• Facebook
  • Twitter
  • Subscribe
  • RSS

Solid Jobs Growth For February, But Shadows Remain Hovering Over The Economy

Now Hiring Sign

After a lackluster jobs report for January and news that the economy had grown at a meager one percent in the final quarter of 2015, February’s jobs report was much anticipated by economic analysts and by political analysts alike. As it turns out, the jobs market was far stronger in the second month of the year, suggesting that January may well have been an anomaly:

Total nonfarm payroll employment increased by 242,000 in February, and the unemployment rate was unchanged at 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in health care and social assistance, retail trade, food services and drinking places, and private educational services. Job losses continued in mining.

Household Survey Data

In February, the unemployment rate held at 4.9 percent, and the number of unemployed persons, at 7.8 million, was unchanged. Over the year, the unemployment rate and the number of unemployed persons were down by 0.6 percentage point and 831,000, respectively. (See table A-1.)

Among the major worker groups, the unemployment rates for adult men (4.5 percent), adult women (4.5 percent), teenagers (15.6 percent), Whites (4.3 percent), Blacks (8.8 percent), Asians (3.8 percent), and Hispanics (5.4 percent) showed little or no change in February. (See tables A-1, A-2, and A-3.)

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 2.2 million in February and has shown little movement since June. In February, these individuals accounted for 27.7 percent of the unemployed. (See table A-12.)

(…)

Total nonfarm payroll employment increased by 242,000 in February. Job growth occurred in health care and social assistance, retail trade, food services and drinking places, and private educational services. Mining employment continued to decline. (See table B-1.)

Health care and social assistance added 57,000 jobs in February. Health care employment increased by 38,000 over the month, with job gains in ambulatory health care services (+24,000) and hospitals (+11,000). Over the past 12 months, hospitals have added 181,000 jobs. In February, employment rose by 19,000 in social assistance, mostly in individual and family services (+14,000).

Retail trade continued to add jobs in February (+55,000). Employment rose in food and beverage stores (+15,000) and other general merchandise stores (+13,000). Retail trade has added 339,000 jobs over the past 12 months.

Food services and drinking places added 40,000 jobs in February. Over the year, employment in the industry has grown by 359,000.

Employment in private educational services rose by 28,000 in February, after edging down by 20,000 in the prior month.

Construction employment continued to trend up in February (+19,000), with a gain of 14,000 in residential specialty trade contractors. Employment in construction was up by 253,000 over the past 12 months, with residential specialty trade contractors accounting for about half of the increase.

Employment in mining continued to decline in February (-19,000), with job losses in support activities for mining (-16,000) and coal mining (-2,000). Since a recent peak in September 2014, mining has shed 171,000 jobs, with more than three-fourths of the loss in support activities for mining.

Employment in other major industries, including manufacturing, wholesale trade, transportation and warehousing, financial activities, professional and business services, and government, showed little change over the month.

Additionally, the jobs growth number for December was revised upward from +262,000 to +271,000, and January jobs growth was revised from
+151,000 to +172,000, for a net upward revision of 30,000 for the two months. With these revisions, jobs growth for the past three months has averaged 228,000 per month, a respectable number but barely enough to be considered ideal and still short of the ideal replacement figure of 250,000 per month needed to make up for changes in the population. Labor force participation increased slightly to 59.8%, while the labor force participation rate stands at 62.9%. While these are still near historic lows for both figures, they have also both increased .5% since September. Additionally, the long-term unemployment rate now stands at 9.7%, far below where it was at the height of the jobs recession that continued well after the Great Recession itself had supposedly ended in the summer of 2009.

While hiring was strong in February, wage growth was mostly stagnant. Both for the economy as a whole and in several important job sectors, the average workweek declined slightly, while average hourly wages decline by three cents per hour, although it’s worth noting that this decline comes off of an increase of twelve cents per hour in January, as well as the news that average hourly earnings have increased by 2.2% over the past year. The fact that wages and work hours are stagnant suggests that employers are not finding it necessary to extend the existing payroll beyond where it is right now, a decision that could be influenced as much by increased productivity as anything else, but also due to the fact that they don’t feel the need to expand hiring very much beyond where it is right now. This could bode ill for hiring in the coming months, but for the moment most analysts are celebrating these stronger numbers.

