Tag: unemployment

The Fed: ObamaCare “Leading to Layoffs”

The Hill has the story:

The Federal Reserve on Wednesday released an edition of its so-called “beige book,” that said the 2010 healthcare law is being cited as a reason for layoffs and a slowdown in hiring.

“Employers in several Districts cited the unknown effects of the Affordable Care Act as reasons for planned layoffs and reluctance to hire more staff,” said the March 6 beige book, which examines economic conditions across various Federal Reserve districts across the country.

Or in other words, yes, ObamaCare will eliminate some 800,000 jobs.

America Does Not Have a ‘Genius Glut’

On Friday, Ross Eisenbrey of the Economic Policy Institute wrote an op-ed in the New York Times titled “America’s Genius Glut,” in which he argued that highly-skilled immigrants make highly skilled Americans poorer. 

A common way for highly-skilled immigrants to enter the United States is on the H-1B temporary worker visa. 58 percent of workers who received their H-1B in 2011 had either a masters, professional, or doctorate degree. The unemployment rate for all workers in America with a college degree or greater in January 2013 is 3.7 percent, lower than the 4 percent average unemployment rate for that educational cohort in 2012. That unemployment rate is also the lowest of all the educational cohorts recorded. 

Just over half of all H-1B workers are employed in the computer industry. There is a 3.9 percent unemployment rate for computer and mathematical occupations in January 2013, and an unemployment rate of 3.8 percent for all professional and related occupations. For selected computer-related occupations from the Bureau of Labor Statistics’ “Quarterly Census of Employment and Wages,” real wage growth from 2001 to 2011 has been fairly steady:   

 

 11 percent of H-1B visas go to engineers and architects but wage growth in those occupations has been fairly steady too:

 

Mr. Eisenbrey concludes that those rising incomes would rise faster if there were fewer highly-skilled immigrants. 

The unemployment rates for engineers and computer professionals are low but not as low as they used to be. There are a whole host of factors explaining that, but highly-skilled immigration is not likely to be one.  

The ‘New Normal’ of High Unemployment

I almost feel sorry for the Obama administration’s spin doctors. Every month, they probably wait for the unemployment numbers from the Bureau of Labor Statistics with the same level of excitement that people on death row wait for their execution date.

This has been going on for a while, and today’s new data provide another good example.

As the chart below indicates, the White House promised that the unemployment rate today would be almost 5 percent if we enacted the so-called stimulus back in 2009. Instead, the new numbers show that the jobless rate is 7.9 percent, almost 3.0 percentage points higher.

Obama Unemployment

I enjoy using this chart to indict Obamanomics, in part because it’s a two-fer. I get to criticize the administration’s economic record, and I simultaneously get to take a jab at Keynesian spending schemes.

What’s not to love?

That being said, I don’t think the above chart is completely persuasive. The White House argues, with some justification, that these data simply show that they underestimated the initial severity of the recession. There’s some truth to that, and I’ll be the first to admit that it wouldn’t be fair to blame Obama for a bleak trendline that existed when he took office (but I will blame him for continuing George W. Bush’s policies of excessive spending and costly intervention).

That’s why I think the data from the Minneapolis Federal Reserve are more damning. They show all the recessions and recoveries in the post-World War II era, which presumably provides a more neutral benchmark with which to judge the Obama record.

A Four-Picture Indictment: Final Pre-Election Jobs Report Is Not Good News for Obama

In some sense, President Obama is fortunate. I predicted a long time ago that he would win re-election if the unemployment rate was under 8 percent.

Well, the new numbers just came out and the unemployment rate is 7.9 percent.

So even though his stimulus failed, and even though his class-warfare tax policy is like a dark cloud over the economy, and even though his plans to further increase the burden of government spending will accelerate America’s descent into a Greek-style fiscal quagmire, he may dodge the proverbial bullet.

You can see my latest election prediction by clicking here, and you can even cast a vote in my reader poll. But let’s set aside the crystal ball nonsense and focus on public policy.

Below are four images that summarize Obama’s dismal performance.

