Radio commentary, April 4, 2009
more signs of stabilization…
Again, more signs that the rate of decline is slowing, though hardly yet turning around. On Thursday morning, we learned that new orders for manufactured goods rose almost 2% in February, the first increase in six months. Orders for what are known as nondefense capital goods ex-aircraft, meaning the sort of gadgetry that is at the core of business investment, and a key to long-term economic growth, rose by over 7%, a very strong performance. Obviously one month’s positive numbers can easily turn into next month’s negative numbers, but this is encouraging news. For now.
New car sales even bounced a bit in March, thanks to big incentives—and they remain at very low levels. Still, this is a surprise. Yes, we need an economy that’s not so dependent on the sales of new earth-destroying machines, but until we get there, this is what people’s livelihoods depend on.
…but not in the job market
In less good news, first-time claims for unemployment insurance rose by 12,000 last week, and the average for the last four weeks rose by about half that much. About 650,000 people a week are losing their jobs and signing up for unemployment insurance checks. The number of people continuing to draw benefits also rose last week to 5.7 million, nearly twice as much as a year ago. As a percentage of the population, both these measures are still below the highs of the mid-1970s and early 1980s, but they’re still quite high, and likely to go higher.
Friday morning brought the release of the monthly employment report for March. Few signs of stabilization here—in fact, it was another stinker.
Last month, 663,000 jobs disappeared. Almost half that loss was in goods production, construction and manufacturing. But private services also got hammered, with almost every sector showing serious losses. Even government, usually a reliable if modest gainer, lost jobs last month, mostly because of declines in local government employment. Since the economy peaked in December 2007, we’ve lost over 5 million jobs, with more losses almost certainly on the way.
Those figures came from the Bureau of Labor Statistics’ survey of about 300,000 employers. Their simultaneous survey of about 60,000 households showed that the unemployment rate jumped 0.4 point to 8.5%, the highest since 1983. Though not at a post-Depression record yet—that would be 1982’s 10.8%—it’s still very high by post-World War II standards. And the share of the adult population working, the so-called employment/population ratio, fell by 0.4 point to 59.9%, the lowest it’s been since 1985. Since its cyclical peak, set in December 2006 (a full year before the business cycle peak), the employment/pop ratio is off 3.5 points, the worst decline over any similar period since the series began in 1948. The ratio’s rise was very weak during the expansion, and its steep decline over the last 27 months suggests that what used to be called The Great American Jobs Machine is now seriously broken.
The forward-looking measures in this report—like temp employment, which was down hard, and the length of the workweek, which fell to a record low, suggest more of the same to come. In somewhat more comforting news, the Economic Cycles Research Institute’s weekly leading index, which forecasts turns in the economy three to six months out, picked up a bit last week, its fourth consecutive rise. That suggests that maybe the abstraction known as The Economy is stabilizing. But the job market, which is what matters to most people, has yet to get the news.
Summers, well-paid tool of Wall Street
And an update on the rogue’s gallery of malefactors in high places. A former quantitiative analyst employed by the Harvard University endowment says she was fired for questioning the university’s investment strategies. Iris Mack, only the second African-American woman to get a PhD in applied math from Harvard, says she was scandalized by the reckless use of derivatives that the endowment’s traders didn’t understand. According to her account, published in the university newspaper, The Harvard Crimson, her colleagues didn’t get basic financial math. She wrote the university’s then-president, Larry Summers, to complain—and she was fired for making what were called “baseless allegations.” Funnily enough, her employer before Harvard was Enron, so the woman obviously knows fuzzy math from the inside! When Summers was president of Harvard, he pressed the university to borrow heavily to take aggressive investment positions that have since turned very sour, forcing the university to borrow to meet basic operating expenses. Need I point out that Summers is now running the economy?
[On Friday afternoon, the Obama administration disclosed that Summers was paid over $5 million last year by D.E. Shaw, the hedge fund where he worked after leaving Harvard. That, plus hundreds of thousands in speaking fees from other Wall Street firm. Any wonder that his administration is going so easy on Wall Street?]
Finally, in other news, one Edward Hadas, writing on the financial news site BreakingViews.com, complains about the lack of a serious left opposition. His opening words, inspired by the anti-G20 demos in London: “A great age of protest should be dawning. The global mismanagement of the financial system has led to a deep recession. Intellectual paralysis has gripped the authorities and their policy response has been risky. After such failure, the political leaders gathered in London for the G20 conference deserve a serious challenge. Sadly, all they are getting are the senseless slogans of a hippie festival.”
Sad to say, he’s right. The old Seattle strategy of street parties and puppets and all that seemed right for the late stages of the 1990s boom, but in the middle of this bust, they seem silly and irrelevant. This isn’t what the scared masses want. As Hadas says, the world needs “a new intellectual framework,” not a street party. He concludes: “Sadly, the more intellectually sophisticated Left seems to be hardly more capable of helping out. Any protester who can articulate a coherent alternative to the establishment’s tattered notions really could change the world.” It’s true, and I’m hanging my head in shame that I haven’t done more to articulate that alternative. I’ll try harder in the future.