The New York Times report on today’s numbers highlights what it calls the “brisk” hiring”:

The government reported on Friday that employers added 242,000 workers in February, a hefty increase that highlights the labor market’s steady gains at a time when voters around the country are homing in on their choices to lead each major party into the presidential election.

Four years ago, at this point in the last presidential election cycle, the jobless rate was at 8.3 percent and the economic recovery was in a relatively early stage. Then worries centered on rising gas prices, deep consumer debt and government layoffs.

Now, the recovery is in its seventh year, the unemployment rate has dropped sharply to 4.9 percent and the private sector has chalked up 72 months of uninterrupted job gains, the longest streak on record. Oil prices may still be causing ulcers, but this time it is producers who are feeling the pain because the prices have plunged so low.

Wages fell by 0.1 percent in February, a disappointing showing after the 0.5 percent increase in January, resulting in a 2.2 percent bump in the yearly rise.

The Labor Department also revised its figures for December and January, adding 30,000 more jobs collectively for the two months.

Despite the improved economic picture, there is still plenty of distress and anger that has helped fuel the success of the Republican front-runner, Donald J. Trump, and rallied many Democrats behind the underdog Bernie Sanders’s attacks on inequality and Wall Street cronyism.

Part of the reason is the unevenness of the recovery, with fortunes diverging depending on where you live, how high your education and skill level and what industry you work in.

“We are seeing job growth across a range of industries, but we’re also seeing a polarization in the labor market,” said Tara Sinclair, chief economist for the job site Indeed.

Robust demand for hospitality and service workers has been helping keep total job growth count up despite weaknesses in manufacturing, transportation and energy, sectors that also tend to be dominated by white blue-collar men, who have suffered the most from deep shifts in the American economy.

The economy is also diverging geographically, a divide that can be seen in the five states that are holding their primaries on Saturday. While Nebraska’s jobless rate in December (the most recent available) was 3 percent, among the lowest in the country, Louisiana’s, at 5.8 percent, and Kentucky’s, at 5.7 percent, were among the highest.

Many of Louisiana’s woes, like those of other oil and mineral-rich states — including Alaska, North Dakota, Oklahoma, Wyoming and New Mexico — can be largely attributed to the vertigo-inducing drop in oil prices. They were among the handful of states that registered job losses in 2015 or ended the year with a higher unemployment rate than they began with.

A scattershot survey of businesses and experts across the country collected by the 12 Federal Reserve banks underscored the wide variation across different regions and sectors. The report, known as the Beige Book and released on Wednesday, noted that “wage growth varied considerably, from flat to strong.” Economic activity declined in St. Louis, remained flat in New York and Dallas and grew moderately in Richmond, Va., and San Francisco.

Moreover, even as unemployment among those active in the job market has fallen, the overall share of Americans in the labor force has been dragging along at historically low levels. While a growing number of retiring baby boomers is partly responsible, the problem continues to afflict people in their prime working years as well.

“That has been the shadow hanging over all the other labor force statistics,” said Patrick O’Keefe, director of economic policy at CohnReznick, an accounting, tax and advisory firm. “Underutilization of a potentially significant share of our labor force is a significant explanation for why the overall recovery has been sluggish.”

