Posted on 09/07/2007 11:56:15 PM PDT by yorkie
The job market took a serious and unexpected turn for the worse last month, raising the risk of a recession and putting added pressure on the Federal Reserve to move more aggressively to keep the ailing housing industry from infecting the rest of the economy. The Labor Department reported yesterday that 4,000 jobs were lost from July to August, and the deepest cuts were in industries that are connected to the housing market, like construction and manufacturing. It was the first employment decline since 2003, when the job market was still struggling to emerge from the slump after the 2001 recession. The jobs report all but guarantees that the Fed will cut its benchmark short-term interest rate when its policy-making committee meets on Sept. 18. A quarter-point reduction, to 5 percent, remains the most likely move, although a half-point cut now cannot be ruled out, economists said. The unexpected weakness in employment changed the terms of the debate over the health of the economy. Before the report was released, most economists were predicting that the economy had added about 100,000 jobs in August and that growth had slowed but continued. But now, the odds of a recession in the next year have risen, to 25 to 50 percent, economists interviewed yesterday said. A recession is typically defined as an extended period in which the economy shrinks, leading to a rise in unemployment and a drop in consumer spending and business investment. “People need to start thinking about the housing market not just as some ring-fence problem which is off on its own,” said Nigel Gault, chief United States economist at Global Insight, an economic research firm in Lexington, Mass. “They need to start worrying about the health of the broader economy.”
(Excerpt) Read more at nytimes.com ...
If that happens, the Dems will take the White House...unless, of course, they go with HRC, who I think has a BETTER chance if the economy seems solid on election day.
A loss of 4000 jobs in a country of 300+ million is going to cause a recession? What?! The media sure is reaching to make President Bush and the GOP look bad!
When more and more people are thrown out of work, unemployment results.
It’s not noted, but I bet you a LOT of these “job losses” in the construction industry are a result of the new attitude on illegals. Employers are getting the hint that it’s not in their best interest to hire folks with, shall we say, a dubious background.
Yes, Job increases should be infinite, like Congressional Spending.
Yeah, effing idiots. Maybe they’re counting the cockroaches running back to Mexico so that makes it what? 204,000 lost jobs? Just guessing and hoping which is better than the NYT.
I know your remark was in jest but it is/was the law: 15 U.S.C. § 3101, Humphrey-Hawkins Full Employment Act.
Aw heck, I could be wrong, the full employment part could have been revoked but don't it make ya feel all warm and fuzzy that dunderheads are spending our money and dictating things like full employment?
One book I enjoyed was called ‘eat the rich’.. it was a pro-capitalist book about the success of nations with strong property rights around the world.
In it the author said why in a communist utopia does everyone have a full time job? He said in capitalist utopia no one has to work!
I want to see a day when we build structures of such advanced strong, long lasting materials that we don’t have to build replacements. We can build extensions or new homes as a luxury if we feel like it. Same applies across many industries.
Other then the dot.com boom era, unemployment is lower then nearly all of the last 37 years.
Countrywide to Cut Up to 12,000 Jobs in Bid to Slash Costs and Cope With Soaring Foreclosures
LOS ANGELES (AP) — Struggling mortgage lender Countrywide Financial Corp. will cut as many as 12,000 jobs in a bid to slash costs and cope with soaring foreclosures and defaults, the company said Friday.
The cuts, amounting to as much as 20 percent of its work force, are needed because the company expects new mortgages to fall about 25 percent in 2008 from this year’s levels, Countrywide said.
In a letter distributed to employees, Countrywide Chief Executive Angelo Mozilo called the current market cycle “the most severe in the contemporary history of our industry.”
“During the past two years the growth in home price appreciation has stopped dead in its tracks and in many areas of the country it has turned in the wrong direction,” Mozilo said in the letter.
In recent weeks, Countrywide borrowed $11.5 billion and sold a $2 billion stake to Bank of America so it could keep operating its retail banking and mortgage lending businesses.
Whoops. Looks like the fed is going to have to revise its numbers next week.
