Chart by MB (Source: Department of Labor)
After the release of two statistics this morning, The Wall Street Journal
chose the word "murky" to describe the current economic situation. It's not murky for rank-and-file Americans, 45 million of whom are living off food stamps, millions of whom are losing unemployment compensation benefits over the next few months, most of whom still cannot find work even though a few more are at least getting interviews now.
While job growth has trended steadily upward, it's been a slog for the many millions still unemployed or working part-time. And here we are in the 41st month since the recession began. Yet some who claim to be on the side of the working classes are still saying be patient, be calm, steady as she goes while viewing with equanimity plans by both political parties to chop government spending and make the situation worse. Not to mention the would-be-funny-if-it-weren't-so-pathetically-true-to-form Republican "plan" for creating jobs.
Today's report on last week's unemployment compensation claims from the Department of Labor and the revised (or rather unrevised) figures on weak first-quarter gross domestic product are not encouraging. Add to that Wednesday's numbers on orders for durable goods and you have a week of, at best, sluggish economic news.
Start with the new jobless benefit claims. In November 2010, these convincingly broke through a plateau, headed toward a low in February, and held below 400,000 new claims for six of seven weeks. The 400,000 number matters because anything below that has traditionally been seen as meaning that significant job growth is under way, although an argument has been made for a higher number. But new claims hit 424,000 last week, a rise of 10,000 over the previous week, which was revised upward. This was way above the 4000 decrease that a consensus of experts had predicted.
As with all economic statistics, trends matter more than a single data point. So analysts prefer to use the four-week moving average of jobless claims to smooth out volatility in the weekly numbers. No solace can be found there. As can be seen in the chart above, even though the average fell slightly this week, the trend is not good. What it shows, once again, is that the labor market is exceedingly and stubbornly weak even though we are officially in the 23rd month of economic recovery. The trend could change again, of course. Or what we're seeing could reflect the so-called "new normal."
The other big statistic released today was the second estimate of the annualized rate of growth in gross domestic product for the first quarter of 2011 from Labor's Bureau of Economic Analysis. The headline figure for GDP? Still at the same paltry 1.8 percent growth. Once again, the "consensus of experts" missed the mark, having figured there would be an upgrade today to 2.2 percent since the first estimate was released a month ago.
Revisions to the "internals" of the second GDP estimate were mixed. Exports were up, a good thing, but imports were up even more. Demand, final sales, labor compensation and the all-important consumer spending that makes up 70 percent of the economy were all lower than in the first estimate. In fact, the rise in consumer spending in the first quarter was revised from 2.7 percent to just 2.2 percent.
Earlier this year, some economists, including the president of the Federal Reserve Bank of Richmond and Fed Chief Ben Bernanke said that GDP growth for the whole year might be north of 4 percent. But those rosy predictions seem extremely optimistic now. Analysts who were predicting 3.5 percent or higher GDP growth for the second quarter of 2011 have since retreated. It would be no surprise to see that figure clock in at 2.5 percent given that gas prices, meager pay increases, the double dip in housing prices and continued high unemployment make it highly possible that consumer spending will fall off.
That could be rough on financially beleaguered state and local governments just when many have been seeing a much-needed rise in tax revenues. Add to that the fact federal spending fell at an annualized rate of 5 percent in the first quarter and the stimulus provided by the Federal Reserve's bond-buying program will end next month, and the jury-rigged system that was supposed to bring us back to economic health is looking more wobbly than murky.
What does all this mean for anyone looking for a job? Despite the fact the economy has generated 1.8 million new private positions in the past 12 months and some analysts still predict we'll see 2.3 million added for 2011, the unemployment rate is outrageously high and the damage being caused immense. The too often ignored employment-to-population ratio remains awful.
Instead of this delusional backing off on spending at a time of economic slowdown, the government should be creating jobs—directly—by investing more money now so it can spend less in the future. Instead of lopping $4 trillion off the federal budget over the next decade, we should be directing tax revenue and additional borrowing toward investment in a national infrastructure plan that is heavy on the green stuff.
That investment would pay dividends for decades the same way that investing in the WPA during the Depression and GI Bill after World War II did. That was the answer two-and-a-half years ago, and it's the answer now. Politically possible then; politically impossible now. But that doesn't make it any less necessary.