Those shadows hanging over the economy are important for two reasons. First of all, there’s the Federal Reserve’s ongoing policy to continue modestly raising interest rates throughout the year. So far, the Fed has not put another increase in place since initially doing so in December, and instead has delayed the decision at each of the monthly meetings it has held in 2016. A strong jobs report such as this, however, could provide the impetus for another rate increase notwithstanding the fact that the economy still shows signs of sluggishness hear at home and that the international economy has been significantly volatile in the opening months of the year. In addition to Federal Reserve policy, there’s also the political implications of the state of the economy to consider. As I’ve noted before, positive news such as this would seem to inure to the benefit of incumbents and incumbent political parties, while indications of sluggishness will likely be cited by Republicans as evidence of the need for a concentration on policies that will increase economic growth beyond the 2.0% to 2.5% average annual growth that we have seen during this recovery. As many Republican candidates have noted, this is relatively low growth for an economic recovery, especially coming off of the deep recession that the economy suffered beginning in late 2007. Ideally, we should be able to generate growth close to 3.5%, or even 4.0% or above, but that’s proven to largely be a chimera for the better part of the 21st Century so far. Whether there are any policy changes that can change that is, of course, another question entirely.

Related Posts:

About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May, 2010 and also writes at Below The Beltway. Follow Doug on Twitter | Facebook

Comments

  1. al-Ameda says:

    The numbers continue to show steady, if not spectacular, growth in employment since the 2008 financial catastrophe.

    History will be very kind to President Obama when it comes to assessing overall economic performance in the years following the 2008 collapse of the economy. Not perfect by any means, but in consideration of the crash that caused the vaporization of $18 trillion, or over 20% of the wealth of America’s homes and businesses, a solid performance.

    Like or Dislike: Thumb up 8 Thumb down 2

  2. SenyorDave says:

    I think the idea of sustained 4% growth is a fantasy. The last time we had a 10 year period with average 4% growth was 1964 – 1973. Even 5 year periods of 4% growth in the past few decades have been followed by periods of very low growth. I believe if we had a reasonable GOP Congress we would have had another 0.5 point growth per year on average. Compounded over 7 years that would have been a major changes from where we are now.

    Like or Dislike: Thumb up 5 Thumb down 0

  3. Pch101 says:

    The Great Recession was a “balance sheet” recession, the result of having too much private debt in the economy.

    The most effective approach would have been to have a massive discharge of that debt (a sort of debt jubilee) so that consumers would gain some net worth and would be free to start spending again, which would drive corporate profits and greater demands for employment.

    This would have required a grand nationalization of the banks. Since banks can’t file bankruptcy, a quick rinse nationalization (over and done with over the course of a few days), this process would have been used to remove the bad loans from bank balance sheets and sell them off at steep discounts to investors who could work out the loans and allow borrowers to refinance based upon written-down balances. (Banks are reluctant to workout debt, have motivations to avoid doing much of it, and generally aren’t good at it; it’s better to allow third parties who have the expertise, motivation and much lower basis in the loans to do the workouts.)

    Of course, this would have been labeled as communism, but it would have gotten you your high growth rates. Extending-and-pretending as we did was bound to work, but that isn’t quick by design — when your plan is to get your balance sheet in order by waiting for assets to regain their value, as we did, then you are going to be waiting for a long time. Take this more conservative approach, and this is what you get.

    None of this changes the fact that most of the decline in labor force participation is due to demographics. We use unemployment rates to measure the joblessness and underemployment of those who want to work or work more, not labor force participation.

    Like or Dislike: Thumb up 1 Thumb down 0

  4. Barfour says:

    A few months ago, Doug said on Facebook that Barack Obama’s economic policies are a joke. He did not offer any explanation what he meant by that. No one is saying that Obama’s policies have been perfect or that there is perfect economis conditions in the US now, but blindness to reality have serious consequences. It is this blindness that have led to Donald Trump now being two short steps away from the presidency. How ignorance and blindness have led to Trump is a long discussion that we can have in another thread.

    Like or Dislike: Thumb up 12 Thumb down 0

  5. Moosebreath says:

    @al-Ameda:

    “History will be very kind to President Obama when it comes to assessing overall economic performance in the years following the 2008 collapse of the economy. Not perfect by any means, but in consideration of the crash that caused the vaporization of $18 trillion, or over 20% of the wealth of America’s homes and businesses, a solid performance”

    And by comparison to the other OECD nations, even better than that. By not going down the austerity path of Europe and instead stimulating the economy both directly through the Federal budget and indirectly through the Federal Reserve, we far outperformed them.

