More on an Improving Economy

A little off topic, but Bush changed his mind on the steel tariffs. Look at the states and industries the EU was going to hit with counterstrikes and it's obvious why...
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President To Drop Tariffs On Steel
Bush Seeks to Avoid A Trade War and Its Political Fallout

By Mike Allen
Washington Post Staff Writer
Monday, December 1, 2003; Page A01


The Bush administration has decided to repeal most of its 20-month-old tariffs on imported steel to head off a trade war that would have included foreign retaliation against products exported from politically crucial states, administration and industry sources said yesterday.

The officials would not say when President Bush will announce the decision but said it is likely to be this week. The officials said they had to allow for the possibility that he would make some change in the plan, but a source close to the White House said it was "all but set in stone."

European countries had vowed to respond to the tariffs, which were ruled illegal by the World Trade Organization, by imposing sanctions on up to $2.2 billion in exports from the United States, beginning as soon as Dec. 15. Japan issued a similar threat Wednesday. The sources said Bush's aides concluded they could not run the risk that the European Union would carry out its threat to impose sanctions on orange juice and other citrus products from Florida, motorcycles, farm machinery, textiles, shoes, and other products.

Bush advisers said they were aware the reversal could produce a backlash against him in several steel-producing states of the Rust Belt -- including Pennsylvania, West Virginia and Ohio. That arc of states has been hit severely by losses in manufacturing jobs and will be among the most closely contested in his reelection race.

The sources said that Bush's aides agonized over the options to present to the president and that they considered it one of the diciest political calculations of this term. A source involved in the negotiations said White House aides looked for some step short of a full repeal that would satisfy the European Union but concluded that it was "technically possible but practically impossible."

Bush decided in March 2002 to impose tariffs of 8 to 30 percent on most steel imports from Europe, Asia and South America for three years. Officials acknowledged at the time that the decision was heavily influenced by the desire to help the Rust Belt states, but the departure from Bush's free-trade principles drew fierce criticism from his conservative supporters. After a blast of international opposition, the administration began approving exemptions.

The WTO's ruling against the tariffs was finalized three weeks ago, clearing the way for the retaliatory levies, and Bush's economic team concluded unanimously that the tariffs should be scrapped. The source involved in the negotiations said the consensus in the White House was that "keeping the tariffs in place would cause more economic disruption and pain for the broader economy than repealing them would for the steel industry."

A White House spokesman would not comment beyond saying that it is "still a matter under review by the president, and we'll make announcements when we have announcements to make."

Officials said the repeal could help Bush in Michigan, where automakers and parts factories are heavy consumers of steel and were hurt by the tariffs, but they said that was not the reason for the decision. In 2000, Bush won Ohio and West Virginia, a traditionally Democratic state. He lost Pennsylvania and Michigan, and they are among his top targets in 2004.

Bush travels today to Michigan to make remarks on the economy. Tomorrow he flies to Pittsburgh, headquarters of U.S. Steel Corp., which is the nation's largest domestic steel producer and led efforts to pressure the administration to retain the tariffs. Bush is going there for a fundraiser for his campaign. One of the organizers is Thomas J. Usher, U.S. Steel's chairman and chief executive.

A trade war could be used to bolster Democrats' claims that Bush has been a poor steward of jobs and could force his campaign to focus on manufacturing states where he would otherwise be safe. Republican officials, who had hoped the tariffs would help them make inroads with steelworkers, were disappointed in August when the United Steelworkers of America endorsed Rep. Richard A. Gephardt (D-Mo.) for president.

The administration had foreshadowed the decision, most bluntly when U.S. Trade Representative Robert B. Zoellick told reporters last month that the tariffs had already helped the steel industry to restructure. "The safeguard gave the industry an opportunity to do what we hoped it would do," Zoellick was quoted as saying. Zoellick said when the tariffs were announced last year that they were meant to provide "breathing space" of "a temporary nature to try to give steel companies and steelworkers a chance to get back on their feet."

Steel executives, who have said they will feel betrayed by a repeal, argue that they made the investments and changes that the White House envisioned when the three-year tariffs were announced and that the administration should not buckle to European pressure. Industry sources said that with the decision all but made, the White House recently asked steel companies to present a proposal that would phase out the tariffs instead of eliminating them. These sources said they were pessimistic that Bush would accept the proposal.

Administration officials are bracing for blistering news coverage from Rust Belt states they have been courting, and a lobbyist said unions and the industry plan to organize "a strong and negative response." But a Republican source said Bush's aides have calculated that the decision alone will not swing the election in any of the steel states.

