Suitably Flip

Crude, Crude Summer

By now we all know that gas prices are on the rise, with crude oil topping $106/barrel and pump-watchers bracing for $6 gas.  Despite the President having previously heralded rising gas prices as a good thing for the economy, so long as it's "a gradual adjustment," and his energy secretary being on record pining for much higher, European-level gas prices, election-year-Obama now feels it's time to address the worrisome run-up.

But given historical seasonal fluctuations in oil and gas prices, if the administration has readied any fresh excuses (those already trotted out include "things beyond our control, like unrest in the Middle East or other factors like the growth of emerging countries such as China and India"), particularly any that divert attention from their own track record of quashing domestic exploration and upturning their nose at supply from friendly neighboring countries, they may want to keep those arrows quivered for another few months.

February is not typically a month when we see energy prices cresting.  Instead, prices tend to rise as we get into the summer driving months (and, inconveniently, as we enter the general election season).  Over the last six years, crude oil climbed an average of 44% from its late February level before reaching its calendar year high (on average, it took about six months to get there).

A similar run-up from this week's average of more than $105/barrel would have us cruising past $150 by the end of August, surpassing the record weekly average price seen during the 2008 oil bubble.

(One could argue that the bubble year was anomalous and should be dropped from the data, though doing so only brings down the average run-up from February prices from 44% to 43%.*)

Below, the blue line represents the average weekly crude price since 2006.  The red arrows are the price change from late February to the respective yearly highs.  The dotted arrow represents a 44% jump from current prices over the next six months.

If this were to play out, $6 a gallon might start to sound pretty good.

* A better pruning might be to toss out the year following the bubble (2009), when prices rebounded from the burst, rocketing more than 100% from late February levels.  Stripping out 2009 gives you an average run-up of 32%, suggesting a 2012 peak of roughly $140.

Well, He Made a Fine Go Of It

Say this for Rick Santorum - he held onto the mechanical bull that is the 2012 GOP frontrunner status for longer than any of the other non-Romneys.  His dishonorable dismount was always assured, of course, given the general weakness of his Presidential resume (current White House occupant notwisthstanding), nearly insurmountable disadvantages in campaign infrastructure and finance, and the fact that his surge was the combined effect of Republican primary voters having literally run out of other non-Romneys to flirt with and the fortuitous, but ultimately unsustainable, resurgence of social issues to the forefront of the political discussion.  And his ability to hang onto that lead likely owes at least in part to the uncharacteristically empty debate calendar since his rise.

So, with Santorum already poised for a fall no less swift than his frontrunning predecessors, his performance at last night's debate (the first in a month and perhaps the last of the cycle) should help accelerate the process.

Hot Air recaps Rick's lowlights, but none's so low as the I-voted-against-my-principles-for-political-reasons soundbite.  I suppose I can see where his prep team was going with this - curry favor with the GOP base by reassuring them you're "on their team" and that your team loyalty is stronger than your conviction on issues where you differ with the base.  Unfortunately (both for Rick and, one presumes, the aide who came up with this one), this comes across not as fielty to party ideology, but as a lack of core principles, precisely the attack he levels against the non-non-Romney.  Hence, the booing.

Once the first wholly post-debate polling begins to emerge, I suspect we'll see Mitt having retaken Michigan convincingly, and drawing even with Santorum nationally.

Romney Set To Unveil Bolder Tax Reform

Bout time.

Team Romney tells me there will be a bolder tax-cut plan released either at the debate tomorrow night (if Mitt gets it in) or more formally at his Detroit Economic Club speech on Friday. I’m embargoed from releasing details until tomorrow. But I can say that the new plan will be across-the-board with supply-side incentives from rate reduction, and that it will help small-business owners as well as everyone else.

Perhaps Romney has at last realized the disservice he's done his candidacy by neglecting to aggressively champion a broadly defensible, base-rallying policy point (particularly one that resonates with both his own relative strengths and the chief campaign issue of the economy).

If he can adequately bite-size it for the fickle and fleeting debate audience attention span, he may have an opportunity to yank the primary contest back to his home turf, perhaps a welcome change for voters who've been spun into various social policy tangents for weeks, as we draw closer to a general election that won't be won or lost on contrasting social policies.

FoxNews.com Live 10-11

I'll be on FoxNews.com Live this morning from 10:00-11:00, talking Romney, Santorum, and Gingrich.  You can catch a replay at the link until Tuesday morning (dial the wheel to 10:00:00).

Unsustainable Drop In Headline Unemployment May Have Run Its Course

If Gallup's mid-month numbers are any indication, the next labor report might include an ugly rebound in the official unemployment rate.