    Like or Dislike: Thumb up 5 Thumb down 1

  6. John says:

    @al-Ameda:

    I think the stimulus decision and increased regulations of 2009 will age very well for Obama-I consider it the signature achievement of his Presidency, really. The debt is as much of a problem as ever, but what else can you do? I’m beginning to honestly wonder how soluble many of these problems are.

    As for how this plays politically, though, it needs to be remembered that overall economic growth matters little to the people who support Trump, and to a lesser degree, Sanders. The main beneficiaries of the real economic growth of the second Obama Administration are mainly the people they despise. The government class, affluent upper-middle class professionals, certain newcomer Millennial groups who avoid student debt (such as DREAM scholars), etc. American society is becoming increasingly ossified when it comes to moving across class barriers, and until we solve that problem, economic growth is only going to do much to relieve our political problems. And that’s just one problem among many: another is the fact that the education/employment pipeline is completely broken. A basic guaranteed wage (a measure proposed by figures from Martin Luther King and Robert Kennedy to Richard Nixon in the past) increasingly looks like a good idea in a society increasingly moving past “old-style” work, but…

    Part of the reason I support Sanders and really don’t trust Hillary Clinton is that she seems to want to use identity politics as an ansatz for real socioeconomic reform that would actually do something to improve the political health of our nation. History shows that knotty questions of state finance and economic decisions get all the more explosive, all the more harder to address seriously when looked at through ethno-racial or religious prisms.

    Like or Dislike: Thumb up 2 Thumb down 1

  7. Moosebreath says:

    Doug,

    Where does the 250,000 monthly growth to keep up with poulation figure (“still short of the ideal replacement figure of 250,000 per month needed to make up for changes in the population”) come from. I have seen far lower numbers, in the 90-150,000 range, such as here:

    “We can also estimate the number of jobs needed each month, just to maintain, by rough numbers. If we assume a smoothed noninstitutional civilian population growth rate of 0.076% per month, then next month’s population growth would be 185,617 additional people ages 16 and over and not locked up somewhere. If we then assume the labor participation rate of this new growth would be 68.0% and not the actual, artificially low 63.5%, we would get an additional 126,920 jobs needed to keep up with this population growth.”

    Like or Dislike: Thumb up 4 Thumb down 0

  8. gVOR08 says:

    China is in trouble, Europe is weak, the Fed wants to raise rates, and the 72 months of sustained growth is way past historical norms. I fear a recession yet this year. Greatly fear it because it’s a path to President Trump. Or Cruz.

    Like or Dislike: Thumb up 1 Thumb down 1

  9. John says:

    @gVOR08:

    Yeah, there are some disturbing signs that there might be a recession this year. Nothing conclusive, but definitely not impossible.

    Cruz will never win a general election under any circumstances and the primary math does not work in his favor against Trump at all. Don’t worry about that one. On the other hand, a recession is really going to help Trump, because the DNC hasn’t counted on a challenge in the Rust Belt, and HRC is no Bill Clinton or Joe Biden with working class whites-she’s by contrast doing everything she can to alienate them. And that’s where he consistently gets his highest support.

    Like or Dislike: Thumb up 1 Thumb down 0

  10. de stijl says:

    RE: the stock photo topping this post.

    Whoever it was that was responsible for generating the text for that sign was either given crystal clear instructions as to what the message should be, or she was hyper-focused on one and only one goal – to produce message-focused signage that says that we are are hiring and that we are hiring right now.

    Who: us
    What: hiring
    When: now
    Why: we need people, obvs
    Where: here
    How: that’s why we have a HR department to figure out that crap

    That company is *definitely* looking to hire people right now.

    Like or Dislike: Thumb up 1 Thumb down 0

  11. @Pch101:

    The most effective approach would have been to have a massive discharge of that debt (a sort of debt jubilee) so that consumers would gain some net worth and would be free to start spending again, which would drive corporate profits and greater demands for employment.

