7/8/10

BUZZ: U.S. marks 3rd-largest, single-day debt increase

News
Weekly Jobless Claims Fall
The number of U.S. workers filing new claims for unemployment benefits fell last week by 21,000 to 454,000, more than analysts expected.
Apartment Vacancies Fell in Quarter
People Who Moved In With Others Are Getting Their Own Places as Economy Improves, Driving Rents Slightly Higher.
Europe presents main threat to global recovery, IMF says
Europe's weakened economy is now the central threat to global recovery, as its countries struggle with heavy debt, banks face a reckoning over their lack of capital and growth is slowing, the International Monetary Fund said Wednesday in its first assessment of the world economy since a crisis over government borrowing in Greece.
U.S. Retailers Weathered a Bumpy June
June is usually a month for clearing out merchandise, but many retailers this year seemed to go especially heavy on the discounts.
Australia Employment Soars; Currency Up
Australia's employment soared in June as 45,900 jobs were added to the labor force, ramping up pressure on the central bank to resume policy tightening on the back of a surging commodities boom.
Obama: New Export Initiative off to Good Start
President Obama declared good progress on his pledge to double U.S. exports over the next five years.
Dow Roars Past 10000 Again
Stocks rallied, reversing a three-week slide and pushing the Dow Jones Industrial Average through the 10000 mark as investors grew hopeful for the approaching earnings season.
Returns on U.S. TARP Investments May Decline
Now, with financial stocks sliding, the Treasury and taxpayers are facing the prospect of diminishing returns as more companies repay their public support.

Blogs
Why are corporations saving so much?
Corporations with cash surpluses are not destroying real resources, nor are they stuffing cash in their mattresses. They are investing in financial assets.
“Unions Outspending Corporations on Campaign Ads”"Unions have spent $9.7 million (or 39 percent of the total), compared with $6.4 million (26 percent) spent by individuals and $3.4 million spent by corporations."
Confirmation Bias and Stimulus
...outside of economics models where you can hold every variable but one constant, ceteris is rarely paribus.
All the news that’s fit to print (plus some more)
How can the economy recover without government stimulus? Let’s keep an eye on Ireland.
Are stimulus skeptics logically incoherent?
...businesses may be reluctant to invest in an economy that they expect to be distorted by historically unprecedented levels of taxation in the future. The more the government borrows, the higher taxes will need to go, the more distorted the future economy will be, and the less attractive is investment today.
NYTimes Cluelessness Part IX
...the SBA likes to think that the taxable revenue from the businesses that they “produce” will offset the cost of the program overtime. Their website is forced to make it clear: on average, the SBA loses about 6% a year, and taxpayers are currently owed $9,971,048,478.
A Speed Bump on the Road to Universal Broadband?
Section 254 of the Telecommunications Act of 1996 lays out criteria the FCC is supposed to consider when it decides whether to provide universal service subsidies for new services in addition to phone service. One of the criteria is that the new service must be subscribed to by a “substantial majority” of residential consumers.
Cut Medicare first
"...if we’re going to cut spending on retirement programs then it makes much more sense to reduce Medicare outlays by $1 than to reduce Social Security benefits by $1."

Research, Reports & Studies
The Importance of Startups in Job Creation and Job DestructionA relatively new dataset from the U.S. government called Business Dynamics Statistics (BDS) confirms that startups aren’t everything when it comes to job growth. They’re the only thing.
Trade, Taxes, and Terroir
High internal tax rates generated Alchian-Allen effects that biased consumption and production towards local producers who sold higher priced wine.

Graphic of the Day
Mapping the EU's debt, jobs and growth worries
See: Taxes and Growth
See also: America's Birthday by the Numbers

Economists' Comments & Opinions
Both Krugman and Wesbury Get It Wrong
About the only thing policymakers can do is responsibly enact laws that set the stage and provide the environment for the free society unfettered by central government planning that the founding fathers envisioned.
The Berwick Evasion
Obama dodges a Senate debate on his ideal Medicare chief.
The Next Bailout: Save USPS or Its Padded Pensions
The US Postal Service is in a deep financial hole with liabilities and obligations over $88 billion last year alone. With the decline in the use of mail, the USPS may need a taxpayer bailout.
Unemployment Benefits Aren't Stimulus
Let's not reduce the incentive to find work. A federal tax holiday is a better way to cut the high jobless rate.
The Rout of Obamanomics
The top 1% of income earners in the U.S. pay more in income taxes than the bottom 95% combined.
Obama and the Spending Volcano
An eruption of public spending from Mount Obama has caused deep anxieties among the voters in America's villages.
Baptists & Bootleggers: Red-light-camera manufacturers lobby for red-light cameras
Local governments tell us red-light cameras make us safer. Of course they fill local government coffers. But they also enrich private industry, too — private industry that fights for more cameras.

Book Excerpts
"Those who wish to destroy the conditions which allow for a strong democratic nation can do little better than to reduce the self-reliance of citizens and of their families by converting them into dependants of the state. Inevitably the result is the strengthening of state bureaucracy and the weakening of civil society." -Sir James Goldsmith, The Trap (1994)

"Did You Know"
The most severe polluter of the US is the Department of Defense.