With heavy lobbying campaigns underway by both sides, including advertising in the affected areas, lawmakers from steel states wrote to Bush's senior adviser, Karl Rove, on Nov. 21 to request a meeting about the issue.

 

I'll spin away. Not as a slam mind you on GWB or anybody, but to raise a few points regarding the unemployment situation.

It's nice that manufacturing jobs are doing better, and while it conjures up images of blue collar, working class, middle america types, but we switched over from being a manufacturing based- to services based- economy about 20 years ago; so most of the worlds manufacturing is not going to be done in the US. Ultimately, the big picture is far more affected by the services industry than steelworkers here and there,

The problem with that area is that, with the advent of the internet, communications, etc etc etc, the Services industry is now facing a new wave of structural unemployment for the first time in a long time. Example: Bangalore, India runs customer service centers for Dell and a number of other high tech companies. Just the other day I called American express and ended up talking with a bunch of Poles.

Jobs like this aren't coming back. Ever. This is not really anybody's fault, but it is something that is highly relevant, far more so than manufacturing jobs at this point.

 

Interesting article from the NYTimes today...
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Why Americans Must Keep Spending
By LOUIS UCHITELLE

NOTHING props up the economy more than consumers, and dips in their spending frighten forecasters. But that is all that has happened in recent years - dips, not plunges. Consumers in America spend because they feel they must spend. More than in the past, the necessities of life, real and perceived, eat up their incomes.

That treadmill spending is good news for the economy. As a recovery takes hold, the biggest threat to its survival would be a downturn in consumer spending. That is not inconceivable: The support for recent spending - the household cash generated through mortgage refinancings and tax cuts - is disappearing, and a new source of cash, from many new jobs and many new paychecks, is not yet a reality.

But do not worry, various experts say. Consumers will keep spending anyway, going deeper into debt to do so if they must. They have too many needs, some that were luxuries only yesterday. A second car and child care, for example, are now necessities for millions of households with two earners commuting to jobs. Mall-crawling, for all its popularity, is increasingly the anomaly, not the norm, in the vast realm of personal consumption.

So as the typical household keeps spending, and as other sectors of the economy revive, the country will prosper. There is considerable optimism on this point among the nation's forecasters. All but one of the 51 surveyed by Blue Chip Economic Indicators expect the economy to grow more strongly in 2004 than it has in the past 33 months - expanding at a 4 percent annual rate, up from less than 3 percent through most of the past three years.

"The economic upturn does have staying power," said Lynn Reaser, chief economist of Banc America Capital Management, the primary investment management group of the Bank of America.

Business investment, she notes, is already on the rise, profits are soaring and stock prices have gone up, reawakening the wealth effect. Above all, consumption outlays, which never flagged during the 2001 recession and the weak economic growth thereafter, surged in the third quarter, contributing significantly to economic growth. Not surprisingly, mortgage refinancing reached a peak in this quarter, as homeowners took advantage of low interest rates, and so did the effects of the tax cuts championed by the Bush administration. Without that support, consumer spending may dip in the months ahead, but it will not plunge. Too much of a household's income goes for items now considered necessities.

This spending truly matters. Consumers are purchasing roughly $7.6 trillion a year in goods and services. Their outlays represent about two-thirds of the nation's economic activity, so when people slow their buying, the growth of the economy also slows. But that seldom happens anymore.

Look back to 1947, a total of 227 quarters. In only 20 of these three-month periods did a drop or weakness in consumer spending curb economic growth or weaken an expansion, and most of that occurred in the early decades. Only three times in the last two decades has consumer spending faltered enough to damage the economy - twice during the 1990-1991 recession and once as the slow recovery got under way. That drag disappeared in the 2001 recession, the first since the 1940's in which consumer spending rose enough to limit the contraction instead of contributing to it.

This suggests that consumers are earmarking an increasing share of their disposable income for purchases that are, or that they consider, necessary, even in recessions. "The spending you can't fool around with has gone up - for homes, health insurance, day care, car payments," said Elizabeth Warren, a Harvard Law School professor and co-author of "The Two-Income Trap" (Basic Books, 2003). She argues that the optional portion of consumer spending has become relatively small.