    Except for everyone suddenly losing their pensions, retirement accounts, savings, credit, etc.

    Like or Dislike: Thumb up 0 Thumb down 0

  12. Avid sportman says:

    @gVOR08: It’s quite possible we’re already in a recession. Much of the data since Dec has been indicative of a recession . But the official decision on when they start isn’t made at the start of possible recessions. If they were there would be a ton of false recession starts. There’s no way to really know at this point.

    Like or Dislike: Thumb up 0 Thumb down 1

  13. Avid sportman says:

    @al-Ameda: What happens if we’ve just blown up another bubble? High Yield credit looks similar to subprime mortgages that blew up so spectacularly in 2008 (see link below).

    https://medium.com/@munilass/the-great-paper-chase-in-reverse-62c2c2923227#.7kbx009tb

    Additionally, take a look at the amount of covenant lite debt that companies have accumulated recently (see linked article from June 2014). We’re looking at a lot more leverage in the financial sector than people realize. When articles try to convince you somethings not a bubble, it usually is.

    http://www.cnbc.com/2014/06/13/there-are-a-record-number-of-covenant-lite-loans-with-few-strings-attached.html

    Like or Dislike: Thumb up 0 Thumb down 0

  14. Pch101 says:

    @Stormy Dragon:

    Not at all. Banks accounts are insured (which is precisely the reason why we have deposit insurance and an FDIC, and why banks can’t file Chapter 7 or 11), while bond and shareholders could get the General Motors treatment.

    This is essentially what already happens when the feds seize a financial institution, but on a larger scale.

    Like or Dislike: Thumb up 0 Thumb down 0

  15. Tyrell says:

    Wages have been essentially flat for years. People do not believe these rosy government reports and employment statistics. And some of these jobs that people are getting – real career makers; such as: sidewalk scrapers, school crossing guards. inflatable bouncy technicians, food blender demonstrators.
    See:
    http://www.forbes.com/sites/investor/2013/11/19/fake-unemployment-report-shocker/#77f37d424eb3

    http://www.gallup.com/opinion/chairman/181469/big-lie-unemployment.aspx

    Like or Dislike: Thumb up 0 Thumb down 2

  16. @Pch101:

    The FDIC trust fund doesn’t contain nearly enough money to cover all outstanding deposits in the US if all of the mortgages, loans, etc. purchased with those deposits are suddenly nullified.

    And the shareholders and bondholders in GM were essentially wiped out. Which means all the retirement accounts, pensions, etc. holding bonds and shares are going to be wiped out.

    Like or Dislike: Thumb up 0 Thumb down 0

  17. Pch101 says:

    @Stormy Dragon:

    The only one is talking about nullifying deposits is you. What do you think happened when Washington Mutual was handed off to Chase and Wachovia to Wells Fargo?

    The GM shareholders and unsecured bondholders were given stock in the new GM. So no, they were not completely wiped out (although the feds had every right to do so.)

    During the more modest crash of the early 1990s, the FSLIC sold off the insolvent commercial real estate loans of the S&L’s to third parties, which worked them out. The Swedes did something similar in the early 1990s when the country had a short depression. This does not work as you think that it does.

    Like or Dislike: Thumb up 0 Thumb down 0

  18. @Pch101:

    1. You said you were getting rid of all debt. The money a bank owes you for previous deposits is a debt, which under your plan no longer exists.
    2. Even if you exempt bank deposits, the money you deposited at a bank doesn’t just sit in a big room, they loan it out to people. If the recipients of those loans suddenly don’t have to pay them back, the bank has no money to pay out the account holders. There are currently 4.3 trillion dollars worth of mortgage debt owed to the depositors at banks. The FDIC doesn’t have trillions of dollars sitting around to handle that sort of writeoff.

    You’re trying to take a process designed for when banks become insolvent in small numbers and scale it up to all the banks going insolvent at once. That doesn’t work.