The U.S. unemployment rate, as measured by Gallup without seasonal adjustment, is 9.0% in mid-February, up from 8.6% for January. The mid-month reading normally reflects what the U.S. government reports for the entire month, and is up from 8.3% in mid-January.

Gallup also finds 10.0% of U.S. employees in mid-February are working part time but want full-time work, essentially the same as in January. The mid-February reading means the percentage of Americans who can only find part-time work remains close to its high since Gallup began measuring employment status in January 2010.

Underemployment, a measure that combines the percentage of workers who are unemployed with the percentage working part time but wanting full-time work, is 19.0% in mid-February. This is higher than the 18.7% recorded for January, and is up significantly compared with January’s mid-month reading of 18.1%.

Given that the 5-month decline in headline unemployment has been accompanied by an unprecedented rate of workers excusing themselves from the labor force entirely, a 30-year low participation rate, rates of job creation and unemployment filings that have failed to hold levels at or better than breakeven, and - particularly in the most recent month - significant recalculation, remodeling, and re-adjustment, a jump was inevitable.

In the wake of the January data, I argued on Fox that the White House was likely doing itself a disservice in over-trumpeting the decline to 8.3% (and further fixing this reference point in the minds of voters), given the near certainty that we'd see the rate move higher from there.  Even if we see job creation hold or improve on its not-great-but-decent (if boldly massaged and adjusted) January pace, we'd still expect to see the rate rise in the short run, in response to the opposite phenomenon that accounted for most of the recent decline (namely, discouraged workers re-entering the active labor force, once again being counted among the officially unemployed).  And if we don't see the job creation and claims data at long last stabilize and swiftly improve, that 8.3% could indeed become a distant memory rather quickly.

While White House spokespeople have laughed off the impact of modeling revisions and a shrinking labor force on the declining rate over the last few months, expect to see them discover and louldy tout these pesky data distortions as soon as the rate begins to climb, particularly if we see anything like the 0.4-0.7% jump that Gallup darkly foretells.

(Via Weasel Zippers)

CBO Quantifies the Enormity of the Stimulus Fail

Much like the depth of the recession that Obama insists he's only now fully grasping, the stimulus was way worse than anyone realized.

Today we, er, celebrate the third anniversary of the 2009 stimulus package’s presidential signature.  When Barack Obama applied his signature, he promised that the $800 billion authorized to his administration by a Democratic Congress would allow him to keep unemployment under 8% and revamp the American economy for long-term prosperity and solid economic growth.  Yesterday, in an early anniversary present, the CBO scored the performance of the stimulus and the Obama administration on that very metric, and the first paragraph delivers the verdict clearly, emphases mine:

The rate of unemployment in the United States has exceeded 8 percent since February 2009, making the past three years the longest stretch of high unemployment in this country since the Great Depression. Moreover, the Congressional Budget Office (CBO) projects that the unemployment rate will remain above 8 percent until 2014. The official unemployment rate excludes those individuals who would like to work but have not searched for a job in the past four weeks as well as those who are working part-time but would prefer full-time work; if those people were counted among the unemployed, the unemployment rate in January 2012 would have been about 15 percent. Compounding the problem of high unemployment, the share of unemployed people looking for work for more than six months—referred to as the long-term unemployed—topped 40 percent in December 2009 for the first time since 1948, when such data began to be collected; it has remained above that level ever since.

FoxNews.com Live 10 am

I'll be on FoxNews.com Live this morning from 10:00-10:45, talking about the GOP horse race.  You can catch a replay at the link until Tuesday morning (dial the wheel to 10:00:00).

The Real Problem With the Chrysler-Eastwood "Halftime In America" Ad

Yes, it's old news by now, but CNBC is endlessly looping it this morning, along with interview snippets with the star himself, and I can't help but be irked by it.

No, not the thinly veiled pro-Obama bent, not the fact that members of the ad's creative team have done explicitly pro-Obama work in the past.  It's the triply mixed metaphor.

This country can’t be knocked out with one punch. We get right back up again and when we do, the world is going to hear the roar of our engines.  Yeah, it's halftime America. And, our second half is about to begin.

Are we a boxer, a Nascar driver, or a football team?

I suppose it's arguably a metaphorical mashup of the Super Bowl, Chrysler, and Million Dollar Baby, but come on.  Reagan's ad men never tried to cram "morning in America", the "shining city on a hill", and the "bear in the woods" into a single paragraph.

John Fund On Romney's Triple Fail

Here's WSJ's John Fund on last night's numbers and why they should cause Romney some real concern.