SO even if more jobs and more paychecks fail to materialize, the typical household will keep up its spending, Ms. Warren contends. People will do so by going into debt, or deeper into debt, to acquire what they view as essentials. Such consumption will help sustain the economy in the coming presidential election year, although painfully for many households. "It is hard to construct a happy story for 2004 unless we consistently create a significant number of jobs, which we have not done yet," said Mark Zandi, chief economist at Economy.com, a research and consulting firm.

The happy story will materialize once the strengthening economy is consistently generating 300,000 jobs a month, said Jared Bernstein, senior labor economist at the Economic Policy Institute. So far, job creation, while finally rising, has not reached half that level. If the level is reached soon and maintained over the next year, that would be enough to absorb the nearly 3 million people who want to work and begin to push wages up. Real disposable personal income - that is after-tax income - has risen by 3.2 percent over the past year, but that resulted almost entirely from the mortgage refinancings and tax cuts, the Commerce Department reported. The wage portion has been stagnant for nearly three years.

"Nonlabor sources have been the sole driver of real disposable income," Mr. Bernstein said.

The growing list of purchases that households consider essential helps explain why "personal consumption expenditures," as the Commerce Department calls them, held up so well over the last 33 months, which included an eight-month recession followed by persistently weak economic growth.

There have been 10 recessions since World War II, and this was the first in which consumer spending provided support instead of dragging the economy down. With jobs disappearing and wage income going nowhere since 2001, that support should theoretically have given way this time, too. But households regarded an increasing portion of their outlays as essential.

What is more, they had nonwage means to pay for them. Rising home prices and falling interest rates allowed homeowners to withdraw tens of billions of dollars in equity from their homes through mortgage refinancing. Tax cuts have also fueled consumer spending. The two together put more than $200 billion into people's pockets this year. The falling interest rates also encouraged households to run up other debt: car loans, for example, and on credit cards.

Still, while consumer debt, including mortgages, is at a record level - approaching $8 trillion, according to the Federal Reserve - the monthly repayment at nearly 14 percent of disposable income is manageable, according to Edward McKelvey, a senior economist at Goldman Sachs. The Federal Reserve's "financial obligations ratio," which includes debt service as well as rent, auto leases, property taxes and homeowner insurance, comes in at 18 percent of disposable income. Both measures are at near-record levels, but not so high as to inhibit spending, thanks mainly to low interest rates.

"What consumers consistently tell us is that mortgage rates and car loan rates have never been lower, and that is an opportunity they don't think they should miss," said Richard T. Curtin, director of consumer surveys at the University of Michigan. "They don't expect these rates to be lower in their lifetimes."

Now these sources of cash flow - particularly mortgage refinancing, the biggest source of all - are drying up as interest rates begin to rise in a strengthening economy, and the tax cuts run their course. As a result, the total new stimulus from these sources will be around $100 billion in 2004, less than half this year's injection. Most of it will be delivered in the winter and spring in the form of tax refunds, as a result of the retroactive nature of this year's tax cut.

"Our models tell us that modest increases in interest rates will sharply curtail mortgage refinancing by the end of the first quarter," said Douglas Duncan, chief economist at the Mortgage Bankers Association in Washington.

But economic rescue is at hand, the forecasters insist. They foresee rising employment that will lead to more wage income as the recovery takes root. Or, as James W. Paulsen, chief investment strategist for Wells Capital Management, put it: "We are switching stimulants for the household."

Consumer spending is not the only source of economic growth, of course. Government outlays and business investment are also big factors, but the former comes to $2.1 trillion annually and the latter to $1.2 trillion. So if consumer spending, the $7.6 trillion elephant, is pulling the nation's $10.8 trillion economy in one direction, neither of the other factors pulling in the opposite direction is likely to win the tug of war. That is particularly the case today. Government spending is barely rising, and business investment, although rising strongly, is limited mainly to replacement of aging computers, government data suggest. Given so much idle production capacity, economists say, business investment for expansion is not likely to kick in soon.

That makes the composition of consumer spending increasingly important in assessing the economy. If consumers were to decide that they could cut back on spending, the recovery would be in trouble. However, as long as they view much of their spending as essential, it should be sufficient to support the recovery.

Statistics compiled by the Commerce and Labor Departments are inconclusive on this issue because the line between discretionary and essential spending is hard to draw. "They form a continuum," said Stephen Brobeck, executive director of the Consumer Federation of America, but the continuum, he said, is tilting toward more nondiscretionary spending.

Typical households - those that account for more than half of the nation's personal consumption expenditures - have two earners and one or two children, according to various experts in these demographics. The two earners bring home together $60,000 to $80,000 a year, and they disperse 70 to 75 percent of it for essentials: groceries, home costs, vehicles and fuel, public transportation, education and health care. That outlay is up roughly four percentage points since 1990, according to the Bureau of Labor Statistics.