We’ll start with a chart showing what President Obama claimed would happen to unemployment if we enacted his so-called stimulus compared to the actual real-world results.

As you can see, the joblessness rate currently is more than 2.5 percentage points higher than Obama claimed it would be if we implemented his Keynesian plan.

Now let’s look at some updated images of how this “recovery” compares to previous recoveries in the past six decades, based on data from the Minneapolis Federal Reserve Bank. We’ll start with the unemployment rate. Take a wild guess which president has presided over the red line at the bottom.

Previously, I’ve compared Obamanomics and Reaganomics,but this image may be even better because it shows all business cycles and confirms that the Obama years have been the worst in post-World War II history.

And we see something similar if we look at GDP growth. Once again, go out on a limb and guess who is responsible for the weakest recovery since World War II.

Last but not least, this info-graphic is a bit dated, but Obama’s dismal track record would not change if we added the past few months of data.

Defenders of the White House argue that all these bad numbers are a legacy of the dismal situation that Obama inherited. That’s partially true. Obama should not be blamed for the depth of a recession that began before he took office.

But he should be held at least somewhat accountable for an anemic recovery—particularly since he promised “hope” and “change” and then continued the big-spending, pro-cronyism policies of the Bush years.

The moral of the story, needless to say, is that free markets and small government are the keys to growth and prosperity.

France to Ban School Homework

Let’s say that you are a newly-elected French president and you have a lot on your plate. The unemployment rate is 10.2 percent and youth unemployment hovers around 23 percent. The budget deficit is 4.5 percent of the GDP and the explicit national debt 90 percent of the GDP. Your economy is at a standstill and your currency is on the verge of collapse. Many of your most productive people wonder if they should pack up and leave, because you have just asked them to fork over 75 percent of their earnings to the taxman. Your popularity is shrinking faster than you can say sacre bleu! So, what do you do?

Easy. You switch the subject and start talking about something completely different …  even if it is, well, a little crazy.

Thus, “French President François Hollande has said he will end homework as part of a series of reforms to overhaul the country’s education system. He doesn’t think it is fair that some kids get help from their parents at home while children who come from disadvantaged families don’t.”

Better that all children suffer, so long as they suffer equally. Equality of misery—that pretty much sums up socialist mentality everywhere.

An Alleged Decline in Economic Mobility and Arthur Brooks’s ‘47 Percent Solution’

A Wall Street Journal article by Arthur C. Brooks, president of the American Enterprise Institute, urges presidential candidate Mitt Romney to acknowledge two “simple facts” about income inequality. One is that “low-income Americans are struggling,” which is surely true by definition. The second is that “economic opportunity is declining.” The author scolds the Republican convention for being too cheerful about the facts, as though Romney never mentioned shrinking median income, or high poverty and unemployment.

That second “simple fact” (declining opportunity) is not simple and not a fact. When Mr. Brooks asserts that opportunity is declining, he means “mobility” supposedly declined before 2006 according to one source—a 12-page brief by Katharine Bradbury of the Boston Fed.   But “mobility” is not at all the same as “opportunity,” because studies of this sort treat downward mobility the same as upward mobility. Bradbury is troubled by people making fewer big leaps from one fifth (quintile) to another, which Mr. Brooks likewise defines as declining opportunity; yet her data cannot distinguish ups from downs.

What is ostensibly being measured is the percentage of people in each fifth (quintile) of the income distribution who spend five or six years out of 10 in either the “same or adjacent” quintile. Bradbury compares three 10-year periods: 1976 to 1986, 1986 to 1996, and 1996 to 2006 and finds 27.4 percent remained in the poorest quintile during the earliest period and 25.9 percent in the most recent 10 years.  Since that suggests increasing mobility for the poor, she switches to emphasizing how many remained in either the same “or adjacent” quintile. This permits Bradbury to argue that those in the poorest or richest quintiles “did not move very far.”

