventory out there, that a quick review of the history of past severe financial crises in this country dictates a minimum of five years for housing to recover, at least.
Right now, almost one out of three homeowners with mortgages are underwater, owing more on their homes than their current market valuation. Deutschebank has just come out with a study that tells us that 48% of homeowners will be underwater by 2011. (See: "Frank Veneroso on Mortgage Armageddon.") Common sense--and statistical fact--dictates that when homeowners are faced with this reality, they: stop buying discretionary goods; they buy less in general, and/or, they have a higher chance of just walking away from their homes, allowing them to slip into foreclosure. (See: "Home Price Declines Accelerate in Second Quarter.")
…
As these and other articles also note, the Summer months are, historically, when the number of real estate transactions increase; and that's happened, even this year. What's different is that demand is for foreclosures, and price pressure in the marketplace is intensively downward (and/or negative), as a result of this.
Combine these facts with the reality that the federal first-time homebuyer tax credit ($8,000) is about to expire (in October, with closings scheduled for folks whose offers are being accepted now), and even demand for foreclosures is anticipated to diminish in coming months.
I’ve commented frequently on this Deutschebank forecast ever since; as recently as within the past week, in fact. And, anyone with any serious chops in the real estate or mortgage banking business has been aware of a massive, hidden inventory overhang (i.e.: “shadow inventory”) that’s been “there” all along, despite many spinning their own brand of “reality” to the contrary, during these past couple of years, as well.
As the numbers now tell us (see link in previous paragraph), as well as THIS LINK and THIS LINK, which provide us with more examples of these inconvenient truths, we’re looking at somewhere in the neighborhood of between six and six-and-a-half million foreclosures, after everything’s said and done, by 2014. Using average household size figures from our most recent census, that’s around 14 million folks kicked out of their homes.
Using those same average-household-size numbers, you may add another 60 to 70+/- million formerly middle class Americans living in mortgaged homes where they’ll—instead of looking at it as their primary investment asset, as they have for the past few decades–owe more to the banks than their homes are worth, by year’s end.
And, if you still have doubts about these truths, click on THIS LINK, and you may read Calculated Risk’s take, from Wednesday, on the most recent Standard & Poor’s/Case-Shiller Report. Calculated Risk references Standard & Poor’s coverage…
Data through March 2011 ... show that the U.S. National Home Price Index declined by 4.2% in the first quarter of 2011, after having fallen 3.6% in the fourth quarter of 2010. The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels.
...
As of March 2011, 19 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were down compared to March 2010. Twelve of the 20 MSAs and the 20-City Composite also posted new index lows in March. With an index value of 138.16, the 20-City Composite fell below its earlier reported April 2009 low of 139.26. Minneapolis posted a double-digit 10.0% annual decline, the first market to be back in this territory since March 2010 when Las Vegas was down 12.0% on an annual basis. In the midst of all these falling prices and record lows, Washington DC was the only city where home prices increased on both a monthly (+1.1%) and annual (+4.3%) basis.
…
“This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation. The National Index, the 20-City Composite and 12 MSAs all hit new lows with data reported through March 2011. ... Home prices continue on their downward spiral with no relief in sight.” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “Since December 2010, we have found an increasing number of markets posting new lows. In March 2011, 12 cities - Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland (OR) and Tampa - fell to their lowest levels as measured by the current housing cycle. Washington D.C. was the only MSA displaying positive trends with an annual growth rate of +4.3% and a 1.1% increase from its February level.
Speaking of things being worse than they were during the Great Depression…perhaps the most important MUST-READS—and today there are a multitude of them, I might add--of the past 24 hours are these two pieces running atop University of Oregon economics professor Mark Thoma’s “Economist’s View” blog: “10-Year Real Wage Growth Worse Than During Depression,” and “20 Facts About U.S. Inequality that Everyone Should Know.”
20 Facts About U.S. Inequality that Everyone Should Know
Mark Thoma
Economist’s View Blog
June 2, 2011
This is from the Stanford Center for the Study of Poverty and Inequality:
20 Facts About U.S. Inequality that Everyone Should Know, The Stanford Center for the Study of Poverty and Inequality: Click an image to learn more about a fact...
Krugman concludes…
…So the mistake of 2010 may yet be followed by an even bigger mistake. Even if that doesn’t happen, however, the fact is that the policy response to the crisis was and remains vastly inadequate.
Those who refuse to learn from history are condemned to repeat it; we did, and we are...
As the NY Times’ editors told us just a couple of days ago: "The Numbers Are Grim.” According to Professor Krugman, today, they might just get a hell of a lot worse.
One would think that, given all of these incredibly disheartening facts about the current state of our economy, our government wouldn’t be in too much of a hurry to rush through rightwing-placating deficit cutting measures anytime soon.
It’s as if there’s some not-so-invisible force in the status quo putting a gun to our collective head(s).