More important is the remaining 25 percent or so of the spending. It could weaken the economy if it declined sharply enough. That 25 percent seems discretionary, but in many cases it is not, said Mark Cooper, director of research at the Consumer Federation. Take cable or satellite television, cellphones and Internet hookups. The majority of the nation's 111 million households have one or more of these items, and the proportion is rising. For all three, a household pays at least $130 a month in fees, all of it once considered discretionary. "People have come to define their quality of life as being full participants in the information age," Mr. Cooper said, "so they give up the connections slowly, and they feel deprived when they have to do without cable TV or cellphones or the Internet."

What about designer wear, electronic gadgets, television sets? They are more easily sacrificed than housing or food in hard times. Yet expenditures are rising for this merchandise, too, strong evidence that they have been converted into essentials for many households through social pressures, says Juliet B. Schor, an economist and sociologist at Boston College and the author of "The Overspent American" (Basic Books, 1998). "These lifestyle and expenditure norms have risen pretty dramatically for the middle class and the upper middle class," she said.

No one has been more forceful lately than Ms. Warren and her daughter, Amelia Warren Tyagi, a business consultant, in pushing the message that the typical household is increasingly diverting income to purchases they now see as essential. In their book, "The Two-Income Trap," they define essential consumption more narrowly than Ms. Schor, excluding purchases that result from social pressure.

They see the pressure on a household to spend beyond its means as coming from two directions: Household incomes are rising more slowly than the costs, yet families keep up their spending because so much of it is needed to maintain a certain standard of living. Stretching to purchase a home in a community with a good school system, for example, is viewed by many as a necessity and not an option, now that public school quality has declined in so many less expensive communities. "People will not give up these homes," Ms. Warren said. "They have to be persuaded there is no hope before they do that."

A third squeeze, the authors note, is that the typical household already has two adults at work. By contrast, in the early 1970's most households had one adult (usually the wife) still at home, available to take a job and supplement family income if the principal earner's wages fell short.

The arguments made by Ms. Warren and Ms. Tyagi resonate. Personal consumption expenditures, adjusted for inflation, have risen since 1973 at a faster average annual rate than median household income, similarly adjusted for inflation: spending is up at a 3.2 percent annual rate versus a 0.5 percent increase in income, according to recent government data.

As a result, a typical two-earner household with a $68,000 annual income today is earmarking 75 percent of it for such fixed costs as mortgage payments, child care, health insurance, cars and taxes. In the early 70's, only 54 percent of a typical household's $39,000 income went for the same expenses, the two authors maintain.

"What happens when income falls short is that people start increasing the risks they take to keep up their spending," Ms. Warren said. Cut off from mortgage refinancing, they turn to home-equity loans, which are now on the rise, and, if they cannot pay their debts, to personal bankruptcy. Bankruptcies have risen in each of the past three years.

In this situation, rising employment and the new paychecks that come with it are the lifesaver nearly every forecaster is counting on to sustain consumption. But the hiring will have to be robust, approaching 300,000 new jobs a month, Mr. McKelvey of Goldman Sachs said, echoing Mr. Bernstein. Otherwise it will not generate enough new disposable income to offset the rise in debt payments as interest rates go up - and people might grow reluctant to take on new debt, even to buy essentials.

"That is the pessimistic scenario," Mr. McKelvey said. "But in my mind there will be enough job growth; that is a more realistic scenario. The numbers today have created a sense that the process has begun to take shape, and in two or three months, we'll be there."

 

Spin - what's that number, three million jobs lost and counting? I guess that's an improvement if you are a Bushie.


Jobs going to India - tough luck mate.
http://news.bbc.co.uk/2/hi/business/3255606.stm

 

Holiday bonuses remain fewer, frugal despite rising economy
By Stephanie Armour, USA TODAY

Companies are holding back on year-end bonuses despite the recent uptick in the economy.

Nearly two-thirds of companies won't offer a holiday bonus this year, according to a survey by human resources firm Hewitt Associates.

And only about a quarter of employers said incentive payments such as annual bonuses would be larger in 2003 than they were in 2002, according to a poll by Mercer Human Resource Consulting. Far more said their payouts would be equal or less.

"It's a little more pessimistic than we expected, and it's a dramatic turnaround from what we saw several years ago," says Steven Gross at Mercer. "The recovery hasn't been as robust as companies expected."