7/7/10

BUZZ: Long Recession Ignites Debate on Jobless Benefits

News
Credit card delinquencies fall to 8-year low
The number of consumers behind on their credit card payments fell to an eight-year low in the first quarter of 2010. Overall, delinquencies across a wide-range of consumer debt categories have also fallen.
Farm workers: Take our jobs, please!
Facing growing anti-immigrant rhetoric, the United Farm Workers union is challenging Americans to take their labor-intensive, low-paying farm jobs.
Bush tax cuts up in the air
Odds are good that the middle-class will get to keep their tax cuts. The question now is for how long.
Mortgage Applications in U.S. Rise 6.7% as Homeowners Move to Refinance
The Mortgage Bankers Association’s index increased 6.7 percent in the week ended July 2. The Washington-based group’s refinancing gauge jumped 9.2 percent to the highest reading since May 2009, and its index of purchases fell 2 percent to the second-lowest level since 1997.
Obama Will Appoint CMS Chief While GOP Is Away
Obama intends to overcome GOP resistance to his nominee to lead the Centers for Medicare and Medicaid Services by making a recess appointment Wednesday.
Expect lots of government layoffs at state, local level
Up to 400,000 workers could lose jobs in the next year as states, counties and cities grapple with lower revenue and less federal funding.
Services report fuels US recovery fears
Concerns that the US economic recovery is in danger of stalling mounted on Tuesday when a monthly report on activity in the services sector showed a surprisingly steep drop in June.
Even State Capitals Feel the Squeeze
Many capital cities, particularly those with limited private industry, may suffer additional strain as states embark on their deepest cuts yet in the financial downturn.
Hard Times for Ill., but Not for Governors Staff
Giving Quinn's staff big pay hikes while he slashes spending in education and health care services doesn't sit well with lawmakers and could hamper the governor's efforts to convince them to support borrowing for state pensions.
Home-Efficiency Program Takes Hit
A White House-backed effort to encourage home-energy improvements was dealt a blow Tuesday after a federal regulator said the program posed significant risks to mortgage lenders and investors.
TSA drops policy blocking 'controversial' sites
Revises 'acceptable use' for Internet access after criticism.

Blogs
States Fighting Back Against Obamacare: Virginia
Although President Obama signed the Patient Protection and Affordable Care Act into law , the battle against the federal takeover of health care is far from over. In March, Virginia passed its own statute protecting Virginians from having to comply with such a mandate.
Side Effects: Obamacare Shifts Costs to the Privately Insured
President Obama promised to address the growing costs in health care with passage of his “reform” bill. But instead of reducing costs, Obamacare will succeed only at shifting the burden to taxpayers and the privately insured.
Unemployment Extension Could Boost Jobless Rate
The government’s unemployment rate counts only workers who say they’re looking for work. To qualify for benefits, a person has to say he or she is looking for work. When benefits were less generous – or simply unavailable – more jobless workers indicated that they had given up looking, and thus weren’t officially counted as unemployed.
Legislators’ Ignorance of the Legislation is No Excuse
'Suppose a “yes” vote also requires a signed statement, before the vote, that says, “I have personally read this law, in its entirety, and approve its content.”'
Secondary Sources: Better Jobs, Putting Idle Cash to Work, Benefits Extension
A roundup of economic news from around the Web.
The Obama Tax Future
How heavily will President Obama's planned tax hikes weigh upon the U.S. economy?
Induced Human Error
No one who has studied much economics will be surprised by this: the Peltzman effect in action.
The Ethics and Etiquette of Statistical Discrimination
No matter what they say, everyone engages in statistical discrimination.
Environmental Disaster
[The administration's energy retrofit program is] Not so blandly heartwarming after all; more like an unmitigated disaster for anyone who took one of these loans
Administration More Concerned about Trade Appearances than Action
Simply relying on bigger federal government programs is not going to increase exports.
Executive Compensation By Any Other Name and Continued
Most convincing piece of evidence: public company CEOs are not paid more than their private counterparts.

Economists' Comments & Opinions
Keynes vs. Hayek: The Great Debate Continues
Is all spending equally productive, or should government policies aim to simulate private investment?
More Grade Inflation for President Obama
Just 18 months into his term, a team of presidential scholars has decided Barack Obama's already the 15th best president we've ever had. On Thursday, the Siena Research Institute released its latest presidential rankings list, based on a poll of 238 academics.
A Trillion Unintended Consequences
Dodd-Frank's last minute assault on Main Street derivatives.
The Curse Of Economic Uncertainty
Fiscal austerity is not the problem-- lack of clarity is.
Government taxes imaginary income
IRS has long been a lawless agency outside the Constitution.
Hard Knocks From Easy Money
The Federal Reserve is feeding big government and harming middle-class savers.

Somebody will come up with a way to genuinely rebuild some trust, and securitization will return. -Garett Jones, Twitter

Graphic of the Day
NYTimes: American Dream Is Elusive for a New Generation
See: Total Government Spending (% GDP)
See also: After the gold rush
PODCAST: Kling on the Unseen World of Banking, Mortgages, and Government

Research, Reports and Studies
The Rising Threat of Deflation
As we enter the second half of 2010, while markets have been obsessed with Europe's debt crisis, they have failed to notice potentially more ominous developments. By later this year, persistent excess capacity will probably create actual deflation in the United States and Europe
How Americans Are Overtaxed to Overpay the Civil Service
Salaries and benefits—for identical jobs—are 30 percent to 40 percent higher in the federal government than in the private sector. Congress should not overtax all Americans to overpay the privileged workers in the civil service.
The Death of Neoliberalism
As the Bush-Obama era of bailout economics and Keynesian rehabilitation settles into something like cruising speed, perhaps the most fantastic fact to swallow will be that once upon a time the United States had a president who restrained government spending, balanced the budget, argued forcefully for the benefits of free trade, and declared that “the era of big government is over.”
ISM Nonmanufacturing Survey Disappoints
The headline reading of the health of the non-factory sector was below the consensus estimate, a weaker but still expansionary 53.8. The contraction in employment and drop in new orders are particularly bothersome.
Missing the Point: Lessons from The Big Short
The regulatory legislation now before the House and Senate will make it difficult for participants in the CDS market to speculate against a bubble, making future bubbles more likely.
Do Consumer Price Subsidies Really Improve Nutrition?
In fact, it may have had a negative impact for some households.

