Saturday, July 18, 2009

Obama's Bad Bill Syndrome

A disturbing pattern is beginning to emerge with respect to President Obama's relationship with Congress and the American people. It seems that he prefers bad legislation to no legislation, For example he supported the stimulus bill that was weighed down with the Democratic Party's 28 year wish list, but really offered little or no near term stimulus for the economy. He could have exercised leadership, but chose not to. A similar thing happened with the cap and trade energy bill that passed the House. That bill is a long way from an ideal carbon tax and for that matter a pure cap and trade system. Instead of charging for carbon emissions, it mostly gives away licenses to pollute for favored industries and penalizes the unfavored oil refineries. Should it pass in its current form, refineries will close and the U.S. will import even more gasoline and worse it will be a bonanza for Washington lobbyists seeking to bend the permit system in their favor.

Indeed the same syndrome is playing out with the health care bill. As the CBO noted it does nothing for cost control and, in fact, it increases health care costs for both government and the economy as a whole. President Obama surely wants the glory of presiding over national health care legislation, but he fails to realize that a bad bill will soon cause most American to look back with nostalgia at the system we now have. As the good Doctor Hippocrates once said, "do no harm." Bad bills do lots of harm.

Thursday, July 16, 2009

Strange Claims Data Offer Hope of Recession's End

The Labor Department (DOL) reported that new unemployment claims declined to 522k for the week ended July 11 down 47k from the prior week. These data are well below the 650k peak reported in the Spring. DOL noted that the seasonal adjustment factors could be completely out of whack because major auto lay-offs took place in April and May rather than July thereby rendering the seasonals less than accurate. In fact unadjusted claims actually increased by 86k for the week.

Nevertheless with two weeks of claims below 600k it is quite possible that on a GDP basis the recession might have ended this month. In terms of the labor market the recession is still far from over. Although layoffs might be waning, employers remain on strike with respect to hiring.

Friday, July 3, 2009

In the Washington Post, "Job Losses Dampen Hopes for Recovery," July 3

"This sprayed some Round-Up on the green shoots," said David Shulman, a senior economist at the UCLA Anderson Forecast, using a metaphor for signs of economic improvement that Federal Reserve Chairman Ben S. Bernanke popularized in the spring.
"The economy is in the process of bottoming, but that's different from saying it's recovering," Shulman said.

Full story at

Thursday, July 2, 2009

No Shock in Job Numbers

The payroll number was no real surprise. The job losses occurred because there was a slowdown in the seasonal hiring college and high school graduates for summer and full-time employment. As someone who is associated with three universities, it was patently obvious to me that the normal hiring of college graduates did not take place this year. Hence when the data went through the seasonal meat grinder of the BLS it showed up as job losses. See post below.