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New statistics from the Labor Department today (Friday) will likely confirm that the U.S. economy is in a deeper hole than previously thought.
Economists expect that the national unemployment rate rose to 10.1% in January from 10% in December. More importantly, however, the number of jobs lost from April 2008 to March 2009 will be revised upwards by 824,000 - the largest margin in 18 years, according to Bloomberg News.
Most of those losses came from companies that closed or went out of business, which would undermine the popular birth/death model for joblessness. That model is based on the assumption that hirings at newly formed companies generally offset the job losses associated with company closures.
Economists expect that the national unemployment rate rose to 10.1% in January from 10% in December. More importantly, however, the number of jobs lost from April 2008 to March 2009 will be revised upwards by 824,000 - the largest margin in 18 years, according to Bloomberg News.
Most of those losses came from companies that closed or went out of business, which would undermine the popular birth/death model for joblessness. That model is based on the assumption that hirings at newly formed companies generally offset the job losses associated with company closures.
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The revision is reflective of the austerity of the jobless recovery that has plagued the average American while helping return many companies to profit. The U.S. unemployment rate peaked at 10.2% in October, but for months it has lingered in double-digits. And economists expect it to remain there for much of 2010.
Adding to the somber tone permeating the labor market, the number of workers filing for first-time jobless benefits unexpectedly rose last week.
There were 480,000 initial jobless claims filed in the week ended Jan. 30. That's the highest level since Dec. 12 and up 8,000 from an upwardly revised 472,000 the previous week. The four-week moving average of initial claims, which smoothes out volatility, was 468,750, up 11,750 from the previous week's revised average of 457,000.
"The latest figures are clearly concerning, as they raise the possibility that claims are stabilizing at a high level," Abiel Reinhart, economist at JPMorgan Chase & Co. (NYSE: JPM) told The Wall Street Journal.
The Obama Administration's budget plan calls for $100 billion in additional stimulus spending as part of a new jobs package, including $61 billion to extend for one year the administration's "Making Work Pay" tax credit, which provided $400 to individuals and $800 to couples. And on Tuesday the U.S. President issued a proposal to provide community banks with $30 billion to increase lending to small businesses.
The new lending program aims to invest $30 billion in 8,000 banks to provide loans to businesses ready to hire new workers. Funding for the program would come from money returned by large banks to the government's Troubled Asset Relief Program (TARP), and would require Congressional approval.
While these measures could alleviate some of the strain stemming from the dour labor market, they're mainly a political measure aimed at generating populist support in the run up to the midterm elections.
"I don't know anybody in business who hires an employee because they will get a tax break," one Democratic lawmaker told MarketWatch. "They hire employees because they have work to do."
News and Related Story Links:
Adding to the somber tone permeating the labor market, the number of workers filing for first-time jobless benefits unexpectedly rose last week.
There were 480,000 initial jobless claims filed in the week ended Jan. 30. That's the highest level since Dec. 12 and up 8,000 from an upwardly revised 472,000 the previous week. The four-week moving average of initial claims, which smoothes out volatility, was 468,750, up 11,750 from the previous week's revised average of 457,000.
"The latest figures are clearly concerning, as they raise the possibility that claims are stabilizing at a high level," Abiel Reinhart, economist at JPMorgan Chase & Co. (NYSE: JPM) told The Wall Street Journal.
The Obama Administration's budget plan calls for $100 billion in additional stimulus spending as part of a new jobs package, including $61 billion to extend for one year the administration's "Making Work Pay" tax credit, which provided $400 to individuals and $800 to couples. And on Tuesday the U.S. President issued a proposal to provide community banks with $30 billion to increase lending to small businesses.
The new lending program aims to invest $30 billion in 8,000 banks to provide loans to businesses ready to hire new workers. Funding for the program would come from money returned by large banks to the government's Troubled Asset Relief Program (TARP), and would require Congressional approval.
While these measures could alleviate some of the strain stemming from the dour labor market, they're mainly a political measure aimed at generating populist support in the run up to the midterm elections.
"I don't know anybody in business who hires an employee because they will get a tax break," one Democratic lawmaker told MarketWatch. "They hire employees because they have work to do."
News and Related Story Links:
- Bloomberg:
824,000 Jobs Will Disappear on February Fifth.
- Money Morning:
Obama Aims to Spur Small Business Hiring With $30 Billion Lending Program. - Money Morning:
Jobless Recovery Category
- Money Morning:
Latest Unemployment Numbers Prove There's No Easy Way Out of a "Jobless Recovery". - Money Morning:
Number of the Day: At 84,000, Private-Sector Job Losses For December Are Less Than Expected.
- Money Morning:
Obama's Budget Adds $1 Trillion in Taxes, Balloons Federal Deficit. - MarketWatch:
Hiring credit may face uphill climb in Congress
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Tags: Economic Recovery, Financial Crisis, Jason Simpkins, Jobless Claims, Jobless Recovery, U.S. Unemployment
What recovery?
If we were smart we'd be protecting key US industries so that jobs could be replaced, we'd establish a voucher system (initially) for First-World goods that won't undermine our standards of living, we'd tax high-income earners and levy a transaction tax on derivatives trading (patriots pay their taxes in times like these), we'd pull out of Iraq and Afghanistan and we'd pay China back. Keynesian economics has been unfairly discredited by neo-liberals and Americans have paid the price. We need to take drastic measures IMMEDIATELY in order to avoid slipping into second-world status.
We cannot spend our way out of this recession without creating a huge mountain of GDP that is no more than landfill. We are creating a monumental environmental disaster fueled by a US dollar that will soon be as valuable as ther Dmark at the end of WW2.
Perhaps it is time to realize that consumerism is dead and we have to look towards less consumption, a shorter work week, more quality and a society built by smaller, local banks and new small businesses supplying custom made products. The technology is available to create custom products at the same cost as mass production. Therefore, instead of producing a million units and sending 50,000 unsold items to the dump, we can produce 950k and sell them all.
In this way, we can provide everyone with a job and products will be better and cheaper, because we do not have to pay for the removal of excess goods, transportation, dumping and the cost of new landfill sites.
The natural resources will be cheaper, because we are not wasting them. Health-care costs will plummet because we will have major reductions in car related injuries due to higher safety standards. We already have cars that can hit a wall at high speed and the driver can walk away uninjured. Unfortunately they are only for the rich.
I always remember what the general manager said to me when I asked why our company paid 25% higher wages than every other company and still managed to be number 1 in the industry.
"People spend 50% of their time working productively, 25% making mistakes or taking unauthorized breaks and another 25% correcting their mistakes. If you pay someone $40 per hour, you are actually paying $80 for productive time.
We pay $50 per hour for people, who are always productive, so we are saving $30 per hour and our staff are happy. We also get 40 hours of production instead of 20 per week. Additionally, we have a low staff turnover and less training costs"
In essence, everyone can have more with a shorter work week, because we will not have to pay for the production and disposal of garbage, which the consumerists are proud to call GDP.
I'm sorry… but who is the 'we'?
It does not seem making the United States a better place to produce goods is a high priority. Until that time expect unemployment to be high. We cannot mine, forest, or produce manufactured goods. We do not even want to drill. We all cannot sit around in a government office or flip hamburgers for a living.