    Like or Dislike: Thumb up 0 Thumb down 0

  19. Pch101 says:

    @Stormy Dragon:

    For the love of Yahweh, the deposits are insured. The deposits would not be touched due to the insurance, so you can now stop pretending that deposit insurance doesn’t exist.

    The Resolution Trust Corporation did this very thing during the S&L crisis. When an institution is insolvent, the mortgages get handed or sold off to others and the deposits remain intact.

    Like or Dislike: Thumb up 0 Thumb down 0

  20. @Pch101:

    Just to put it in perspective, the entire US liquid monetary supply is only $1.2 trillion. You’re calling for a bailout that would literally require all of the country’s money three times over.

    Like or Dislike: Thumb up 0 Thumb down 0

  21. @Pch101:

    The FDIC’s reserve ratio is 2%. It can’t cover a $4.3 Trillion Dollar Write off. The fact the accounts and insured doesn’t count for squat when you plan makes the insurer insolvent too.

    And the entire S&L crisis only bailout only required $160 billion. It’s not even remotely comparable.

    Like or Dislike: Thumb up 0 Thumb down 0

  22. Pch101 says:

    @Stormy Dragon:

    You’re not following this, and I doubt that explanations are going to help.

    When the Old Bank is nationalized, there is no need to pay it at par for its old loans. All the New Bank needs is a new balance sheet, which will have been purified largely by purging its old debt, along with sufficient working capital to resume operations.

    When the loans are sold off, the proceeds will end up going back to the feds that recapitalized the New Banks.

    Like or Dislike: Thumb up 0 Thumb down 0

  23. @Pch101:

    When the Old Bank is nationalized, there is no need to pay it at par for its old loans.

    There is if you want Old Bank’s depositors to be able to withdraw their money, because the value of those loans is what pays those depositors.

    All the New Bank needs is a new balance sheet

    Based on what? The balance sheet is a reflections of the bank’s current assets, which it no longer has because Old Bank never got paid for its loans.

    , which will have been purified largely by purging its old debt, along with sufficient working capital to resume operations.

    What capital? The old bank’s capital was the loans it no longer has. Where is this new capital coming from? And again we need $4.3 trillion of it to replace the $4.3 trillion in mortgages you just nullified.

    When the loans are sold off, the proceeds will end up going back to the feds that recapitalized the New Banks.

    Who’s going to buy the old loans? The only reason you buy an insolvent loan is so you can foreclose on the secured asset. Since the loan has been nullified, you can’t foreclose on anything. Why would someone want to pay money for it?

    Like or Dislike: Thumb up 0 Thumb down 0

  24. Pch101 says:

    And again we need $4.3 trillion of it to replace the $4.3 trillion in mortgages you just nullified.

    No, you don’t.

    Like or Dislike: Thumb up 0 Thumb down 0

  25. de stijl says:

    @Stormy Dragon:

    The only reason you buy an insolvent loan is so you can foreclose on the secured asset.

    That’s untrue or an unjustified assertion. Foreclosure is one option of many.

    Like or Dislike: Thumb up 0 Thumb down 0

  26. de stijl says:
  27. de stijl says:

    @Stormy Dragon:

    I apologize for my last reply: not the message, but the format.

    I was just making a statement. But with the red text and bold it looks like I was making a *STATEMENT*

    I had as a medium-sized quibble with your assertion, but I misapplied formatting so it looks like I kinda – it seem like – I want to slap your baby. Not my intent. With the red, bold text It looks like I wanna go all GRR-aggro on you. Sorry.

    Sorry for the unintentional forcefulness. I was offering a different scenario where companies have value above and beyond the liabilities they owe, obvs.

    Like or Dislike: Thumb up 0 Thumb down 0

  28. Pch101 says:

    @de stijl:

    The Dragon guy really doesn’t get it.

    The very thing that he claims is impossible is what I did in investment banking. Our firm would acquire portfolios of upside-down loans, and we would resolve most of them by working them out.