CUNA Mutual Group in Madison, Wis., which underwent layoffs last year, is forgoing a holiday bonus for a second year as part of an agreement with union members.

In addition, the company won't hold its usual formal, off-site hotel party. Instead, it will hold an on-site gathering to mark the year.

"Even though we're not having the traditional party with steak-and-shrimp dinner, we still want a way for employees to celebrate," says Sydney Lindner at CUNA Mutual. "It's clearly going to be less expensive, but this gives us all an opportunity to gather and reflect."

At HR Staffing Solutions, a temporary staffing service based in Syracuse, N.Y., year-end bonuses will be about 30% less than they were last year.

"We had a good year, and we'll give bonuses, but I'll be careful to protect our capital," says S. Graham Atkinson, president of HR Staffing.

<b>One reason for the frugal approach is the labor market. A 6% jobless rate means employers don't need to shower bonuses on workers to keep them.</b> <I>Meaning, be happy you have a job</I>

Companies are still struggling to meet earnings expectations without raising prices. With other costs such as health care climbing, they're relying on ramped-up productivity and cost-cutting measures such as smaller bonuses.

"A lot of bonuses are tied to sales growth, and that high-revenue growth hasn't been there," says Tom Wamberg, CEO of Clark Consulting, an executive compensation and benefits firm in Barrington, Ill.

But many employees won't be surprised. A survey by Clark found 70% of executives from Fortune 1,000 companies expected to fall short of earning maximum annual bonuses.

While some workers get only a nominal amount for a bonus, others rely on yearly payouts for a financial boost. Bonus payouts are common in financial services, sales and for executives in many industries. <b>For executives, incentive payouts can be as high as 35% of base salary; for hourly workers, they are closer to 5% of annual pay.</b>

The good news? If the economic recovery continues, most companies expect bonuses to be higher next year. <I>Haven’t people said that for the last 3 years?</I>

 

It's funny people keep trying to spin the good news.

Anyways, I'm not spending much money. I bought a car last year and paid for a CPA class, but that's about it. The rest is going to saving and paying off debt.

 

Dell computers just brought back India jobs... link

Dell sending jobs back to US


A local newspaper in the US has reported that Dell is moving technical support jobs back from India to Texas. Dell was among the first large US companies to move tech support jobs to cheaper Indian call centres when technology spending plummeted three years ago.

According to the paper, quoting Dell, customers made a lot of noise and felt some angst, which is why it has decided to make the u-turn. It has been reported that customers were having problems with support calls being based on scripts.

"Our corporate customers have come to expect a certain level of expertise," Gary Cotshott, vice president of Dell's services division said.

To take one recently reported experience in the US of a computer consultant in Austin, Texas, where Michael Dell is said to have started the firm selling boxes out of the trunk of his car while attending the University of Texas. The consultant wrote on the mailing list:

"I was a HUGE Dell fan from probably '91 or '92 until the last few weeks. I currently have an Inspiron 5100. I will *never* buy another Dell again. Let me make this clear: I would sooner eat worms than spend another penny on anything from Dell".

Why the change in attitude? All it took was a couple of phone calls to tech support after he had a problem with the RJ-45 connector on his four-month-old laptop. Concerning the first call, the consultant said:

"I called Dell support, spent 10 minutes getting through the menu and then on hold, and got someone in India who obviously had not done well in English class. It took over 5 minutes for her to just get my name entered correctly. Then - and I am not kidding here, folks - when she asked me what OS I was running, SHE ASKED ME TO SPELL WINDOWS!"

The US jobs will be based in central Texas where Dell already operates several call centers for tech support and sales. The paper says 'Dell's about-face could provide at least a little "I told you so" comfort for Dell technical-support employees in Central Texas who were laid off in 2001'.

 

btw woofer ... your link is about the UK and NOT the US.

Nothing to do with "Bushies."

 

Where does this number come from anyway?

 

For the record, I am honestly asking because I can't figure it out. I mean, I see the number bandied about (though the number is not consistent. Sometimes it's 3 million, sometimes 2.4 million, etc.) and I have no idea how to find the data to back this up or how such a number is calculated.

I mean, it can't be the number of people employed because the Bureau of Labor Statistics says there are more people employed now than there were in January, 2001, when Bush took office (138,014,000 in October, 2003 vs. 137,846,000 in January, 2000... seasonally adjusted figures). So how does 168,000 more employed people work out to 3,000,000 fewer jobs?