I thought that they standard definition of a recession was two consecutive quarters of negative growth (how is that for an oxymoron?)
Is the NEW YORK TIMES up to its old tricks trying to lower the bar here or do economists change the definition when Republicans are in office?
NY Times wet dream for Democrats. If the Fed lowers rates the jobs come back.
This is a good thread to ponder a question a buddy and I have been bandying about. If you take the stats since 1970 or so when “women entered the workforce” ... Hasn’t the next 35 years or so been the most massive “make-work-project” in the history of Man (and Woman)kind? ... and the American economy keeps chugging along with TWICE the number of workers that might have been expected in projections done in, say, 1965?
This is an INCREDIBLE economics story that no one (due to PC) has yet addressed — but it may well be the biggest economics story of the past half-century.
Simply amazing how GW and Congress got them new bankruptcy laws passed just in the nick of time. Also amazing how truckers get reamed by Mexican trucks just when a rescission is hitting
I grew up in Florida and have watched this cycle at least every ten years. People go through trauma but end result is that all the houses eventually get sold and it’s time for a new boom.
I grew up in Florida and saw this cycle
I grew up in Florida and have watched this cycle at least every ten years. People go through trauma but end result is that all the houses eventually get sold and it’s time for a new boom.
I grew up in Florida and saw this cycle
Economics is a subject that is a passion of mine. I’m always curious to learn more and think about it! I’ve pondered women entering the workforce quite a lot, what the implications were. There is many sides to the question as I’m sure you and your buddy have discovered.
One thing that happens in a labor shortage is there is a lot of jobs that there is a market for at a low price, but you can’t find anyone to work at a low enough wage to do it. So those jobs disappear.
For example imagine 80% of cars at a dealer are sold on the weekend. In a labor shortage economy the dealer will close the dealership during the week. With labor almost free its worth opening the dealership all week, even though the employees are standing around most of the time during the weekdays. Or trying to hard sell to people not that interested.
No wonder economics is called “the dismal science”. Science? ha. Macro-economics is way less settled than “global warming”.
The same idiots claim to be expert in both subjects.
Glad you’ve been thinking about it, too. What my friend and I have been pondering is the (obviously PC-mandated) lack of stats indicating the U.S. economy has basically DOUBLED the number of jobs since 1970, in the interest of having women in the workforce, and yet that AMAZING INFUSION OF WORKERS is NEVER noted when figuring employment statistics.
My guess is if you figured an influx of umpteen MILLIONS of workers into your economy in 30 YEARS TIME and yet that economy was strong enough to absorb those workers, this would be a freaking economic MIRACLE, which it apparently is.
But, the weird thing is, NOBODY even mentions it.
“in a country of 300...”
That was my thought, too. If anyone beleieves this garbage, they don’t deserve to work either...way too stupid for a paycheck.
Sure, there have been 1.6 or 1.8 times as many workers entering the workforce, but average wages haven’t kept pace with inflation. The increased supply of workers at the entry level has suppressed wage increases. Make work, perhaps... but the pay is less than it otherwise would have been.
These days Democrats don't even bother making up numbers for that line anymore, they just let people repeat it as if it were true.
While that "falling real wage" story may be good for 'rat politics, in the business world only real money counts. We either face the fact that average people are wealthier and have more income, or we don't feed our families.
Average wages are slightly lower in real terms than they were in the early 1970s. But on average, people are wealthier because HH income is up. And HH income is up because more people in the HH are working.
Most of the white collar occupations have seen huge rises in real income. For those in manufacturing or service occupations, it has been a different story.
In terms of politics, clearly the answer is NOT to increase the minimum wage, service worker unions, and other Democratic nostrums. The answer is self-improvement and entrepreneurship. Wages change as a function of supply and demand, not because someone needs a certain amount of real income to support a family at their preferred standard of living.
Probably Paul Krugman et. al.
I’m confused. I heard twice on CNBC yesterday that these loses were in government but the private sector employment actually increased. That’s good, isn’t it? Sounded good to me.
