Belated: FoxNews.com Live 11-12
I was on FoxNews.com Live this morning from 11-12.
Topics included Libya, the budget battle, and public sector labor unions.
The show will be available at the link until 5 pm (roll the tape back to 2:00:30).
Update: And here's the permalink to the budget bit.
Economy In "Recovery" Still Growing Slower Than Long-Term Potential
The Commerce Department issued their first revision to the the 4th quarter GDP growth estimate today. Rather than adjusting it upward from 3.2% to 3.3%, as economists expected, they ratcheted it down to 2.8%.
That leaves us with just two measly quarters during the current recovery when growth topped 3% (5.0% in 4Q09 and 3.7% in 1Q10). For nearly a year now, we've been stuck with anemic growth.
Compare that to the recovery from the last major recession (1981-82, the last time unemployment topped 10%). The ensuing Regan recovery (triggered, it must be noted, not by government expansion, but government contraction) logged an impressive 13 consecutive quarters of growth in excess of 3%. Over those 3+ years, growth averaged 5.7% and spiked as high 9.3% just a year after the recession ended.
The recession we're imperceptibly digging our way out of ended 20 months ago. So where's our hyper-growth?
Was this recession worse than the Carter hangover? Yes, in terms of GDP shrinkage (more than 4% vs. less than 3%), but not in terms of peak unemployment (10.2% vs. 10.8%). And even that's giving this recession more credit than it deserves, as the unemployment peak this time around came more than a year after the recession ended. So - judging by the admittedly one-dimensional, but still instructive gauge of unemployment - the structural disruptions to the economy shouldn't have been any more severe (read: taken longer to recover from) than in the early 80s. And given the steeper decline in output, the benchmark against which subsequent growth has been measured should have been an easier mark.
As witnessed throughout the dog days of 2010's stimulus-driven "recovery summer" (and the 72-year-high unemployment it wrought), it's not the disease that ails us; it's the cure.
Shock Poll: People Don't Like Pantywaist Legislators
Turns out people don't much respect Run away! as a legitimate governance strategy.
67% Disapprove of Legislators Fleeing Wisconsin to Avoid Vote
Half of America’s voters favor public sector unions for government workers, but they strongly oppose the tactic by Wisconsin state senators to flee their state to prevent a vote that would limit the rights of such unions.
The latest Rasmussen Reports national telephone survey shows that only 25% of Likely U.S. Voters approve of this tactic, while 67% disapprove. State legislators in Indiana have used the same approach to avoid a vote in their state. (To see survey question wording, click here.)
Sizable majorities of Republicans and voters not affiliated with either major party reject such a strategy. Democrats are fairly evenly divided, with 48% approving and 44% disapproving.
Wave Goodbye to Dow 12k; Update: Just Not Yet
The threshold seemed so comfortably - if incredulously - vanquished as recently as Friday, with the DJIA buoyed to nearly 12,400. But with increasingly ugly headlines out of Libya (and elsewhere) and oil once again popping today (cruising above $103/barrel early this morning - a $15 surge in less than a week), the market meltdown looks to continue for a third day.
We'd need another triple-digit decline to lose the 12-handle, so it might not happen today, but... eh, I think it'll happen today.
Update: Here's another splash of cold water for the bulls. Excluding transportation (which saw a bump in commercial aircraft), durable goods orders shrunk 3.6% (vs. expectations of an increase of 0.6%), the steepest decline in two years. The headline number beat expectations, but this still amounts to a crummy leading indicator and is unlikely to de-sour investors.
Video: FoxNews.com Live Recap
From yesterday's show, I chat about the looming government shutdown with Kimberly Guilfoyle and Krystal Ball.
Fox News Live 1-2
I'll be on FoxNews.com Live this afternoon from 1-2.
Topics to include Libya, public unions, and the federal budget battle.
If you miss it live, it'll be available at the link until 5 pm.
Loyal readers know I've been calling for an imminent market top and a subsequent correction ever since the Dow started nudging up against 12,000, in seeming defiance of economic data (e.g. unemployment, housing, notwithstanding manufacturing, confidence), geopolitical instability, and unabating government hostility toward the dastardly menace of profit generation.
That was at least a few weeks premature. But maybe no more so.
With stocks tumbling through what's on pace to be their worst session in more than 6 months (on more unrest, spiking oil prices, and fresh bummers on the housing and retail fronts), the Dow's peak at nearly 12,400 yesterday may prove to be the true pinnacle behind the 12k false summit.
