Skip to comments.Did the sequester or payroll-tax holiday expiration hurt job creation in March?
Posted on 04/05/2013 1:47:48 PM PDT by SeekAndFind
We're certainly hearing plenty of excuses about today's jobs report coming from Obama administration apologists. Almost immediately, some --- including former Obama adviser Austan Goolsbee --- blame it on sequester cuts that have barely had time to take effect, and that mostly impact government operations. A quick check of BLS data (Table B-1, seasonally adjusted) after today's update shows that the entire government sector lost only 7,000 jobs, after growing by 14,000 in February. In January, long before the sequester took place, the public sector lost 16,000 jobs, as well as losing 5,000 in December, 9,000 in November, and 57,000 in October. The loss in March in the public sector was mild, comparatively speaking, and certainly didn’t depress private-sector hiring.
Jim Pethokoukis pops another hole in this theory:
So whats the problem? The payroll tax hike? The sequester? (As IHS Global Insight notes: It is hard to blame the sequester for Marchs disappointment. Federal employment did drop by 14,000, but most of that was in the US Postal Service, which isnt affected by the sequester.)
As Jim notes, another excuse that has been floated today is the expiration of the payroll-tax holiday. Retail lost 24,000 jobs in March, which caused some analysts to point fingers at the loss of income — roughly $20 per week per worker — in the expiration of the FICA reduction. But that reduction took place at the beginning of the year, not in March. If that was the proximate cause, then we should have seen significant reductions in consumer expenditures in January and February, when this tax “hike” hit. According to the Bureau of Economic Analysis, we actually saw consumer spending grow in both months after the PTH expiration, in both nominal and real terms, even with income declining:
Personal income increased $143.2 billion, or 1.1 percent, and disposable personal income (DPI) increased $127.8 billion, or 1.1 percent, in February, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $77.2 billion, or 0.7 percent. In January, personal income decreased $513.5 billion, or 3.7 percent, DPI decreased $498.3 billion, or 4.0 percent, and PCE increased $40.8 billion, or 0.4 percent, based on revised estimates.
Real disposable income increased 0.7 percent in February, in contrast to a decrease of 4.0 percent in January. Real PCE increased 0.3 percent in February, the same increase as in January. …
Real PCE — PCE adjusted to remove price changes — increased 0.3 percent in February, the same increase as in January. Purchases of durable goods increased 0.1 percent in February, compared with an increase of 0.4 percent in January. Purchases of nondurable goods increased 0.5 percent in February, the same increase as in January. Purchases of services increased 0.3 percent in February, compared with an increase of 0.2 percent in January.
I mean, it’s not difficult to find this out. The data is on line, which makes it a lot easier to avoid poor assumptions. Apparently, some economic pundits would prefer to rely on conjecture rather than data.
So what happened in the retail sector? Even though people may be spending more now, they’re not spending enough to cover the escalating costs of employment — and part of that, economist Mark Zandi suggests, is the pending implementation of ObamaCare and the mandates it imposes on employers:
Retail trade number, that is consistent with the I dont think the sequester is in here at all, I think its way too premature for the sequester having an impact, but the retail trade number would be consistent, not only with the payroll tax, but again I think healthcare reform might be having an impact. Remember the ADP number? It said for those companies with employees, with 50 to 499, thats the group that would be affected by the healthcare reform, weve seen a rather sharp slowing in job creation. 43k in January, 20k in February and -5 in March.
If we want more hiring, we should be making it less expensive and simpler, rather than more expensive and complicated. As we keep moving to the implementation date for ObamaCare, this will be a larger and larger drag on job creation.
White House chief economist Alan Krueger on CNBC today said that, why no, this mornings awful jobs report does NOT mean the White House is going to be reassessing their economic approach.
He said this:
“I think if you look at todays report and other indicators that are coming in, the economy is continuing to heal. What we need to do in Washington is avoid self-inflicted wounds. Most importantly, the sequester, the CBO estimates, will reduce job growth by 750,000 full time/equivalent jobs by the end of the year. So, weve done a lot of healing in the economy, the housing sector is finally making a turn and we shouldnt be putting up headwinds in the way of the recovery that is taking place. I think this report, and frankly, where weve been over the last year, supports the presidents proposal to have a balanced approach, which supports growth in the near term, invests in our infrastructure, invests in manufacturing innovation, invests in pre-school so were more competitive in the future, and addresses our long-run deficit problems and the president has show that its possible to do that.”
I see his lips moving, and yet I hear no meaningful words coming out.
"Boehner made me do it."
The common thread in both these things is they were both 0boober's ideas.
Look, the concept that the economy can only succeed if we spend a never ending (and ever increasing) amount of money that we do not have flies in the face of every thing I believe that creates a thriving economy. If your economy depends on spending today the wealth that your children have yet to produce, then your economy is, axiomatically, in bad shape. That is how I view it anyway.
Now, why can’t anyone from the GOP side bring that up when interviewed by the lamestream press?
how about neither
how about due to many different factors and conditions banks are not seeing the yields in lending the reserves they are piling up and industries are not seeing big expansion windows ahead - no matter what ou taxes are or are not
How [how, I ask you] could an increase in taxes paid by employees result in a drop in hiring? It makes no sense. It matters not a bit to an employer if his employees have to pay more taxes.
But the ignorant journalists trot it out anyway because they were told that cutting the payroll tax on employees would result in a hiring frenzy. But, again, why would a business hire more people because employees' taxes were being lowered?
There was no benefit to the employer -- only to the employee. The business stood to gain nothing, yet Democrats and Republicans [who are scared to stand up against even stupid tax cuts] went along with the charade.
You don't even have to know economics to understand that the payroll tax cut -- which actually should have been called "The Social Security Underfunding Act" -- could not result in increased hiring. It's simple logic.
I think we're dead.