The battle against the war is lost.
Back to page 10 in the play book. Talk the economy down.
Hey Pinch.... The main issue in 2008 is going to be the current war with Iran.
That is what I heard in the report late yesterday. Several large construction companies are starting to run scared of ICE.
--by selecting only certain types of wages (factory non-supervisory) and excluding all other benefits and income, then finding some goofy peak that was higher -voila, "...average wages haven’t kept pace with inflation..." There are so many ways to measure real wages that it's always possible to contrive a basis for a political rant. Taking America's real earning power as a whole, virtually all real income measurements are higher. People that need to make a business decision for say, expected public purchasing power, go for the hard numbers.
more people in the HH are working.
Some people say that by showing how the % multi-earner families is a few percent higher than it was in the sixties, but that stat's been falling for a few years now. What they don't like to admit is that the % no-earner has doubled since then, and that number is increasing. Fwiw, here's a sample plot of census numbers.
These people are pathetic. Haven't they yet realized that jobs are always lost at this time of year when students return to school, state and local parks close that usually hire these seasonal people, etc. Frankly, I would have thought the number would have been higher.
The workforce and total jobs grew by the following increments in the last 7 years, in millions, starting in the year from August 2000 to August 2001 (listed in the table below by the endpoint, August 2001). I've also given the resulting unemployment rate -
Year-New workers-New jobs-UE Rate-Rate Change
2001 0.77 -0.5 4.9 +0.8
2002 1.73 +0.5 5.7 +0.8
2003 1.43 +0.8 6.1 +0.4
2004 1.13 +2.1 5.4 -0.7
2005 2.35 +2.8 4.9 -0.5
2006 1.95 +2.2 4.7 -0.2
2007 1.15 +1.2 4.6 -0.1
Notice the last recession was a period in which the economy added only 800,000 net new jobs over 3 years, which was enough to increase the unemployment rate from 4.1% to 6.1%. Then 3 years in which jobs grew faster than workers - 7.1 million new jobs and 5.4 million new workers - drew the unemployment rate back down to 4.7%.
In the last year it has been basically flat, with somewhat fewer new workers than average and new jobs to match, each running about 100,000 per month. New workers per month range between 65,000 and 200,000, and new jobs per month between -40,000 and +233,000.
As the article mentions, the expectation was a figure near +100,000, like the average over the last year and consistent with a flat to slightly rising unemployment rate - slowing growth. An outright negative figure, on the other hand, means the unemployment rate could rise 0.4 to the 5% level in about 6 months.
Which would prompt the Fed to cut rates, unless they also saw something like 4% inflation. Instead they see 2% in the core CPI rate over the last year, so they will judge the risks of an economic contraction outweigh the risks of higher inflation, and cut.
I hope this helps.
It will be one hell of a hangover.
BUMP
Don't know about the media, but I'm worried that we are heading into one of those gray stripes in the chart.
That was my take too, plus the fact that regardless of how serious this is, it's something that hasn't happened in four years.
That said, the employment rate is still at 4.6%, and it's been under 5% for years --a level that some would call "full employment".
In other words, an argument could be made that the change is not the result of less of available jobs openings, but fewer job applicants.
>>What they don’t like to admit is that the % no-earner has doubled since then, and that number is increasing.
Thanks for pointing this out. I wasn’t aware that it was so much higher than the early 70s.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
“The Editorial Board of the New York Times is for entertainemnt purposes only”.
Words of wisdom, and if you know the Federal Reserve, words of experience.
There's something here that I was unaware of too --the role demographics are playing.
I'd been thinking all this time that "no-income" households were all welfare bums, but that also refers to my home too --er, in the no-income class (not the welfare bum group :-P) because I've quit working for a salary and am living off the earnings from investments. My daughter left home and is going to college on my nickel --another no-income household..
Sure, a lot of the no-income types on welfare, but it can't be too many considering the fact that real per capita income is soaring; like, it's tripled in the past 40 years!
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