Legislation By Absenteeism Catching On
In Indiana, a House committee on Monday approved legislation to change state law so that private-sector workers no longer would be required to pay dues or belong to a union that bargains on their behalf. Unions say this would erode union membership, and eventually their finances and political clout, if workers decided not to join or pay dues. Supporters say the change would make the state more competitive and attract employers.
Democratic representatives in Indiana caucused into the night Monday, discussing a possible walkout to deny Republicans a quorum.
I must say, amid persistently high unemployment, the optics of refusing to show up for your job, in order to prevent duly elected majorities from trying to avert financial ruin by tweaking the special protections and above-market pay awarded to other people with jobs they refuse to show up for, are... well, unflattering.
(HT: HA Headlines)
Tracking the Truants
The arm of Madison law may not be long enough to nab fleeing state senate Democrats, but Illinois tea partiers managed to catch up to one.
Apparently safe from performing their elected duties across state lines, the derelict Dems may not have had to skedaddle so far.
Actually, no one is sure that Wisconsin police would have the power to arrest and transport reluctant legislators back to the capital. While on the capital grounds, the law seems to be clear that police can compel legislators to return to the chamber, but outside of the capital, it gets rather murky. One criminal defense attorney called the situation “unprecedented.”
Ace makes a good point regarding media coverage of the mathematically indefatigable, looming debt crisis vs. that of the settled largely debunked but more politically palatable scientific doomsaying about potential, eventual, undated and by-design-untestable consequences of climate change.
Why are those who claim that math has suddenly stopped functioning in 2010 not deemed to be "anti-math"? (Or just anti-science, as math is the handmaiden of the sciences.) Why are those who deny fiscal reality not termed Financial Catastrophe Denialists, on par with Holocaust Denialists?
So here we have a genuine, provable calamity on the horizon (and by "horizon," I mean 3-5 years), and the media fails to take to task those who deny we have a serious problem, permitting them to speak in gibberish and evasions rather than commit to staving off financial Armageddon.
NBC has a Green Week. Think they'll start a Solvency Week? To similarly raise awareness?
Don't count on it. While the media is eager to expose what it believes is erroneous thinking that hurts the liberal cause, they have no desire at all to cure erroneous thinking that helps the liberal cause.
Given the comparatively short timeline on which the fiscal house of cards will begin to wobble, denialism will shortly have to give way to spin and blame-shifting, largely in ways we've already begun to see (e.g. Obama's spend-your-way-to-prosperity approach didn't worsen unemployment; the economy he inherited was already fundamentally sicker than anyone realized; his prescriptions weren't toxic; they were just too little too late).
Much like the ever-shifting case for manmade climate change, this framework has the benefit of withstanding any contrary evidence. If media-preferred policies work, the policymakers behind them are saviors of unparalleled genius. If they don't, they were nonetheless noble and wise attempts by dutiful stewards attempting to bail out a ship that was already sinking when they were belatedly put in charge.
Failures of Keynesian Economics and Politics
Marginal Revolution notes Keynesianism booster-in-chief Paul Krugman's frustration with the utter failure, not of demand-side policies' efficacy, but of policymakers' willingness ever to implement them.
Let's accept for the sake of argument the truth of Keynesian economics. It is now clear that Keynesian politics has failed. But don't take my word for it. Here's Paul Krugman on the great abdication:...without saying so explicitly, the Obama administration has accepted the Republican claim that stimulus failed, and should never be tried again.What’s extraordinary about all this is that stimulus can’t have failed, because it never happened. Once you take state and local cutbacks into account, there was no surge of government spending.
If that sounds familiar let's remember that by their own admission Keynesian's believe that Keynesian politics also failed during the Great Depression. Again, Paul Krugman on the New Deal:So we have had two major cases that massively favored Keynesian economics but Keynesian politics failed both times.
...you might say that the incomplete recovery shows that “pump-priming”, Keynesian fiscal policy doesn’t work. Except that the New Deal didn’t pursue Keynesian policies. (emphasis in original).
This is a nice illustration of the primary salve self-applied by Keynesians to treat the cognitive dissonance that follows implementation of their preferred policies. There's obviously debate over whether government stimulus stimulates and engenders sustainable economic growth. That debate persists, despite the fact that every time it's tried (even at record-setting levels, beyond what even Keynes prescribed), it fails. Rather than acknowledge a flaw in the reasoning behind the policy prescription, neo-Keynesians simply insist the problem was one of dosage.