Is it one of those situations where, because the population is growing, that jobs have to grow at a certain rate to keep up in order to be considered staying the same? i.e. if jobs aren't added at a fast enough rate, those jobs are considered "lost" even though they never existed in the first place?

Or are lost/created jobs just calculated differently than simply looking at the number of jobs there are and seeing if that number is higher or lower than before?

Does anyone actually know?

 

This Krugman piece would seem to discredit the idea that the pace of job creation has to keep up with the growth of the working age population since he notes that Clinton created 11,000,000 jobs per term, which almost coincides with the BLS.gov numbers.

Employed (seasonally adjusted):

January, 1993: 119,075,000
January, 1997: 128,298,000

Net New Jobs: 9,223,000

January, 1997: 128.298,000
January, 2001: 137,846,000

Net New Jobs: 9,548,000

Total: 18,771,000 (or nearly 200,000 per month)

Now, if the BLS numbers jibe with Krugman's numbers here, then where does everything go wrong when calculating the Bush numbers?


New York Times, 10/24/2003
Too Low a Bar
By Paul Krugman



John Snow, the Treasury secretary, told The Times of London on Monday that he expected the U.S. economy to add two million jobs before the next election — that is, almost 200,000 per month. His forecast was higher than those of most independent analysts; nothing in the data suggests that jobs are being created at that rate. (New claims for unemployment insurance are running at slightly less than 400,000 a week, the number that corresponds to zero job growth. If jobs were being created as rapidly as Mr. Snow forecasts, the new claims number would be closer to 300,000.)

Still, Mr. Snow may get lucky, and the job market may pick up. But his prediction was a huge climb-down from administration predictions earlier this year, when the White House insisted that it expected the economy to add more than five million jobs by next November.

And even if Mr. Snow's forecast comes true, that won't vindicate the administration's economic policy. In fact, while private analysts are criticizing Mr. Snow for being overly optimistic, I think the stronger criticism is that he's trying to lower the bar: to define as success a performance that, even if it materializes, should really be considered a dismal failure.

Bear in mind that the payroll employment figure right now is down 2.6 million compared with what it was when George W. Bush took office. So Mr. Snow is predicting that his boss will be the first occupant of the White House since Herbert Hoover to end a term with fewer jobs available than when he started. This is what he calls success?

Bear in mind also that just increasing the number of jobs isn't good enough. If we want to improve the dismal prospects of job seekers — currently, 75 percent of those who lose jobs still haven't found new jobs when their unemployment benefits run out — the number of jobs must grow faster than the number of people who want to work. Indeed, because the working-age population of the United States is steadily growing, the economy must add about 130,000 jobs each month just to prevent the labor market from deteriorating.

Mr. Snow thinks the economy will, finally, start to do better than that — but it's not happening yet. In September, employment rose for the first time since January, but the increase was only 57,000 jobs. And to have kept up with the population growth since Mr. Bush took office, the economy would have to add not two million, but seven million jobs by next November.

Mr. Bush's employment policies would truly have been a success if he had left the job market no worse than he found it. In fact, even his own Treasury secretary thinks he'll fall five million or so jobs short of that mark.

I know, I know, the usual suspects will roll out the usual explanations. It is, of course, Bill Clinton's fault. (Just for the record, the average rate of job creation during the whole of the Clinton administration was about 225,000 jobs a month. Mr. Clinton presided over the creation of 11 million jobs during each of his two terms.) Or maybe Osama bin Laden did it.

But surely there must be a statute of limitations on these excuses. By the time of the election, Mr. Bush will have had almost four years to deal with the legacy of the technology bubble, and more than three years to deal with the economic fallout from 9/11.

And Congress has given him everything he has wanted in terms of economic policy, even though that has led to a frightening explosion in federal debt: in the current fiscal year the Bush tax cuts will account for almost $300 billion of a deficit expected to top $500 billion. (If that $300 billion had been used to employ workers directly — a new W.P.A., anyone? — it would have created six million jobs.)

Yet Mr. Bush's own Treasury secretary has, in effect, admitted that despite the administration's unimpeded efforts, and all that debt, the job market will still be in poor shape a year from now.

Mr. Bush's handlers have often managed to have small achievements hailed as triumphs by persuading people to set the bar very low. Now his officials are trying to convince the public that if, after several years of dismal performance, they can achieve one year of job creation at a rate below the average rate Bill Clinton achieved over eight years, this will constitute a great economic victory.