Book Excerpts
"Interference of any kind... in the spontaneous direction of industry, and the free employment by their owners of the great agents in production, labour, land, and capital, has the certain effect of benumbing their powers and lessening the sum of production, and consequently the shares, of the producing parties; as well as of needlessly, and therefore unjustly, curtailing their freedom of action." -George Julius Duncombe Poulett Scrope, Principles of Political Economy (1833)

"Did You Know"
The average private-sector employer pays $9,882 per employee in annual benefits, while the federal government pays an average of $32,115 per employee. Since the recession began, federal employment has risen by 240,000—12 percent. The unemployment rate for federal employees has only slightly risen from 2.0 percent to 2.9 percent between 2007 and 2009.

7/6/10 Post

BUZZ: States Struggle to Stem False Unemployment Claims

News
House Job cuts for state and local government workers could deepen in 2nd half of year
States and municipalities are facing gaping budget gaps. Many have responded by slashing services, raising taxes and, for the first time in decades, making deep job cuts.
7.9 million jobs lost - many forever
The job losses during the Great Recession were so off the chart, that even though we've gained about 600,000 private sector jobs back, we've got nearly 8 million jobs to go.
Job gloom at all-time high
A record 1.21 million people want to work, but said they aren't looking because of the weak labor market, according to federal statistics released Friday. The June figure is up from 793,000 a year ago.
Congress fixes Wall Street - and orders up 68 studies
The bill studies, among other things: short selling, reverse mortgages, improved insurance regulation, private student loans, oversight of carbon markets and the "feasibility of requiring use of standardized algorithmic descriptions for financial derivatives."
Treasuries Show 12% Chance of Double Dip to Fed as Yields Near Record Lows
U.S. government bond yields are signaling almost no chance of the economy slipping into another recession even as stocks and commodities tumble.
Service sector weakens a bit in June
The ISM nonmanufacturing index fell to 53.8% last month after holding at 55.4% for the past three months. This is the lowest level since February.
Treasury run-up won't last forever
The best investment by far for the first half of this year has been the one that people like me have been warning against: long-term U.S. Treasury bonds. What goes way up, must come down.
Office Vacancy Rate Keeps Climbing
Vacant office space continued to accumulate in the second quarter, the latest indication that businesses aren't planning significant hiring in the near future.
TSA to Block "Controversial Opinion" on the Web
The Transportation Security Administration (TSA) is blocking certain websites from the federal agency's computers, including halting access by staffers to any Internet pages that contain a "controversial opinion," according to an internal email obtained by CBS News.
Cost of Stimulus Cash Vexes Universities
...the stimulus grants have also required the [University of California] to spend about $69 million that wasn't reimbursed by federal agencies to support the new research projects.
They Did Their Homework (800 Years of It)
Their handiwork is contained in their recent best seller, “This Time Is Different,” a quantitative reconstruction of hundreds of historical episodes in which perfectly smart people made perfectly disastrous decisions. It is a panoramic opus, both geographically and temporally, covering crises from 66 countries over the last 800 years.
'Game Changer' Rule Looms For Health Insurers
How federal regulators interpret a metric known as a medical-loss ratio could affect players from industry giant UnitedHealth Group Inc. down to specialized companies such as American National Insurance Co. Plans could be forced to pay out millions in rebates, while others may be driven out of the market.
Post Office Plans to Announce New Rate Increase
The agency lost $3.8 billion last fiscal year despite cutting 40,000 full-time positions and making other reductions. It has continued to face significant losses this year.

Blogs
Department of Selective Charts: Social Security Tax Cap Division
The fight over Social Security policy has almost nothing to do with low earners; they’ll be taken care of no matter whose reform philosophy gets enacted. The real question is whether to impose higher taxes on high earners in order to pay higher benefits to high earners.
Morning Bell: Reclaiming Our Founding Principles
The Declaration of Independence serves as a philosophical statement of America’s first principles. But since the early 20th century, these principles have been under attack and now there is no need for consent of the governed, just experts who will tell us how to live and how to progress.
“And then He said, ‘Let there be Higher Wages’”
Low wages are not the result of arbitrary company decisions; they are the result of low worker productivity. A pen even as mighty as that of Pres. Obama cannot miraculously invest low-skilled workers with greater skills.
Saving and Identities
In general, I think it is really bad economics to tell stories about accounting identities that blame one side of the identity or the other. Instead, economists should trace movements in saving and investment back to exogenous factors that affect relative prices, including risk premiums.
Is Illinois “Greece on Lake Michigan”?Downgraded by every ratings agency, Illinois’ pension system is likely to run out of money to pay retirees in the next few years.
Are We Suffering from Concealed Inflation?
The conventional explanation for the lack of price inflation is that banks are sitting on the reserve because the interest the Fed is now paying is a better deal than lending in a risky environment. I think this point is largely true, but it also may be that we are suffering from inflation that is not being accurately measured.
Weekly Summary and a Look Ahead
This will be a light week for US economic data.
Repeating Tax History -- From Luxury Tax to Tanning Tax
This isn’t the first time, of course, that a tax has reached people that it wasn’t intended to affect.
When will we know if Irish pre-emptive fiscal austerity is a failure?
The Irish experiment remains an open book. In the meantime, it's simply not true that the pre-emptive austerity advocates are committing some kind of economic malpractice. Three years out from now, let's compare Ireland to the other PIIGS.
Failure
The bottom line. Obama took a gamble. He has tried to achieve a lot. He passed a health care bill that still fails to garner majority support and a financial reform that no one understands. The economy is not improving. Throw in the oil spill and you have an administration that no one wants to embrace. We are in for a lot of change in the next 6 months.
Fewest Teen Jobs added in June since 1951
According to the BLS, only 497,000 teens (ages 16 to 19) found jobs in June 2010 NSA (June is the key months for summer employment).
Global Recession Led to Stricter Immigration Rules
Stemming from increased unemployment rates, many countries made changes to migrant policy that largely encouraged both migrant residents to leave and discouraged new immigration from beyond their borders, according to a study by the Federal Reserve Bank of Dallas.
ISM Non-Manufacturing Index shows slower expansion in June
The June ISM Non-manufacturing index was at 53.8%, down from 55.4% in May - and below expectations of 55. The employment index showed contraction in June at 49.7%.