This all invites a rather obvious question. If the great Keynesian experiment following the Great Depression (which even Krugman deems a failure), failed only because it didn't qualify as true Keynesian sitmulus; and if the even grander stimulus we deployed in the wake of the financial crisis failed for the same reason... where does this blind devotion to Keynesian economics stem from?
If the two grandest adventures in the history of government stimulus weren't Keynesian, then surely the world has never witnessed Keynes in action. So what gives his devotees such confidence that it should work?
There's scant theoretical evidence (except, as Keynes himself noted, within totalitarian frameworks) that bold "stimulus" is boldly stimulative, and the doctrine's chief proponents doggedly insist that there's zero empirical evidence, since it's never been tried.
The ideology thus smacks more of religion than of legitimate economic theory.
What has been tried (and has logged some impressive empirical results - ask Kennedy, Reagan, Clinton, and Bush 43) is Keynesianism's antithesis. Reducing the degree to which government marshalls and reallocates resources, lowering taxes and thus increasing the incentives to productive enterprise, have time and again offered unmistakably favorable, tangible results, which don't require policy boosters to contort themselves into logical fugues to maintain their economic worldviews.
Fox News Live 11-12
I'll be on Fox News Live this morning from 11-12.
Topics to include Obama's $3.7 billion budget and revolution in the age of social media.
If you miss it live, it'll be available at the link until 5 pm.
Daniels at CPAC
Looks like he's got it too.
Much has been made about Mitch Daniels and his possible run for the presidency. Most of it has focused on his oft stated desire to focus exclusively on fiscal issues and the perilous state of the nation's finances.
Last night Daniels gave the keynote address at CPAC and there was much interest in whether or not he would expand his topics to include the normal range of issues candidates usually must address. Such a departure from his previous statements would have been seen as an indicator that he was going to bow to reality in his run.
Well, he didn't.
Video and transcript of his address.
Romney at CPAC
MassCare albatross notwithstanding, he's still got it.
Apparently, his speech went over pretty big. And he seems to be zeroing in on the right theme.
These past two years, what America really needed in the White House was a turnaround expert. Failing that, we at least could've used someone who'd recognize the economy (not healthcare, not greenness, not foreign supplication) was first priority, even if he didn't have the financial or managerial chops to handle it as deftly as someone with the right skill set.
It's both the best pro-Mitt and the best anti-Obama argument.
Obama's "Tough Budget Cuts" Illustrated
See the green slice?
Fox News Live 11-12
I'll be on Fox News Live this morning from 11-12.
Topics to include Egypt, ObamaCare, and government spending.
If you miss it live, it'll be available at the link until 5 pm.
Jobs Numbers: Hideous, Despite Drop in Unemployment Rate; Update: Don't Blame the Weather; Update: Lies, Damn Lies, and [the Bureau of Labor] Statistics
We moved lower, from 9.4% to 9.0%, but added only 36,000 jobs in January. That's almost as big a whiff as the one I noted was almost unfathomably suggested by the incredulously strong ADP data earlier this week (once you adjust for ADP's massive overshoot in the prior month).
The market was expecting payrolls to jump by 148,000, so this should qualify as a major disappointment. December's increase was revised from 103,000 to 121,000, so January suffered a more daunting second-order problem as well.
Update: The media narrative today seems to be that the winter storms that plagued January were responsible for the vast underperformance. To that, three points:
1) Economists whose estimates constituted the 148,000 consensus (which was revised this week) were aware of such storms.
2) Canada (yes, Canada) managed to add more than 69,000 jobs in January (more than 4x estimates).
3) From the government report's FAQ:
In the establishment survey, severe weather is likely to have more of an impact on hours than employment. In order for severe weather conditions to reduce the estimate of payroll employment, employees have to be off work for the entire pay period that includes the 12th of the month and not be paid. About half of all employees in the payroll survey have a 2-week, semi-monthly, or monthly pay period.
Employees who receive pay for any part of the pay period, even 1 hour, are counted in the payroll employment figures. While some persons may be off payrolls during the pay period due to severe weather, others, such as those dealing with cleanup and repair activities, may be added to payrolls.
