Initial unemployment insurance claims fell 34,000 to 388,000 for the week ending December 25th. The 4-week moving average of initial claims, a better indication of the underlying trend in labor markets, slipped to 414,000 from 426,500 the prior week….

Now for those of you unfamiliar with the end of the year in the United States, there’s this little holiday known as Christmas.  & with religious aspects aside, usually during Christmas in the US we see a great deal of increase employment due to need based solely upon Christmas cheer spending.  There are part time employees hired in all kinds of capacities such as catalog companies, larger retail stores, and even in restaurants as they see increased traffic as well.

Many actually interested in publishing accurate information, mentioned this repeatedly (article cont’d):

…This report needs to be viewed with a degree of caution given the significant volatility associated with the seasonal factors surrounding the Christmas holiday period and uncertainty as to whether these declines will be sustained….

Other accurate voices also noted another corollary; jobless claims drop for other reasons (here via ChicagoNow):

The national jobless rate for December dropped to 9.4% from 9.8% the previous month.  Unfortunately, the decline in jobless claims only dropped because 260,000 American job seekers stopped looking for employment last month,…

But you know - there’s reality & then there’s politics.  So many voices, quite pleased with a minor decrease of unemployment claims and quite willing to ignore the volatile season and other factors were ready to go to work.  After all, the numbers seem good for the President (here):

President Obama got some early New Year’s cheer Thursday — a positive report on jobless claims that increases the chances that next week will bring the first drop in the unemployment rate since June….

So why shouldn’t he market the glowing numbers on his website (here):

The number of Americans applying for unemployment benefits fell sharply last week, a positive sign that the U.S. job market is slowly improving….

With headlines everywhere reading this is the lowest rate in jobless claims since 2008 (here – they have pretty graphs too):

….The traditional interpretation suggests that the U.S. labor market, which has been a headwind for the economy, is improving as the economy slowly accelerates into the new year. New applications for unemployment assistance decreased by 34,000 to 388,000 (week ending December 25th). That is the lowest level since July 2008….

Prompting Mr. Obama himself to declare success (here via Bloomberg):

President Barack Obama said U.S. job growth is improving after a government report showed employers added 103,000 jobs last month and the unemployment rate fell to 9.4 percent in December from 9.8 percent in November.

In his weekly radio and Internet address, Obama today credited steps taken by his administration to reduce taxes and encourage business investment with helping to restore economic confidence and boost hiring….

The problem is that none of this matches reality. As was noted by many when the unemployment numbers were looking just great…. some employees stopped looking for jobs altogether and others were hired only for seasonal work. So the natural uptick is here via The Street:

The number of Americans filing unemployment claims unexpectedly rose last week, the Labor Department said early Thursday….

Don’t misunderstand, even with the uptick in jobless claims, there are still things that seem positive overall (article cont’d):

The four-week moving average in initial claims, which smoothes the volatility in week-to-week reports, was 416,500, an increase of 5,500 from the previous week’s revised average of 411,000….

Irregardless of what politicians and pundits say (even Nobel Prize winning ones), no matter how many people, no matter their collective resumes or IQs, no matter their fervor, and even for POTUS, or the Chair of the Fed Reserve, or their positions in life don’t matter to the two, very real things we actually know:

1) It’s too early to tell whether the volatility of the recent holiday season will or does have any impact on unemployment trends as a whole.

2) Even if the trend holds and the President claiming credit turns out to be prescient versus premature, let’s not forget.  We spent 1 trillion more dollars to keep the unemployment rate below 8% & by 2011, it should be around 7% (here via DA):

As all politicians told us not too long ago, without passing several “stimulus” bills quickly… way too quick to read (anyone remember the Patriot Act?), everyone would soon be looking for jobs as unemployment sky rockets.  Remember the 1.5 million jobs that would be saved?

So in the end, time will tell us what we know: increased regulations and taxes strangle business and decrease job growth and economic output.

For now, just remember the people telling you how great US economics are trending and how responsible their policies are for these successes are still a mile behind where they told us we’d be just a couple years ago.  As one other thing we do know, we’re still doing worse off than the government told us we would be doing had they one absolutely nothing (~10% higher UE than they predicted).

& when noting the fact that the stimulus they begged for and got; things make it look that much worse as we’re about ~50% higher than the government prediction:

Source: Michael’s Comments blog

According to the Congressional Budget Office, extending all the Bush tax cuts would add $2.3 trillion to the total 2018 debt. The single biggest step our government could take this year to address the structural deficit would be to let the tax cuts expire. Such a credible commitment to long-term fiscal sustainability should reduce interest rates today, helping to stimulate the economy….