Research, Reports & Studies
Creating a Crisis: Spending Increase to Fund Bloated Education Bureaucracy
Congress will soon consider spending $10 billion to prevent layoffs in the public education sector. This money comes in addition to the $80 billion awarded to the U.S. Department of Education (DOE) for K-12 education as a result of the stimulus bill.
Heritage Employment Report: June Job Market Jolts Economy
While the unemployment rate dropped from 9.7 to 9.5 percent, this is due to a large drop (–652,000) in the labor force.
Weak Economy, Failed Policies Keep Obama Jobs Deficit High at 7.4 Million
According to the latest jobs report, total U.S. employment stood at almost 130.5 million in June, which means the cumulative Obama jobs deficit—the difference between the end target and the current employment level—stands at almost 7.4 million.
Ask George W. Bush How to Avert a Double Dip
...given the dramatic changes in taxation and the winding down of stimulus spending just over the horizon that the U.S. economy is getting weaker.
Wells Fargo Economics Group: Weekly Economic & Financial Commentary
U.S. Economic Slowdown... Still No Double Dip.
Hudson Institute Economic Report
A disappointing jobs report for June followed May’s weak housing and retail sales data, leading some to forecast a slowdown in the recovery.
Public Interest Comment on the Draft 2010 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities
...a more careful look at economic theory is warranted as the government seeks to intervene in the obesity arena, although we acknowledge that to be a significant public health concern. Drivers in Q3
...even though the markets are as complicated as they've ever been, there are two key drivers that stand out: the European debt crisis and the macro-economy.

Graphic of the Day
Government Growth Outpaces Private Growth This Decade
See: Poverty in the US and Europe
See also: How much a country's leader is paid compared to GDP per person
>VIDEO: How to create one million jobs

Economists’ Comments & Opinions
Lack of jobs increasingly blamed on uncertainty created by Obama’s policies
...fresh fears about another down turn are combining with the regulatory and tax burdens businesses see coming down the pike.
The Government Pay Bonus
Private employees toil 13½ months to earn what federal workers do in 12.
Welcome to the Double-Dip Recession
From a theoretical point of view, another recession is what we should expect right now. This is because both GDP and employment are driven by private business investment, and huge tax increases on both business income and capital investment are now only six months away.
Dear Mr. President: Immigration Reform Won’t Be Enough To Stop The Brain Drain
Fixing immigration policy is an important start, but it won’t be enough to stop the brain drain of highly educated and skilled workers that the U.S. is presently experiencing.
Fed's Fisher sees slower U.S. growth ahead
The U.S. will experience "slower economic growth than we've had in the first and second quarter." He estimated U.S. growth of 2%-3%, saying that the figure will likely come "closer to the low end of that range."
Why are firms saving so much?
Much of the recent increase in private-sector saving comes from businesses. What explains the rise in corporate thrift?

Sadly, we learn so much from fools, economists, & other reverse role models then pay them back with ingratitude. -Nassim Taleb, Twitter

Book Excerpts
"It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort." -Joseph A. Schumpeter, Capitalism, Socialism, and Democracy (1950)

Did You Know
Since 2007, vice presidents have seen an 11% decrease in overall compensation, while the highest-ranking executives (a category that includes president, CEO, COO, and chairman) have seen their pay drop by 16%. Perks like company cars and club memberships have been hit pretty hard: 51% of employers sweetened the deal with such goodies in 2007, but only 28% still do. Rather ominously, the percentage of companies offering guaranteed severance pay to executives has dropped by half, from 44% in 2007 to 22% today. Also, 23% of companies are still paying sign-on bonuses, down from 36% in 2007, and one-third (33%) are offering stock options or other forms of equity, down from slightly more than half (51%) three years ago.

7/2/10 Post

BUZZ: U.S. Sheds Jobs

Today's News
House passes unemployment benefits extension
After a failed attempt earlier this week, the House voted to extend the deadline to file for federal jobless benefits Thursday. But the bill will be stuck in limbo as Congress takes a weeklong summer break.
Stimulus: The big bang is over
This summer will be the peak of the $787 billion stimulus program in terms of creating jobs and pumping money into the economy. It will be a downhill slide for stimulus even as the economy is expected to continue sputtering.
Bankruptcy filings on the rise
Bankruptcy filings surged 14% during the first half of 2010. Filings totaled 770,117 through June, compared to 675,351 during the same period last year.
Job recovery hits a wall
The U.S. economy lost jobs in June, for the first time this year, a net loss of 125,000 jobs in the month. That was due primarily to the loss of 225,000 Census jobs that had swelled payrolls by 433,000 net jobs in May.
Euro-zone unemployment unchanged at 10%
The number of unemployed workers across the 16-nation euro zone ticked higher in May, but the unemployment rate remained at a 12-year peak of 10% for a third consecutive month.
Jobs report prompts new political sparring
A fresh round of political sparring broke out Friday morning following the release of a disappointing jobs report, as Republicans attacked the White House, and President Barack Obama said the country's "heading in the right direction," but admitted the economy's not whole yet.
US stocks fall on poor economic data
Disappointing economic data that fuelled concerns about the strength of the economic recovery sent US stocks lower on Thursday, but some ground was recovered in the last second half of the trading day.
New Financial Rules Will Lower Bank Profits
The landmark financial overhaul legislation will raise banking industry regulatory costs, lower their profits and limit their use of their own assets in risky investments.
Global Manufacturing Momentum Fades, Fueling Worries
Manufacturing lost momentum around the world in June, adding to worries that global economies are poised for slower growth in the months ahead.
Fiscal Commission Debates Deficit Cuts
The president’s fiscal commission heard from advocacy groups and a few public citizens Wednesday afternoon as it considered ways to reduce the federal deficit.
Car Sales Slowed in June
Auto makers saw their U.S. sales rise in June from the depressed level of a year earlier, but sales fell from May as jittery consumers slowed the pace of recovery in the car market.
Schwarzenegger Pressures Lawmakers in Budget Battle
Gov. Arnold Schwarzenegger's order to pay 200,000 state workers just the minimum wage sent a signal to California lawmakers: In the impasse over closing California's $19 billion budget deficit, Schwarzenegger is ready to play hardball.
Dollar Tumbles in Broad Retreat on Weak Data
The dollar fell against the euro and yen after worse-than-expected economic data fueled concern the U.S. recovery was slowing, leading investors to sell the greenback.
Health overhaul may mean longer ER waits, crowding
Emergency rooms, the only choice for patients who can't find care elsewhere, may grow even more crowded with longer wait times under the nation's new health law.
Premiums for New 'High Risk' Pool Could Be Steep
President Barack Obama's new health coverage for uninsured Americans with health problems won't be cheap — premiums averaging $300 to $600 a month in the largest states, according to a government website that went live Thursday.