The report also suggests that weather may have contributed to the 32,000 jobs lost in the construction industry. And it may have. But this was a whiff of 112,000. And construction was hardly expected to see surging payrolls, absent snowy weather. Mired by a stubbornly languid housing market, construction jobs have seen not just losses, but acclerating losses in recent months (-8,000 in November and -17,000 in December, seasonally adjusted).
If you want to posit that construction jobs would have turned around and recovered to November levels, if not for the storms (perhaps as much rosiness as one can muster with a straight face), then you can confidently say that January's unusual wintriness accounted for about 20% of the job market's underperformance.
Update: I'm scratching my head over this Census population adjustment too. Something doesn't add up.
The labor force is smaller than we thought by 504,000, but payrolls are lesser by 472,000 per the same adjustment. With an otherwise unchanged labor force (which is what we saw in January), that would reults in a tiny uptick in the unemployment rate. Offsetting that by the meager 36,000 jobs added, and it appears the rate should be unchanged (or, rather, lower by 0.02% - too low to move the one-decimal needle).
So how did we fall nearly 0.4% more?
The only way I can make the rate decline so much is to shrink the labor force by 504,000 (like they did), but not reduce the payrolls by 472,000. This arimethic malfeasance is equivalent to suggesting that 100% of the half million people we over-counted in 2010 were unemployed. In fact (per the government's own numbers), less than 7% of the vanishees were unemployed.
Update: Ah, I see. According to the Bureau of Labor Statistics (the agency that puts out the report), it's not supposed to add up.
[I]t doesn’t provide a clear picture of the trend in employment and unemployment levels either, says Jim Borbely, a Bureau of Labor Statistics economist. That’s because it piles all of the new, lower population and employment estimates to December 2010 rather than spreading them out among earlier months. This makes it look like there were big swings in these levels that might not have occurred all at once.
It also makes apples:apples comparisons impossible and, consequently, renders the decline in the unemployment rate genuinely meaningless.
Per the analysis above, the actual incidence of joblessness was likely virtually unchanged from December to January.
Am I Going To Have To Start Liking Andrew Cuomo?
Probably not. But still...
ADP Hints At Strong Jobs Report, Few Care
Yesterday, I noted that absent a real blowout from Friday's employment data, our recent dalliances with Dow 12,000 would likely come to an abrupt and indefinite end.
And if today's sneak peak via ADP's private payroll report (showing an increase of 187,000 in January, well beyond consensus estimates of 145,000) is to be believed, a blowout might be just what's in store.
Thing is, ADP is not to be believed.
Adding to the confusion, the ADP report has recently had a strangely bad track record. It overestimated jobs added in November and it reported a whopping 297,000 jobs added in December when the official tally came in at a more modest 113,000. That’s two straight months of overshoot, which may undercut faith in the ADP figures.
Dauntingly, were ADP to repeat its most recent overshoot, January would notch up just 5,000 payrolls. Surely we won't see that big a whiff (right?), but the expected 148,000 leaves a lot of room for disappointment.
Dow 12k Returns, Despite Being Directed To Go Get Its Shine Box
Buoyed by a report from the Institute for Supply Management showing unexpectedly strong manufacturing activity in January (the strongest showing since 2004, in fact), stocks are on the move, with the Dow once again toying with 12,000 intraday. It failed to close above that threshold last week and I noted on Friday that the disappointing GDP report would likely leave it out of reach for the immediate future.
Still, despite contending with a sudden international crisis, here we go again, surging back into what still feels like very thin air, no disrespect to the utterly respectable manufacturing data.
With the uptrend showing no signs of letting up (we're up another 30 points since I began this post), it appears increasingly likely that we'll actually see a close above 12k today. But no sooner will we conclude today's self-reassurance rally than we'll find ourselves on the cusp of a potentially sobering 3-day contemplation of the labor market, kicked off with tomorrow's ADP private payroll data and concluding Friday with the government's monthly employment report.
At the risk of exposing my 2-sizes-too-small heart (and barring swift and shockingly amenable resolution to mideast crises or - perhaps even less likely - an upside blowout on the jobs numbers), I remain unconvinced that we'll find ourselves even within spitting distance of the symbolic threshold by Friday's close.
Update: Also on DJIA12K-watch is WSJ MarketBeat, which notes that ExxonMobil is (not surprisingly, given the run-up in oil prices amid the overseas turmoil) the biggest contributor to the Dow's gains today. Ex-Exxon, in fact, we'd still be shy of 12,000.