    That’s possible because the loans are bought at a discount to face value, so the borrower could satisfy our obligation to us by paying us just a fraction of the balance while still providing a rather healthy profit for our investors.

    The problem for the bank is that it didn’t get the loan at a discount, and banks are often loathe to write down assets to their true value; their failure to act paralyzes the system. But third-party vulture funds don’t care about the original value; they bought the loan at a steep discount and make their moves accordingly.

    Like or Dislike: Thumb up 2 Thumb down 0

  29. @de stijl:

    That’s untrue or an unjustified assertion. Foreclosure is one option of many.

    None of which apply one the debt has been nullified. You can’t foreclose on the secured asset. You can restructure the payments because the mortgagee doesn’t owe you anything any more. Name one thing you can do with a NULLIFIED mortgage that would cause someone to buy it.

    @Pch101:

    Our firm would acquire portfolios of upside-down loans, and we would resolve most of them by working them out.

    Yes, your firm could working them out because the mortgagee still owed your firm money and you could use that to force them to do things. One the debt has been nullified, there’s nothing to work out any more; the mortgagee doesn’t owe your firm a dime.

    Like or Dislike: Thumb up 0 Thumb down 1

  30. Pch101 says:

    @Stormy Dragon:

    You just keep making one baseless claim after another. I can see that continuing this is pointless.

    Like or Dislike: Thumb up 0 Thumb down 0

  31. Grewgills says:

    Shouldn’t Guraneri be here linking to ZeroHedge?

    Like or Dislike: Thumb up 2 Thumb down 0

  32. al-Ameda says:

    @Moosebreath:

    And by comparison to the other OECD nations, even better than that. By not going down the austerity path of Europe and instead stimulating the economy both directly through the Federal budget and indirectly through the Federal Reserve, we far outperformed them.

    Exactly. There is no contemporary evidence that in a situation of severe recession, implementation of fiscal austerity policies resulted in either 1) reducing the length of recession, or (2) establishing a basis from which strong economic growth occurred. The OECD nations of Western Europe provide us with empirical evidence of the relative failure of austerity policies.

    Like or Dislike: Thumb up 1 Thumb down 0

  33. Pch101 says:

    Austerity is appropriate for addressing inflation. But it is completely inappropriate for tackling deflation. And 2008-9 was a severe deflationary event that would have slid into depression had it not been for QE, various bailouts and the stimulus package.

    Arguing for austerity when faced with deflation is like refusing to call a tow truck if it’s stuck in a ditch. While it would have been nice if the car had not been driven so that it was stuck in a ditch in the first place, refusing to do the things that would make it move while lecturing it about its bad behavior will not get the car moving again or fix the ditch problem once it has been created.

    And you need that car to move. The economy is like a typical shark — if it stops moving, it dies — so allowing it to grind to a halt is not a viable option. That is one reason why it is critical to keep the banking system from becoming dysfunctional; they are the gas stations of the economy, and not much moves if they stop selling fuel (i.e. renting money.)

    The Europeans have paid dearly for the German fixation on inflation when there was no inflation threat. The Germans thought that it could destroy the PIIGS while benefiting from the fallout, but that has proven to be folly; the Europeans can’t prosper if some of its member states are imploding.

    Like or Dislike: Thumb up 0 Thumb down 0

  34. de stijl says:

    Name one thing you can do with a NULLIFIED mortgage that would cause someone to buy it.

    Has anyone else been watching Mr. Robot on USA? Great cast: the lead is truly exceptional, superbly framed and shot and edited; insanely well written first three episodes. Visually, think Raise The Red Lantern only shot in current-day NYC. So symmetrical and pure. Great locations and evocative: the Wonder Wheel exchange with the Ferris wheel cars clanging and bashing, Fun Society interior and exterior. The Steal My Sunshine montage? Neil Diamond? Walking down the subway hallway with the overhead conduits? My God! Fuggedaboutit!