"The Employment Situation" Hearing Report
"Today's report is bad news for American workers and their families. At this slow pace it will take much of the decade to reutrn to normal emplyoment levels. President Obama and Congressional Democrats are pursuing reckless fiscal policies that are clearly unsustainable. Unless their excessive spending, deficits, and debt accumulation are quickly reversed, the United States may experienece a debt crisis similar to Greece."

- Representative Kevin Brady, Senior House Republican for the Joint Economic Committee

Total nonfarm payroll employment declined by 125,000 in June, and the unemployment rate edged down to 9.5 percent. The unemployment rate only decreased because there was another step down in the labor participation rate. As the number of discouraged workers continued to rise and the labor force shrunk by 652,000. The decline in payroll employment reflected a decrease (-225,000) in the number of temporary employees working on Census 2010. Private-sector payroll employment edged up by 83,000.

See: BLS Employment Situation Summary

Blogs
June Employment Numbers Raise Specter of a "Lost Decade"
The soft employment numbers build the case for those who believe we may be entering a "lost decade" similar to what Japan experienced before the Great Recession.
Time to Go Global with Greater Economic Freedom
The latest study by the McKinsey Global Institute reveals some astonishing facts concerning contributions of U.S. global companies to the American economy.
Democrats Rescind Recovery Act Funding to Finance More Ineffective Spending
Conservatives began talking about rescinding the stimulus after President Obama signed it into law. Liberals are starting to listen.
Economists React: Is Economy Deer in Headlights or Roadkill?
Economists and others weigh in on the June employment report.
Economic “Experiments”If Barro and the others are correct, we can’t afford to keep throwing good money after bad.
Employment Report: Temporary Help and Diffusion Index
The decrease in the diffusion index in June (almost falling to 50%), is disappointing.
Why Did the Unemployment Rate Drop?
The unemployment rate fell in June to 9.5% from 9.7%, reaching its lowest point since last July. But the decline wasn’t due to improvement in the labor market. Instead, jobless Americans dropped out of the labor force in droves.
Shovel-ready, revisited
Maybe [the stimulus] would have done more stimulating if the spending had actually been directed at projects that use shovels.
State/Local Government Still Shedding Jobs
The pace of state and local government job loss has slowed in recent months. State/Local governments shed 10,000 jobs in June, compared with 18,000 a month earlier and more than 25,000 in each of the first two months of the year.
More Problems With MassCare
If you don't have the mandate, guaranteed issue and community rating will result in the kind of cost spiral we've seen in New York, where only the very sick bother to buy insurance.
Take That, Keynes and Lerner
"Once you break the spell--once governments find that they can get away with borrowing instead of taxing to pay the bills--it is almost impossibly tempting for politicians to do it again and again until the debt is out of control."
Good News about Polluted Water
Pollution is bad, but there is another side to the story. The Hudson River is now clean enough that I’ve swum in it. Air pollution has dropped by 41% since 1990. U.S ocean fisheries have improved substantially in the last few years. Forest cover in the US is larger today than it was 100 years ago. Then, of course, there are the oysters…

Research, Reports & Studies
Tax to the Max?
Should we lift the payroll-tax ceiling to fix Social Security? It’s pretty much accepted, even among policy folks well to the left-of-center, that the trust fund isn’t real savings and that marginal tax rates do matter.
Europe's Sovereign Debt Crisis: No Place to Hide?
As the debt-to-GDP ratio approaches 100 percent, the effort to reduce it by cutting government spending, raising taxes, or both actually raises the ratio because it cuts GDP growth faster than it cuts debt.
One More Thing America Must Learn from Europe
The United States could learn a lesson from Europe: how to make flying cheaper. In the European Union, any EU-based airline from any member country can pick up and drop off passengers anywhere within the Union.
The Economic Impact of an Offshore Drilling Ban
In short, petroleum can be a major energy source for many decades. Consequently an offshore drilling ban’s impact on the U.S. would be felt for decades.
Errors, Robustness, and the Fourth Quadrant
The paper proposes a methodology to calibrate decisions to the degree (and computability) of forecast error.
Social Security Policy Options
This CBO study examines a variety of approaches to changing Social Security, updating an earlier work, Menu of Social Security Options, which CBO published in May 2005.
International Business Cycle Synchronization in Historical Perspective
We then examine the role of global shocks and shock transmission in the trend toward synchronization. Our key finding here is that global (common) shocks generally are the dominant influence.
Some Intellectuals and Society
Sowell claims that those of us who favor free markets aremore empirically inclined and have less ego invested in our views than those who advocate central planning and heavy government intervention generally.