Copyright © 2003, New York Times Company

 

The incredibly long run of amazingly low interest rates can't last indefintely. Consumer spending is being driven by cheap credit, the resultant buying, and mortgage refinancing adding its fuel. With the stupendous deficits for the foreseeable future and that sucking sound we'll be hearing of money drying up as interest rates rise, what longterm hope have we of a vibrant economy? It is far more likely, in my opinion, that we will see a crashing halt to this growth. I hope I'm wrong, but I can't see how this can be sustained.

Bush and his advisors are following a mad policy, focused on winning the next election at the expense of everything else.

 

Hey, I only posted the article to investigate the job numbers claim. You aren't allowed to pervert that for your own purposes.

 

Sure, with all things being 'static', but the economy is a circular equation, Deckard. Throw in global effects (esp. a weak dollar) and the forecasting gets tougher, eh?

 

I couldn't help myself!


Cohen, I know things are more complicated than I described.
I just can't stand to see these massive deficits going out of sight for the foreseeable future and Bush just keeps cutting taxes. In my opinion, it's crazy. And I don't love paying taxes either. I just think that you don't cut them in the middle of a war. That's reason enough not to do it. It's nuts.

 

As good a thread as any for Krugman's column...
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Looting the Future
By PAUL KRUGMAN

One thing you have to say about George W. Bush: he's got a great sense of humor. At a recent fund-raiser, according to The Associated Press, he described eliminating weapons of mass destruction from Iraq and ensuring the solvency of Medicare as some of his administration's accomplishments.

Then came the punch line: "I came to this office to solve problems and not pass them on to future presidents and future generations." He must have had them rolling in the aisles.

In the early months of the Bush administration, one often heard that "the grown-ups are back in charge." But if being a grown-up means planning for the future — in fact, if it means anything beyond marital fidelity — then this is the least grown-up administration in American history. It governs like there's no tomorrow.

Nothing in our national experience prepared us for the spectacle of a government launching a war, increasing farm subsidies and establishing an expensive new Medicare entitlement — and not only failing to come up with a plan to pay for all this spending in the face of budget deficits, but cutting taxes at the same time.

Recent good economic news doesn't change the verdict. These aren't temporary measures aimed at getting the economy back on its feet; they're permanent drains on the budget. Serious estimates show a long-term budget gap, even with a recovery, of at least 25 percent of federal spending. That is, the federal government — including Medicare, which Mr. Bush has given new responsibilities without new resources — is nowhere near solvent.

Then there's international trade policy. Here's how the steel story looks from Europe: the administration imposed an illegal tariff for domestic political reasons, then changed its mind when threatened with retaliatory tariffs focused on likely swing states. So the U.S. has squandered its credibility: it is now seen as a nation that honors promises only when it's politically convenient.

What really makes me wonder whether this republic can be saved, however, is the downward spiral in governance, the hijacking of public policy by private interests.

The new Medicare bill is a huge subsidy for drug and insurance companies, coupled with a small benefit for retirees. In comparison, the energy bill — which stalled last month, but will come back — has a sort of purity: it barely even pretends to be anything other than corporate welfare. Did you hear about the subsidy that will help Shreveport get its first Hooters restaurant?

And it's not just legislation: hardly a day goes by without an administrative decision that just happens to confer huge benefits on favored corporations, at the public's expense. For example, last month the Internal Revenue Service dropped its efforts to crack down on the synfuel tax break — a famously abused measure that was supposed to encourage the production of alternative fuels, but has ended up giving companies billions in tax credits for spraying coal with a bit of diesel oil. The I.R.S. denies charges by Bill Henck, one of its own lawyers, that it buckled under political pressure. Coincidentally, according to The Wall Street Journal, Mr. Henck has suddenly found himself among the tiny minority of taxpayers facing an I.R.S. audit.

Awhile back, George Akerlof, the Nobel laureate in economics, described what's happening to public policy as "a form of looting." Some scoffed at the time, but now even publications like The Economist, which has consistently made excuses for the administration, are sounding the alarm.

To be fair, the looting is a partly bipartisan affair. More than a few Democrats threw their support behind the Medicare bill, the energy bill or both. But the Bush administration and the Republican leadership in Congress are leading the looting party. What are they thinking?

The prevailing theory among grown-up Republicans — yes, they still exist — seems to be that Mr. Bush is simply doing whatever it takes to win the next election. After that, he'll put the political operatives in their place, bring in the policy experts and finally get down to the business of running the country.