But what Romney won’t be able to explain away is just how much more poorly he did tonight in those three states than in his 2008 showing — when he lost the GOPnomination for president.

In 2008, Romney crushed John McCain in the Minnesota caucuses by nearly two to one. Tonight, he was sent into a humiliating third-place finish, trailing both Rick Santroum and Ron Paul. In Missouri, McCain held John McCain and Mike Huckabee to something close to a three-way tie, winning 29 percent of the vote. This year, with fewer opponents, he won only 25 percent. In Colorado, Romney outperformed John McCain by three to one in 2008. This year, albeit with only early returns in, he is trailing Santorum. Results from Denver caucus sites will likely boost Romney’s overall showing, but it’s tough to see him winning the state with Santorum performing as well as he is in Colorado Springs and the rural areas.

I think one key difference vs 2008 is that at this stage in that cycle, McCain was the moderate nominee-apparent and disappointed conservatives saw Romney as the last remaining alternative to McCain's right, so conservative midwestern GOP caucus-goers favored Romney more than they do now that he's cast as the moderate relative to the remaining non-Romneys.

I agree though that Romney has more than a little explaining to do.  The nearly prohibitively presumptive nominee can't be losing (big) three in a row, at least not without obliterating the new narrative from Nevada, where he put up pluralities even among the most conservative, Tea Party-supporting voting blocs.

Belated: FoxNews.com Live

I was on FoxNews.com Live this morning from 10-10:45, talking primaries, Obama, and the economy.  You can catch the full replay at the link until Tuesday morning (scroll to 10:00:00).

I'll update with any clips that make the highlight reel.

Update:  Here's a clip.

Jobs Report Pick'em

As discussed on Wednesday, economists are expecting 125,000 (or maybe as many as 150,000, depending on which consensus you look at) new payrolls in January, down from 200,000 in the previous month, with the headline unemployment holding at 8.5%.

The ADP report showed a larger deceleration in growth of 117,000 (even from the downward revised December growth number), but as we know, ADP has a spottily predictive record.

I'm going to guess the payroll growth will not disappoint (at least not by much), maybe around the 130,000 level.  But expect to see some, possibly a large, downward revision for December - let's say to 170,000.

With these numbers failing to climb, even fleetingly, meaningfully above the breakeven level, I don't think the recent downtrend in the headline unemployment rate can be sustained, even if we continue to see folks fleeing the labor force.  If anything, the recent glimmers of positivity in the economic data may portend a bit of a rebound in the labor participation rate, which could yield a multiple-tenth uptick in the headline rate.

So let's hang our hat on 8.7% unemployment, 130,000 non-farm payroll growth (145,000 private), and a downward revision to December from 200,000 to 170,000.

Numbers coming at 8:30 am.

Update:  Wow.  Up 243,000 (private: 257,000).  Unemployment rate down to 8.3%.  December revised to 203,000.

The only thing I was right about: the headline payroll number didn't disappoint.

These are very decent numbers, at least relative to the last couple years.  It'd still take years at this level to return us to pre-recession employment, but this is a rare move in the right direction.

Update:  A rather large caveat: there are significant revisions to the seasonal and population adjustment factors in the January report.  So while the adjusted headline participation rate held steady at 63.7%, that obscures a record jump of 1.2 million (the largest percentage jump in 30 years) in the number of eligible workers not participating (i.e. not actively seeking employment).  And this month's 63.7% is actually slightly lower than last month's 63.7%, meaning the labor participation rate has notched a fresh 30-year low.

The historically unprecedented jump in towel-throwing-in by would-be job seekers suggests the contorted seasonal and population adjustments that yielded the declining unemployment rate and the strongish monthly payroll growth may be illusory.

Unadjusted, January payrolls fell by 2.7 million, so the adjustments represent nearly 110% of the raw change.  If those tweaks are overreaching by even 10%, we would've seen a net decline in adjusted payrolls, not an increase.

Your scary chart of the day is this one from ZeroHedge.

ADP: A Little Light

The ADP report on January's private sector job growth was a bit weaker than expected, coming in at 175,000 (versus consensus of 185,000) and way down from December's 292,000 (revised down from 325,000).

Economists are expecting Friday's government numbers to show overall employment growing by 125,000 in January, down from December's 200,000.  If we see an equivalent miss, coupled with an equivalent downward December revision, the much ballyhooed year-end breakout will all but evaporate.

Below, the blue line indicates reported employment growth, while the red line illustrates the updated data, if Friday's report underwhelms to the same degree ADP did this morning.

Crucially, it suggests we're still unable to get above (or even into) that breakeven range with any consistency, meaning the overall employment situation is continuing to degrade, not improving "more slowly than we'd like."