Graphic of the Day
the Atlantic: Dismal Jobs Report
See:Today’s Jobs Report in Pictures
See Also: June Nonfarm Payrolls
See Also: Intelligence tested
VIDEO: Pelosi: Unemployment Checks Fastest Way to Create Jobs

Economists’ Comments & Opinions
The Obama Tax Trap
How some Republicans are preparing to walk right into it.
Economy: the musical
Commentary: The song remains the same for the economy

For them this is a financial crisis; to me it is an intellectual crisis, a crisis of civilization. -Nassim Taleb, Twitter

Book Excerpts
"[L]egal plunder can be committed in an infinite number of ways; hence, there are an infinite number of plans for organizing it: tariffs, protection, bonuses, subsidies, incentives, the progressive income tax, free education, the right to employment, the right to profit, the right to wages, the right to relief, the right to the tools of production, interest-free credit, etc., etc. And it is the aggregate of all these plans, in respect to what they have in common, legal plunder, that goes under the name of socialism." -Frédéric Bastiat, The Law (1850)

"Did You Know"
AAA projects that 34.9 million Americans will travel 100 miles or more during the Independence Day weekend, a jump of 17.1% from last year's 29.8 million travelers.

7/1/10 Post

BUZZ: Deficit Panel Stresses Spending Cuts

News
House approves sweeping bank-reform bill for big banks
The legislative package -- which passed 237 to 192 with almost no Republican support -- moves the Obama administration closer to having a significant triumph in its efforts to rein in Wall Street. The legislation must still receive a filibuster-proof 60 votes to pass in the Senate.
1.3 million unemployed won't get benefits restored after Senate fails to overcome filibuster
The unemployment bill would have provided up to a total of 99 weekly unemployment checks averaging $335 to people whose 26 weeks of state-paid benefits have run out. The benefits would be available through the end of November, at a cost of $33.9 billion.
Jobless claims spike
There were 472,000 initial jobless claims filed in the week ended June 26, up 13,000. Some of the spike could be due to workers who held temporary census jobs filing for unemployment insurance as their positions end, as well as workers who have lost jobs due to the oil spill.
Manufacturing activity slows more than expected
Manufacturing activity expanded for the 11th straight month in June but the rate of expansion slowed more than economists expected.
Pending home sales plunge 30% in May
The sharp drop in pending home sales mirrors the 33% drop in sales of new homes in May, which are also recorded at the time of the sales contract.
Homebuyer credit extension heads to Obama
First-time homebuyers will have until Sept. 30 to close on their purchases and land an $8,000 tax credit under a bill passed by the Senate. President Obama is expected to sign the bill, which was overwhelmingly approved by the House.
Treasury has raised a total of $10.5B from selling Citi shares it got in bank's bailout
The Treasury Department said Thursday it has raised $10.5 billion from the sale of a total of 2.6 billion shares of Citigroup stock it received as part of the government's rescue of the bank.
US states face hard budget choices
For 2009 to 2012, US states have faced nearly $300bn in budget deficits, according to figures from the National Association of State Budget Officers (Nasbo).
Expand New York City's Living Wage?
New York City, which faces a predicted budget gap of $4.1 billion this fiscal year, is considering an expansion of the reach of "living wage" legislation that would make the deficit worse, drive jobs out of the city and raise unemployment among low-skill workers.
Ireland starts to grow after deep downturn
Ireland’s return to growth, in spite of having undertaken a huge fiscal retrenchment over the past two years which prolonged the downturn, will provide encouragement to other European economies facing up to tackling rising public deficits.
Governors Plead for Federal Funds for Medical Programs
Funds for FMAP were provided in the $787 billion economic stimulus package, which expires at the end of this year. The proposed extension would go through the end of June 2011, covering the second half of FY 2011 for most states.
Federal Tan Tax Burns Some Badly but Keeps Everybody in the Dark
Ultraviolet Light Sessions Mostly Subject To New Levy, but Spray-On Jobs Are Cool.
CBO Fires Warning Shot About Unsustainable Budget Path
...spending on mandatory health care and Social Security — 16 percent of GDP — would consume almost as much of the nation’s resources by 2035 as the government’s spending on all programs has averaged over the past 40 years.
Free-Trade Winds May Be Blowing Again
Economists argue that trade helps both exporters (yes, jobs) and importers (not only more, cheaper goods, but also competition from abroad that keeps domestic producers on their toes).
S.E.C. Tightens Rules on Public Pension Funds
The Securities and Exchange Commission on Wednesday tightened restrictions against “pay-to-play” practices in the municipal securities market.
High-Risk Insurance Pools Launched
Health and Human Services officials said they might shift funding among states if a new $5 billion program to cover the uninsured runs out more quickly in some states than in others.

Blogs
The Limitless Power of the Obama-Kagan Congress
The Obama-care provision forces all Americans to buy health insurance. However, Jefferson and the other Constitution framers designed the document to protect our “unalienable Rights” by limiting the power of Congress.
If Deficit Commission Is Serious, They Ought to Look at Welfare Reform
Since 1990, federal welfare spending has more than doubled, from 2.0 percent of GDP to 4.4 percent. This 2.4 percent of GDP expansion exceeds the combined 2.1 percent of GDP expansion of Social Security, Medicare, defense, and education spending over the same two decades.
The Dodd-Frank TARP Raid: Using Yesterday’s Bailout to Pay For Tomorrow’s
Leftists want to use the “profits” from the TARP bailout to pay for future Dodd-Frank financial fiascoes. The left and their allies want us to believe this would mark “the end” of TARP.
The June Employment Report: An Updated (Lower) Scorecard
Many economists have been lowering their estimates of U.S. private-sector job growth in June after a string of weak labor market reports this week.
Why This Isn’t A Time to Worry that Government Is Spending Too Little
It seems to me that by just about any measure, we are currently conducting a large-scale experiment in massive government spending. Moreover, I believe the results of previous experiments predict that this one will lead to slower growth and less economic opportunity.
Austerity?
...it is hard to imagine that anyone would call our fiscal situation austere, even in the event that Team Obama were to freeze non-defense non-homeland-security spending, as it promised back in February.
Economics is hard, but bloggers are undeterred
Economics blogging is not about furthering the economics profession, its purpose is to integrate economic thinking into the daily thought processes of citizens, thereby leading to a more well-informed populace that is not left to blindly follow those in authority – which is, perhaps, exactly what Dr. Athreya is afraid of.
“The Only Place Innovation Will Come From”
Trying to reproduce the innovation, replication, dissemination cycle outside the free market system is like trying to make a wheel more round by increasing or decreasing the value of pi–-and it’s just as unnecessary.
Sticky wage transmission mechanisms
The standard story explains that sticky wages increase unemployment. The standard story, however, is not the only and perhaps not the most important transmission mechanism.
Expectations and GDP, Second Quarter 2010
Using that latest data, we anticipate U.S. real GDP for the second quarter of 2010 will fall into a range between $13,107 billion and $13,642 billion, with a target value of $13,374.8 billion.
ISM Mfg index shows slower expansion in June, Pending Home sales collapse
Both the ISM index and pending home sales were below consensus.
Keynes versus Hayek: Past is Prologue
It does not take much to see that the issues are basically the same today. The positions of the opposing sides are also the same. As I have said many times before, the great debate is still Keynes versus Hayek. All else is footnote.
Recommended Books
Paul Seabright, The Company of Strangers and more.
The Debate Continues: Keynes, Pigou, & co. vs. Hayek, Robbins, & co.
Recovery requires government to get lean and out of the way, and individuals to pursue opportunities for mutual gain through trade and wealth creating entrepreneurial ventures.

