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The ‘New Normal’ of High Unemployment
Daniel J. Mitchell
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.
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.
As you can see from the chart, below, of job creation during all post-World War II recoveries, there’s one period that stands out for having the worst performance. Take a wild guess which line includes the Obama years.
An Obama defender will argue that this chart is unfair because the recession began during the Bush years. Since there’s no significant difference between Bush’s policies and Obama’s policies, I don’t think that’s a strong defense, but let’s bend over backwards and instead look at job creation during the recovery periods, which is shown in the chart below.
These numbers are a bit more favorable (or less damning) to Obama, but you can see that job creation for this recovery has been far below the average. Indeed, it only surpasses Bush’s job numbers coming out of the 2001 recession.
I’m not surprised that the job numbers for both Bush and Obama are both dismal. As stated above, they both pursued a statist agenda (though a Bush defender doubtlessly will point out that unemployment didn’t drop that much in 2001, so it would have been impossible to have a strong post-recession bounce).
The real lesson to be learned is that we live in an era of higher taxes on productive activity, a heavier burden of government spending, and more costly government regulation and intervention. And since we’re now more like Europe, the “new normal” is to have weak European-style economic numbers.
View full post on Cato @ Liberty
Dead Crops, Extreme Drought And Endless Wildfires Are Now The New Normal In America
As you read this, the United States is experiencing the worst drought it has seen since the Dust Bowl days of the 1930s. As you read this, nearly half of all corn crops in the United States are in “poor” or “very poor” condition. As you read this, 38 major wildfires are ripping across the central and western United States. The brutal wildfires in Oklahoma have been so bad that they have made national headlines. The price of corn has hit a brand new record high this summer and so has the price of soybeans. More than half of all the counties in this country have been declared to be “natural disaster areas” by the U.S. Department of Agriculture at this point. Things are so bad for ranchers that the CEO of Smithfield Foods is projecting that meat prices will rise by “significant double digits” in the months ahead. Sadly, this drought is projected to continue throughout August and into September. As you will read about below, some meteorologists are even openly postulating that there may not be enough moisture to avoid another drought next year. Yes, things are really bad this year, but when you step back and take a look at the broader picture they become truly frightening.
According to the U.S. Drought Monitor, as of July 31st close to two-thirds of the continental United States was experiencing at least some level of drought….
Keep in mind that brown is “severe drought”, red is “extreme drought” and dark brown in “exceptional drought”.
This is truly a historic drought. We have never seen anything like this in modern times in the United States.
The week before, this is how the U.S. Drought Monitor described conditions in the center of the country….
“Over 90 percent of the topsoil was short or very short of moisture in Oklahoma, Kansas, Nebraska, Missouri, Iowa, Illinois, Indiana, and Ohio, with virtually all (99 percent) short or very short in Missouri and Illinois”
There had been some hope that rain would bring relief to farmers in the central part of the country, but instead things just keep getting worse and worse.
At this point, close to half of all corn being grown in the U.S. is either in “poor” or “very poor” condition.
For ranchers, the outlook is even more dismal. The following is from a recent CNN article….
Nearly three-quarters of the nation’s cattle acreage is now inside a drought-stricken area, as is about two-thirds of the country’s hay acreage, the agency reported.
What that means is that a lot of animals are being slaughtered now and the price of meat is going to be moving substantially higher later in the year.
The following is what the CEO of Smithfield Foods, Larry Pope, recently told the Financial Times….
Beef is simply going to be too expensive to eat. Pork is not going to be too far behind. Chicken is catching up fast. Are we really going to take protein away from Americans?
He also told the Financial Times that he expects meat prices to rise by “significant double digits”.
Those are very frightening statements.
The CEO of a major food company says that beef is going to “be too expensive to eat”?
That doesn’t sound good at all.
Meanwhile, this drought is absolutely devastating farmers and ranchers all over the United States….
“When I was a kid in the ’50s … it got real dry, but nothing like this,” said Marvin Helms, a 70-year-old farmer and rancher in central Arkansas who was compelled to sell his beef cattle after being short on feed.
His thousand acres of farmland near Arkadelphia include corn and soybeans, which Helms says is normally sufficient to sustain his family and provide for his cattle.
“We’ve got some insurance on the crops, but it’s not enough,” he said. “It will help, but it won’t pay the bills.”
Of course the federal government is going to step in and try to help these farmers and ranchers, but the truth is that the federal government is already drowning in debt. Any additional help will have to be done with more borrowed money.
It is hard to describe how oppressive the heat and the drought have been in the middle part of the nation this year. We have seen some unprecedented things happen.
For example, it got so hot in Oklahoma recently that it started melting the street lights.
Of course the main problem in Oklahoma right now is the horrible wildfires that are ravaging the state. The following is from a recent Chicago Tribune article about those fires.