According to Mr. Johnson, even though critics say letting the tax cuts expire would retard growth, that money could be used more effectively (he continues):

…If the goal is to boost growth and employment immediately, it would be better to let the tax cuts expire and dedicate some of the increased revenue to real stimulus programs…

You mean, stimulus programs like “Cash for Clunkers” (NBER working paper here)?

…Our empirical strategy exploits variation across U.S. cities in ex-ante exposure to the program as measured by the number of “clunkers” in the city as of the summer of 2008. We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended….

Or how about the stimulus plan we were told would keep unemployment rates to 8% (DA Post here), while they currently hover around 10% (here):

…in August, and the unemployment rate was about unchanged at 9.6 percent, the U.S. Bureau of Labor Statistics reported today.

Or…maybe the government takeover/purchase of GM (post here):

…in reality, the US Treasury through pressure by the Obama administration spent $50 billion dollars to own 61% of the shares.  With roughly 500 million shares available, this means the US government current owns 305 million shares.  At the current stock price today of .375 dollars, their 50 billion dollar investment is worth roughly 115 million dollars….

Or maybe controlling healthcare costs by passing a bill no one understands…. which has already started failing as insurers have already started raising rates more than goverment predictions (post here):

…The economics and logic of these required rate increases are undeniable.  If someone, in this case the government through force of law, tells a private business that they must increase their spending, under force of law, some, if not all, of those new expenditures will be passed on to consumers…

So to sum up Mr. Johnson, even though evidence, extremely recent evidence, demonstrates what economic thinkers have told us for centuries:  government can not create jobs – the problem doesn’t lie with government spending, but instead in allowing people to keep their own money.

I don’t know when we start understanding what Albert Einstein expressed so eloquently so many years ago, “The definition of insanity is doing the same thing over and over again and expecting different results.” but let’s hope it’s soon.

For more, excellent Cato article The Stimulus: The Government Job Creation Myth

…A CNN poll last week found that only 25 percent of Americans want Congress to pass a health-care bill similar to the one it has been working on for the past year, while 73 percent say Congress should either start from scratch or not pass health-care legislation at all (other polls show support for the bill in the low 40s). …

The White House is once again, on a media blitz to prove the administrations’ efficacy and job one is selling the idea the simulus worked.  While they have seemed keen enough to not discuss actual housing or job numbers, but instead spend time on nebulous items such as “saved jobs“, they are nonetheless telling us with great frequency what the stimulus did for us.

Vice President Joe Biden (here via ABC News):

Vice President Joe Biden said today that it is “taking a while” for the nation’s economy to “get out of this ditch” but credited the Obama Administration’s stimulus legislation, enacted one year ago, for laying a foundation for long-term economic growth. …

As well as President Obama himself (here via USA Today):

President Obama credits the one-year-old economic stimulus legislation with staving off a second depression …

The President even sent high level officials all over the country to prove the stimulus worked.  In one case, they used construction for residential housing to spotlight the great work the stimulus package has done for Cincinnati (here via Cincinnati.com).

With unemployment numbers continuing to rise (UE Rate for January 2010 10.6%)

& defaults on existing mortgages doing the same (here via Reuters):

…More than 8 percent of homeowners were behind 30 days or more on their mortgage loans, up 4.4 percent from December 2009 and 21 percent from last January…

& just like the last media blitz the White House went on to prove the stimulus was working (here via DA), they have spent approximately 34% of the money they claimed to need originally (here via ProPublica).  Combining the money spent and tax cuts approved listed on Recovery.gov they find:

…the government has now moved at least $272 billion into the economy, or 34 percent of the total amount approved by Congress last February….

So there you have it.  Successful stimulus program is now defined as a jobless, homeless, shaky recovery, for which the majority of the money requested has yet to have been spent.

• Proving once again that fascism isn’t just a word, Italy (here via Economist) gave three Google executives six-month suspended sentences for “allowing a clip of an autistic boy being bullied to be viewed on Google Video, which the judge said broke Italy’s privacy laws. “

Just to clarify, I’m not pro-autistic-bullying and would think a civil trial isn’t out of the question, but jail?

• Fannie Mae needs more cash, but just 15 billion… from the taxpayer of course (here via RTTN News).   Seems like people might not agree with this (here via WSJ):

The Obama administration’s decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday….

Probably why the decision was made over the holidays.

• Crazy fundamentalists blame the Golden Girls for homosexuality (here via ChristWire).

• Democrats & President Obama, all firmly against the Patriot Act after signing it, vote to  prevent all measures from lapsing (here via Wired) for the next full year.