Research, Reports & Studies
Revitalizing Federalism: The High Road Back to Health Care Independence
The Patient Protection and Affordable Care Act represents more than a federal takeover of health care; it is a direct threat to federalism itself.
The Nation's Mid and Long-Term Fiscal Challenges
Testimony before the National Commission on Fiscal Responsibility and Reform
‘Clean’ Energy and Disguised Costs
One of the big benefits of economics is that it restrains the enthusiasm of zealots who want government to have a big say in how our resources are allocated. Economics reminds us that there are no free lunches.
Trends in World Inequality in Life Span Since 1970
The sources of widening inequality in length of life between countries remain unclear, but signs point away from trends in income, leaving patterns of knowledge diffusion as a potential candidate.


Graphic of the Day
A special report on debt: Repent at leisure
See: Count on this: Hiring will be weak
See also: World Debt
See also: Banks' profits and losses
See also: The Unsustainable Welfare State: Reform is Necessary

Economists’ Comments & Opinions
Greece Must Restructure Debt and Quit the Euro
Any debt restructuring for Greece would need to involve at least a 50 per cent write down to provide any meaningful relief. Such a large write down would constitute a severe hit to the European banking system
Thanks to Tax Competition, Corporate Tax Rates Continue to Fall in Europe
Many people assume that Europe is the land of high-tax welfare states and America is an outpost of laissez-faire capitalism. But the United States is a lot closer to France than it is to Hong Kong
Obama and the Fiscal 'Road to Hell'
G-20 leaders don't agree with the president that more spending will revive the economy. Nor do most Americans.
Paul Krugman's Depression Economics
To put it very simply, government spending is a huge tax on true economic productivity, so contrary to Krugman's deeply held views, global economic revival will be at least partially authored by the spending cuts he decries, not the increases that he endorses.
The Bucyrus Travesty
A tale of two Obama loan guarantees.
Stocks, like most of us, like job growth
Commentary: Correlation between stocks and jobs at strongest since 1960s
The Dodd-Frank Financial Fiasco
The bill all but guarantees bailouts as far as the eye can see, while failing to address real problems like Fan and Fred and our outdated bankruptcy code.
Piecing it together
Putting a central planner (or committee of planners) in charge won't work. First, there's no way that the planner, gazing at a huge pile of [economic] puzzle pieces, can foresee any of the possible meaningful pictures that might emerge once these billion pieces are assembled. This jigsaw puzzle doesn't come in a box whose cover depicts the final result.

"Marginal product of capital that matters is net, not gross. MPK-depreciation rate<0 likely true when K not very useful." -Garrett Jones, Twitter

Book Excerpts
"...federal deficits distorted allocation of resources, damaged the stability of financial markets, and, because the money was borrowed from the capital market, inhibited the formation of capital. Since capital investment is necessary for productive growth and high levels of unemployment, the “uncontrollable” deficits constituted a direct assault on the productive system and a direct cause of unemployment.

"Further complicating matters, the federal budget has itself been touted by government economists as a “tool for economic stabilization.” Rationalizers of deficit spending have argued that increased federal spending and the resultant deficits were a creative act, that they were actually economic activity. Thus, at every dip of the economy, the proposed cure was always deficit spending. Unfortunately, the deficits never disappeared. They continued during both “stop” and “go” periods, during periods of both weak and strong economic activity. There were two destructive results of this alleged “stabilization” by deficits: The momentum of government spending was incessantly upward and inflationary, and the capital markets were further drained of investment capital." -Former Treasury Secretary William E. Simon, A Time for Truth (1976)

"Did You Know"
Today in History
1862 - The office of Commissioner of Internal Revenue (forerunner of the IRS) was established.
1943 - Federal income tax withholding began.