Switching to “adjacent” quintiles means anyone in the top or bottom quintile would have to leap all the way to the middle to be counted as having moved at all. Since those at the bottom or top can only move in one direction, Bradbury therefore finds (of course) that for “those in the poorest or richest quintile… mobility is quite low.” People in other quintiles can move either up or down, so their “mobility” appears higher by this peculiar definition, particularly during severe recessions.

It is unsurprising that there was greater movement (up and down) between adjacent income groups in 1976-86, since that period included nasty inflationary recessions in 1980-82, followed by four years of 4.8 percent economic growth. The 1986-96 period, by contrast,  experienced a barely measurable slump in 1991, while 1996-2006 included the exhilarating tech boom of 1997-2000 and the perilous housing boom of 2004-2006. When the economy is rising steadily there is less risk of falling to a lower quintile, hence less movement (aka “mobility”). Since Brooks and Bradbury define income  stability as “declining opportunity,” they would presumably define 1929-33 or 2008-2009 as periods of rising opportunity.

A more serious study of income mobility by Treasury economists Gerald Auten and Geoffery Gee in the June 2009 National Tax Journal found,  “considerable income mobility in the U.S. economy over the 1987–1996 and 1996–2005 periods. Consistent with prior mobility studies, the data show that over half of taxpayers moved to a different income quintile and that roughly half of taxpayers who began in the bottom income quintile moved up to a higher income group by the end of each period. By contrast, those with the very highest incomes in the base year [the top 1 percent] were more likely to drop to a lower income group and the median real income of these taxpayers declined in each period. Economic growth resulted in rising incomes for most taxpayers over both time periods.” The largest percentage increases in real incomes were for those initially in the lowest income groups, while the most dramatic downward mobility was among those who had briefly occupied the top 1 percent.  This evidence is consistent with my own work showing that rising income shares for the top 1 percent have been associated with falling poverty rates and vice-versa.

Another Month of Data Re-Confirms Obama’s Horrible Record on Jobs

Remember back in 2009, when President Obama and his team told us that we needed to spend $800 billion on a so-called stimulus package?

The crowd in Washington was quite confident that Keynesian spending was going to save the day, even though similar efforts had failed for Hoover and Roosevelt in the 1930s, for Japan in the 1990s, and for Bush in 2008.

Nonetheless, we were assured that the stimulus was needed to keep unemployment from rising above 8 percent.

Well, that claim has turned out to be hollow. Not that we needed additional evidence, but the new numbers from the Labor Department re-confirm that the White House prediction was wildly inaccurate. The 8.2 percent unemployment rate is 2.5 percentage points above the administration’s prediction.

Defenders of the Obama administration sometimes respond by saying that the downturn was more serious than anyone predicted. That’s a legitimate point, so I don’t put too much blame on the White House for the initial spike in joblessness.

But I do blame them for the fact that the labor market has remained weak for such a long time. The chart below, which I generated this morning using the Minneapolis Fed’s interactive website, shows employment data for all the post-World War II recessions. The current business cycle is the red line. As you can see, some recessions were deeper in the beginning and some were milder. But the one thing that is unambiguous is that we’ve never had a jobs recovery as anemic as the one we’re experiencing now.

Job creation has been extraordinarily weak. Indeed, the current 8.2 percent unemployment rate understates the bad news because it doesn’t capture all the people who have given up and dropped out of the labor force.

By the way, I don’t think the so-called stimulus is the main cause of today’s poor employment data. Rather, the vast majority of that money was simply wasted.

Today’s weak job market is affected by factors such as the threat of higher taxes in 2013 (when the 2001 and 2003 tax cuts are scheduled to expire), the costly impact of Obamacare, and the harsh regulatory environment. This cartoon shows, in an amusing fashion, the effect these policies have on entrepreneurs and investors.

Postscript: Click on this link if you want to compare Obamanomics and Reaganomics. The difference is astounding.

Post-postscript: The president will probably continue to blame “headwinds” for the dismal job numbers, so this cartoon is definitely worth sharing.

Post-post-postscript: Since I’m sharing cartoons, I can’t resist recycling this classic about Keynesian stimulus.