• Harvard intellectual tells us why allowing corporations to spend money on politics is bad (here):

…To understand why, it is important to focus on the individuals who make decisions for companies. When corporations decide which politicians to support, what kind of messages to send, and which political outcomes to seek, their general investors are not consulted. Rather, such decisions are likely to reflect the preferences and objectives of the insiders who manage the companies, ostensibly on shareholders’ behalf….

A little interlude for a thought experiment.  Change which politicians to support and which political outcomes to seek to which charities to support and which cultural outcomes to seek.  Or try reality and change it to, which lobbyists to support and which regulatory outcomes to seek.  But of course, he defines the problem for us:

…And politicians that benefit from corporate spending and access to corporate resources will have an interest in serving the insiders’ preferences and objectives….

Which presupposes politicians already don’t have this interest, presumes it will get much worse, and last, but not least; for spending to have any affect at all, voters have to be swayed to vote against their interests.

It seems the default assumption of every perceived risk these days is simply this:  there can never be too many laws when trying to protect people from themselves.

• CalTech researchers say the brain is wired for equality (here):

…Specifically, the team found that the reward centers in the human brain respond more strongly when a poor person receives a financial reward than when a rich person does. The surprising thing? This activity pattern holds true even if the brain being looked at is in the rich person’s head, rather than the poor person’s….

Oddly enough, the Freakanomics blog posted this with little comment (here) proving environmental factors such as working for the NY Times can affect even innovative economists.  I’ll admit there might be more, but from what they’ve shown, the results do not necessarily say anything about equality at all.  A perfectly reasonable answer is one of need: a rich person doesn’t need a windfall as much as a poor person.

CalTech’s reasoning:

…It’s long been known that we humans don’t like inequality, especially when it comes to money. Tell two people working the same job that their salaries are different, and there’s going to be trouble…

Conflating the thinking that comes with social status and worth when compared to colleagues and equality of results.  It could be in a lot of cases, the person making less might think they work harder and deserve more, not equal.

• & finally, via the Hill.  Did Nanci Pelosi really say that

…”They’ve had plenty of opportunity to make their voices heard,” she said on CNN’s “State of the Union” Sunday morning. “Bipartisanship is a two-way street. A bill can be bipartisan without bipartisan votes. Republicans have left their imprint.”…

]]> http://detailedabstractions.com/2010/03/01/infinite-monkey-theorems-20100301/feed/ 0 http://detailedabstractions.com/2010/03/01/housing-recovery/?utm_source=rss&utm_medium=rss&utm_campaign=housing-recovery http://detailedabstractions.com/2010/03/01/housing-recovery/#comments Tue, 02 Mar 2010 01:10:20 +0000 Michael S. Langston http://detailedabstractions.com/?p=818 According to many reports from recent “economist” we are on are way.  Starting with the “Sage” Warren Buffet (here via Calculated Risk) arguing that supply has dropped below demand, which effectively will balance out the system:

…Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us…

The NY Times  (here):

After a plunge lasting three years, houses have finally become cheap enough to lure buyers. That, in turn, is stabilizing prices, generating hope that the real estate market is beginning to recover….

& Our trusted Federal Reserve Chairman Ben Bernake (here via CNBC):

Federal Reserve Chairman Ben Bernanke told lawmakers Tuesday he expects the downtroddenU.S. housing sector to improve by the end of the year, a senator who participated in the closed-door meeting said….

At first, this might seem like some sort of an agreement, however there is one stark difference.  Mr. Buffet spoke in February 2010, the NY Times piece is from July 2009, & Mr. Bernake spoke in February 2008.

The timing of the statements is instructive, as each was based upon changes in supply and demand.  The problem all had in their given time frames appears to be the same – you simply can’t count on economic activity trending when the growth was due to temporary incentives from the federal government.

As with Cash-for-Clunkers (here), Cash-for-Appliances (here), and recent tax breaks and money for lending, Cash-for-Homes will fail as well.  A temporary relief program will only provide temporary relief and is already showing signs of weakness.  From WaPo (here):

…Even as the housing market shows signs of improvement, including in new data released Tuesday, economists warn that it could take up to a decade for many homeowners to regain equity in their homes, while some people in the hardest-hit regions of the country may not see a recovery during their lifetime. …

CNBC (here):

The recent slump in housing is making some analysts uneasy about a recovery that many thought sustainable just a couple months ago and comes at a time when the Federal Reserve is nearing the end of a critical, year-long program to support the mortgage market….

& Time (here):

For a while there, it seemed the housing market had made the turn to recovery. Housing sales were up in nearly every month in 2009. But today it looks like real estate is headed back down again…

Delaying the inevitable will just make the pain worse.