6/30/10 Post

BUZZ: Stocks Drop on Growth Fears

News
Private Sector Adds Few Jobs
Private-sector jobs in the U.S. increased by 13,000 last month, according to a national employment report published by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers. Economists had expected ADP to report a jobs gain of 60,000 for June. The estimated change in employment for May was revised to a gain of 57,000 from an increase of 55,000 first reported.
Bank Fee Is Eliminated in Financial Bill
The Obama administration supported the change in the final bill, in part because of concern that the proposed fee on big banks in the financial regulatory measure would complicate Mr. Obama’s efforts to impose a separate, larger $90 billion bank tax over 10 years.
23 Doomsayers Who Say We're Heading Toward Depression In 2011
The truth is that we are facing the greatest sovereign debt crisis in modern history. There is no way out of this financial mess that does not include a significant amount of economic pain.
Top 5 Most Economically Optimistic Countries
Who's Weathering the Global Recession?
House votes to give homebuyers 3 extra months to qualify for tax credit
Under current law, homebuyers who signed purchase agreements by April 30 have until Wednesday to close on the sale to qualify for tax credits of up to $8,000. The bill would give buyers until Sept. 30 to complete their purchases. The bill passed 409-5. It now goes to the Senate.
High rates, more fees -- credit card traps here to stay
Beginning Aug. 22, your credit card company won't be able to charge you inactivity fees or excessive late fees, and it will only be allowed to charge you one penalty fee at a time. That's the good news. But banks will still be able to get around many of these rules.
U.S. debt to reach 62% of GDP by year-end: CBO
Lower tax revenues and higher federal spending to fight the recession will push the federal debt to 62% of gross domestic product by the end of this year.
Fiscal 2011 could be hardest yet for states
Fiscal 2011 begins on Thursday for most states, which have turned to another round of cuts and tax increases to try to wipe out the gap. All states with the exception of Vermont must balance their budgets.
Dodd-Frank bill amended to change funding method
The sweeping Dodd-Frank bank reform bill was amended Tuesday by a joint House-Senate conference committee to change the way the bill is funded, in order to address the objections of several key Republican senators.

Blog
Is it 1937 again?
There are many commentaries on David Leonhardt's article today on whether we should be raising taxes and cutting government spending, as was done in 1937. Yet I don't see anyone -- at least not today -- talking about monetary policy during 1936-7.
Secondary Sources: Absent Recovery Engines, Growth Risks, 401(k)s
A roundup of economic news from around the Web.
Oops, they may have made the data up
Fraud can happen to anyone. But confirmation bias always make fraud easier.
City Unemployment Rates: Vegas Struggles, Washington on Top
Fifteen of the 49 largest cities in the U.S. saw year-over-year declines in their unemployment rates in May, according to new Labor Department data, even as the unadjusted national rate — at 9.3% — was 0.2 percentage points above its year-ago level.
2nd Half: Slowdown or Double-Dip?
No one has a crystal ball, but it appears the U.S. economy will slow in the 2nd half of 2010.
Recovery Faces Tough Road, Double Dip or Not
...both the data and the gloom pervading financial markets suggest the current recovery will be a long, painful process.
No Easy Way to Fix Social Security
Keeping Social Security just as it is means not doing a lot of other things that progressives want, because the pockets of the rich are not a bottomless resource.
Treating R&D as Investment, Rather Than Expense, Boosts GDP
If research and development costs were treated as an investment, rather than as an expense, gross domestic product would have been 2.7% higher between 1998 and 2007, according to updated figures released Wednesday.
American Austerity
Austerity is an expensive form of insurance against a true fiscal crisis. And though it doesn't necessarily seem like it when you're not having one, fiscal crises are much, much worse than austerity budgets. Fiscal crisis means that rather than unpleasant cuts, you have sudden, unmanageable collapses in things like public pension plans. The resulting suffering is not unpleasant; it is disastrous.

Research, Reports & Studies
CBO: The Long-Term Budget Outlook
Federal Debt Held by the Public Under Two Budget Scenarios
Consumer Confidence Plunged in June
Consumer confidence plunged 9.8 points in June, as consumers lost faith in both the pace and sustainability of the recovery. Expectations fell with fewer consumers expecting economic conditions to improve.
The Political Economy of the Subprime Mortgage Credit Expansion
The evidence suggests that both subprime mortgage lenders and subprime mortgage borrowers influenced government policy toward housing finance during the subprime mortgage credit expansion.
A Comparison of OMB's and CBO's Technical Assumptions Used in Estimating Defense Spending
Letter to the Honorable Nancy Pelosi
Missing the Point: Lessons from The Big Short
The book Big Short raises questions about the validity of the ideas underpinning the financial regulation legislation Congress is now considering.
Markets: The Credit Ratings Agencies
Can financial institutions instead be trusted to
seek their own sources of information about the creditworthiness of bonds, so long as financial regulators oversee the safety of those bond portfolios?

Graphic of the Day
Study Measures Impact Beyond the Jobless Rate as Pay Cuts and Furloughs Take Toll
See: 50 Dead-Simple Ways for the US to Cut Its Budget
See also: Total Nonfarm Payrolls
See also: The Facebook Economy

Economists’ Comments & Opinions
Financial Overhaul Is Politics in Worst Sense: Richard Posner
The most sensible legislative response to the financial collapse of September 2008 would have been to do nothing until the causes of the collapse were fully understood.
Obama's fiscal fantasyland
Responsible people, whether they are national leaders or average citizens, understand that both in their personal and public lives they cannot spend themselves into prosperity.
2010 mid-year review
Commentary: Where we've been and where we're going
Why Obamanomics Has Failed
Uncertainty about future taxes and regulations is enemy No. 1 of economic growth.
It's Time To Bring Back Jobs
The focus should be on better long-run policy, not more feeble short-term fixes.
A Big Bang for Greece
How did Greece get into the death spiral that it's in? Unfunded entitlements. In other words, promise somebody something, don't come up with the financing for it, and pretty soon you find yourself in a fiscal/debt crisis. What should Greece have done?
The Bailout Tax
CBO estimates that the bill's vaunted "Orderly Liquidation Authority," which is being sold as tough medicine for failing banks and their creditors, will cost taxpayers $20.3 billion between now and 2020.

Book Excerpts
"...entrepreneurship and competitiveness are two sides of the same coin: that entrepreneurial activity is always competitive and that competitive activity is always entrepreneurial..." -Israel Kirzner, Competition and Entrepreneurship (1973)

"Did You Know"
"Estimates of the size of the “informal sector” (i.e. the Black Market) in the US indicate that 9% of activity occurs in this sector.

The Western European average: 18%
Greece: 28.6%