Wildfires burned out of control on Friday in Oklahoma, destroying homes and shutting down highways in a state that has suffered 18 straight days of 100-plus degree temperatures and persistent drought.
Emergency officials counted 11 different wildfires around the state, with at least 65 homes destroyed in parched areas north and south of Oklahoma City and south of Tulsa.
Oklahoma joins several states that have been plagued by wildfires this summer, including Colorado, Arkansas and Nebraska. Fires are being fed by a widespread drought.
But these fires in Oklahoma are only part of a very distressing long-term trend. As I have written about previously, 6 of the 10 worst years for wildfires ever recorded in the United States have all come since the year 2000.
Another major change that we have seen is that massive dust storms called “haboobs” are becoming much more frequent in the southwest part of the country.
Just the other day, a dust storm that was approximately 2,000 feet high and nearly 100 kilometers wide ripped through the city of Phoenix, Arizona at 35 miles an hour.
Such events were once very rare in Phoenix.
But not anymore.
Meanwhile, much of the central and western United States is rapidly running out of water.
And I am not just talking about surface water.
A lot of the key aquifers that have allowed us to build cities and irrigate crops in the western half of the United States are being drained completely dry. The following is from a recent San Diego Union-Tribune article about what is happening in California….
Few places in Southern California is that more evident than the desert sands of Borrego Springs, where residents, farmers and golf course operators are sucking about four times as much water from the ground each year as nature replaces.
They’ve been pumping so hard for so long that the community’s main aquifer could essentially run dry after a few more decades. That’s a dire possibility: A recent study showed it would be prohibitively expensive to build a pipeline to an outside source.
Did you catch that last part?
The truth is that someday entire cities may have to be abandoned because it will be “prohibitively expensive” to build water pipelines stretching hundreds of miles to bring them water.
Sadly, this is not just happening in California. This kind of thing is going on all over the nation….
Similar concerns are bubbling up along San Diego County’s backcountry and across the nation — particularly in places such as the Central Valley and the Great Plains, where residents have dug deep to withstand a drought that has squeezed the nation’s midsection dry.
“It took Mother Nature in some cases thousands of years to accumulate the water in the aquifers, but we are pumping it out in mere decades,” said Robert Glennon, a law professor and water expert at the University of Arizona. “It’s a huge national and international problem. … It is utterly unsustainable and scary.”
I have previously written about how the largest underground water source in the United States, the Ogallala Aquifer, is being drained at an almost unbelievable pace. You can read my previous report about the Ogallala Aquifer right here.
So even when this summer ends our problems will be far, far from over.
But right now the most immediate concern is the condition of our corn and our soybeans.
Corn is found in about 74 percent of the products we buy in the supermarket, and it is used to feed livestock all over the country.
In addition, the United States exports more food to the rest of the world than anyone else does.
So if our crops fail that is a very big deal.
Right now, it is being reported that this drought “will likely cost the U.S. food export industry billions in lost revenue.”
Considering the fact that the “employment rate” in the United States is lower than it was during the last recession and that the U.S. economy is in the midst of a horrible long-term economic decline, this is the last thing that we need.
And what happens to all of the countries that are depending on us for food?
A recent Wired article had this startling headline….
“U.S. Drought Could Cause Global Unrest“
When people cannot feed their families, they tend to lose it.
Unfortunately, this year might just be the beginning.
According to a recent article in the Guardian, some scientists say that the drought has been so bad this year that it is going to take a “freak event” to avoid catastrophic damage to next year’s corn crops….
What matters now is whether there will be enough rain to get next year’s crops off to a good start.
“This drought isn’t going anywhere,” he said. “The damage is already done. What you are looking for is enough moisture to avert a second year of drought,” he said.
However, Svoboda conceded that might require a freak event, especially in the mid-west which has already passed its rain season. “In the entire corn belt, from Indiana to Nebraska to the Dakotas, we have already reached the maximum precipitation periods for year. From here on in, it’s all downhill,” Svoboda said.
“As far as widespread general relief for the whole region it would take a really freakish dramatic change to make that happen. That doesn’t appear to be in the cards, given the time of year we are in.”
The skies are dry and our fields are scorched.
Our crops our failing and millions of acres are burning.
Our groundwater supplies are being rapidly depleted and giant dust storms are sweeping across some of our major cities.
Welcome to the new normal.
It isn’t going to be pleasant.
View full post on The Economic Collapse
American • The New Normal of the Non-Recovery
April 11, 2012
The New Normal of the Non-Recovery
In "Americans Agree: There Is No Recovery," I highlighted a recent Washington Post-ABC News poll, noting that
no matter how you break it down — whether by party/ideology, household income, age, or any other category — the majority of Americans agree on one thing: there is no recovery.