    The plot is a knock-off / homage to Fight Club sans the the fisticuffs. Take down Evil Corp. which owns all of the consumer debt and re-write the world. That’s how this relates to the above conversation. I keep expecting there to be a Where Is My Mind Pixies thing but that would either be way too cheesy or else super-duper cool.

    I’m sorry Michael Reynolds bailed. He got super weird after the Riverside shooting about Muslims, but he had been, and hopefully still is, a super mensch. I would love his take on Mr. Robot.

    Like or Dislike: Thumb up 0 Thumb down 0

  35. Pch101 says:

    @de stijl:

    I still don’t know what a “nullified mortgage” is supposed to be. The dragon dude is just spewing.

    Like or Dislike: Thumb up 0 Thumb down 0

  36. de stijl says:

    @al-Ameda:

    There is no contemporary evidence that in a situation of severe recession, implementation of fiscal austerity policies resulted in either 1) reducing the length of recession, or (2) establishing a basis from which strong economic growth occurred.

    It had the secondary effect of making the Germans feel morally superior. It was ineffective and inefficient. Actually, it was anti-efficient as Pch101 correctly identifies, but the volk were satisfied. We’re not like those swarthy layabout Greeks or Spaniards. They need a hard lesson.

    There is some pithy saying about your nose and spiting one’s face that comes to mind.

    Like or Dislike: Thumb up 1 Thumb down 0

  37. @Pch101:

    I still don’t know what a “nullified mortgage” is supposed to be. The dragon dude is just spewing.

    @Pch101:

    The most effective approach would have been to have a massive discharge of that debt (a sort of debt jubilee) so that consumers would gain some net worth and would be free to start spending again, which would drive corporate profits and greater demands for employment.

    Like or Dislike: Thumb up 0 Thumb down 0

  38. Pch101 says:

    @Stormy Dragon:

    You need to type “loan workout” into Google.

    Like or Dislike: Thumb up 0 Thumb down 0

  39. de stijl says:

    @Pch101:

    You said a provocative thing –a massive discharge of that debt (a sort of debt jubilee) – that someone could latch on to.

    IIRC, Stormy Dragon leans libertarian or libertarianish.

    But you did the stupid thing in blog commenting: you spoke an unvarnished thought without caveats and cavils. Folks who disagree with the assertion will hammer you. Hell, Dr. Taylor did it to me when I said that I thought that Trump would win the nomination back in August.

    You said discharge of debt; he or she heard mortgage nullification, and that was the bent nail to hammer away at. Taylor wanted me to define “establishment” and “insurgency” and to explain why Goldwater or ’76 Reagan were or weren’t traditional or insurgent Republicans – basically he wanted a dissertation.

    That’s what happened to you here.

    You said x. She heard x times 7000 and she attacks you on the x times 7000 thing she heard. It really doesn’t matter what you actually say. If someone dislikes your overall message they will latch on to any dashed off thought that they can exploit. The chink in the armor. You didn’t realize you were in the armor-making business until someone decides to go all aggro on you.

    Like or Dislike: Thumb up 0 Thumb down 0

  40. Pch101 says:

    @de stijl:

    Occam’s razor would suggest that someone who is abysmally ignorant of finance and macroecon didn’t like the comment, and proceeded to prove that s/he understood approximately 0% of it. That’s to be expected on the interwebs.

    It’s one thing to disagree, which is fine. It’s quite another to be incoherent..

    Like or Dislike: Thumb up 1 Thumb down 0

  41. al-Ameda says:

    @Pch101:

    Austerity is appropriate for addressing inflation. But it is completely inappropriate for tackling deflation. And 2008-9 was a severe deflationary event that would have slid into depression had it not been for QE, various bailouts and the stimulus package.

    Dead on, exactly right.

    It’s almost a pure Keynesian prescription.

    The last thing you want to do in a deflationary environment is pull even more demand out of the system. Keynes said, in an inflationary period a sensible fiscal policy is to pull the reins in. One can argue the merits of Keynesian Economics, but on this – the Great Recession of 2008-2009, the correct path was QE

    Like or Dislike: Thumb up 0 Thumb down 0