But the fact that things haven’t returned to normal isn’t just a matter of (public) opinion. As the Globe and Mail’s Market Blog reveals in "These Are Bad Days for Garbage," the volume of waste being created nowadays essentially means that, despite persistent talk (from Wall Street, among others) of a renaissance in consumer spending, people are continuing to consume less and recycle more than they used to.
You might think that the business of hauling garbage is a stable industry that can thrive regardless of how the economy is performing. But although the solid waste industry is decidedly unglamorous – and unglamorous can be synonymous with defensive – waste is surprisingly exposed to the economy, making it as vulnerable to setbacks as swishy retailers and gold-plated banks.
And right now, Moody’s Investors Service is arguing that waste operators are in a tough spot. In a report, the credit rating agency cut the industry’s outlook to “stable” from “positive” and warned that low demand from consumers is colliding with weaker pricing from operators. That’s a sign that stocks could be stuck in (wait for it … ) the trash heap.
…
“The slow economic improvement has failed to generate meaningful growth in waste volumes, and the pricing discipline maintained by waste operators during the recession is beginning to fade,” said Bruce Herskovics, a Moody’s analyst, in a note. “We’re hearing that customers, particularly cash-strapped municipalities, are pushing back when contracts come up for renewal and we believe that operators are bidding more defensively to maintain accounts.”
Garbage gets tossed in good times and bad, of course, but the bad times generate considerably less of it. For example, Moody’s points out that waste volumes from U.S. construction and demolition sectors remain weak and are unlikely to rebound this year, offsetting some improvements in industrial waste.
And then there are the dreaded R-words. No, not recession – but rather reducing, reusing and recycling. Can you believe it? Mr. Herskovics points out that there has been a long-developing trend among consumers to avoid sending old junk to landfills, and that has played havoc with residential waste volumes.
Sounds like the "new frugality" of the Great Recession has become the new normal of today’s non-recovery.
http://www.financialarmageddon.com/
Statistics: Posted by yoda — Wed Apr 11, 2012 4:19 pm
View full post on opinions.caduceusx.com
Business • Anything But Normal
In "Lack of Lending to Creditworthy Borrowers Restricting Housing: Bernanke," HousingWire details remarks from the Fed Chairman on the state of the U.S. mortgage finance market.
Mortgage originators who are reluctant to extend credit to potential borrowers who meet underwriting standards set by Fannie Mae and Freddie Mac are hindering the nation’s economic turnaround.
Fed Chairman Ben Bernanke, speaking Friday at the International Builders Show in Orlando, Fla., said the wave of creditworthy households that are finding it difficult to obtain mortgage credit or to refinance is resulting in actions taken by the Federal Reserve — such as lowering interest rates to record lows — is helping to prevent a boost to the housing industry.
Fewer than half of lenders are offering mortgages to borrowers with a FICO score of less than 620 and a down payment of 10%, even though such loans are within the government-sponsored enterprises’ purchase parameters.
Bernanke referrenced a number of possibilities that could explain the reluctance.
He said that because borrowers are unable to obtain private mortgage insurance required by the GSEs, the weakened finances of private mortgage insurers could be damping mortgage credit availability for some potential borrowers. In other cases, lenders may be concerned about high servicing costs if mortgages become delinquent.
Another set of concerns relates to representations and warranties, which are contractual commitments by an originator concerning the quality of the loan.
The contracts are designed to protect the GSEs or other purchasers of loans, but originators appear uncertain about how they will be enforced going forward and thus have been very cautious about making loans that could be viewed as less than perfect from an underwriting perspective.
If Mr. Bernanke’s explanations are correct, that would suggest a key part of the U.S. financial system remains broken, putting paid to the notion set forth by Treasury Secretary Timothy Geithner (and others) that things are returning to normal.
Then again, there could be another explanation. Since interest rates represent the price of money and mortgage rates are near all-time lows, wouldn’t that indicate that the supply of loanable funds, including mortgages, far exceeds the demand? Based on the laws of economics — which I’m sure Mr. Bernanke is well aware of — wouldn’t that imply that qualified borrowers should have no problem getting a loan?
Unless, of course, you have a situation akin to that which exists in dysfunctional third world countries, where the "official" rates tend to be far different than those found in the shadow, or "black," economy. That, too, would indicate that current conditions are anything but normal (if history is any guide). It also suggests that that those who are relying on official statistics to assess the health of the economy may be making a serious mistake.
Either way, it’s hard to see how the current situation could be seen in anything other than a negative light, no matter how hard you spin it.
http://www.financialarmageddon.com/
Statistics: Posted by yoda — Fri Feb 10, 2012 10:09 pm
View full post on opinions.caduceusx.com