But I think they're in denial. Everything we know suggests that Mr. Bush's people have given as little thought to running America after the election as they gave to running Iraq after the fall of Baghdad. And they will have no idea what to do when things fall apart.

 

http://cbs.marketwatch.com/news/sto...-8730-EF2FB951000A}&siteid=google&dist=google


Jobless claims rise slightly
4-week average up 3,000 to 362,500

By Rex Nutting, CBS.MarketWatch.com
Last Update: 9:25 AM ET Dec. 4, 2003



WASHINGTON (CBS.MW) - First-time jobless claims rose last week for the first time in six weeks.


The average number of Americans filing for state unemployment benefits over the previous four weeks rose by 3,000 to 362,500, the Labor Department said Thursday. Read the full release.

In the most recent week, initial claims rose by 11,000 to 365,000. The four-week average is considered a better gauge of the labor market than the volatile weekly number.

The average number of initial claims has declined by about 50,000 over the past two months, as the weak U.S. labor market gained strength.

"Given the clear downward trend, this increase in all likelihood is nothing more than noise," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. "There is no reason to believe at this point in the cycle that layoffs have begun to rise again."

At just over 350,000 per week, initial claims are close to the level that could indicate enough strength in the labor market to begin bringing down the unemployment rate, which currently stands at 6 percent.

The claims data measure the number of workers who lost their jobs through no fault of their own and were eligible for unemployment benefits. They reflect layoffs, not hiring.

The number of workers still collecting benefits also increased slightly in the last week to 3.385 million. The four-week moving average fell to a nine-month low of 3.42 million.


"The real data of importance was the revision to last week's continuing claims," said Mat Johnson, chief economist at Quantit Group. During the survey week for the November payrolls report, continuing claims were nearly 200,000 lower than in the October survey week, rather than 170,000 lower as reported previously.

The continuing claims figures do not include some 810,000 Americans receiving extended federal benefits that are available only after workers have exhausted their state benefits, typically after six months.

The federal program will stop accepting new claimants after the new year.

Continuing claims have fallen by about 250,000 over the past two months, reflecting increased hiring in the economy. Some economists say large numbers of workers are exhausting their benefits without finding work, contributing to the decline.

The Labor Department will report on November's job situation, with economists expecting payrolls gains of about 140,000, not including some 65,000 workers who were out on strike. The jobless rate is expected to remain at 6 percent. See Economic Calendar.

Nonfarm payrolls rose by 126,000 in October, the third straight increase.

However, the number of long-term unemployed has remained very high. In October, more than 2 million of the 8.8 million officially unemployed Americans had been out of work longer than six months. The average length of joblessness was 19.1 weeks.

In a separate report that helped explain the weak labor market, the Labor Department said productivity surged at a 9.4 percent annual rate in the third quarter, the highest in 20 years. Unit labor costs fell 5.8 percent, the biggest drop in 20 years. See full story.

With productivity up 5 percent in the past four quarters, employers were able to get as much work out of 950 workers in the third quarter that they got out of 1,000 a year ago.

Rex Nutting is Washington bureau chief of CBS.MarketWatch.

 

http://www.sunspot.net/business/bal-jobless120103,0,6585663.story?coll=bal-business-headlines
Jobless recovery is good for many firms
U.S. employers are in no hurry to resume hiring as increased productivity cuts their need for workers
--------------------------------------------------------------------------------
By David Streitfeld
Times Staff Writer
Originally published December 1, 2003



LOS ANGELES -- The economy roared last quarter, and so did Falcon Plastics Inc.

A family owned firm in the eastern South Dakota city of Brookings, Falcon posted record sales in September. Yet there's no impulse to celebrate, no rush to hire. The bad times are still too vivid.

"We want to make sure that when we add someone, we won't have to turn around in three months and let them go," Falcon President Jay Bender said.

Multiply Falcon's situation by tens of thousands of other companies, and a picture begins to develop of an economy climbing a wall of worry.

Last month, the U.S. Labor Department in Washington said that employers added a net 126,000 payroll jobs in October. In all, the economy has added 286,000 positions over the last three months -- the best showing since early 2001.

But 2.4 million more jobs would be needed to regain all the ground lost since March 2001, when the last recession began. When, or even if, those positions will come back is far from clear.

Here's the problem: Many companies like the notion of a jobless recovery. The leaner they can keep their U.S. payrolls -- by using overtime, automating the production process and outsourcing jobs overseas -- the higher their profits.

The murky hiring picture affects not only the 8.8 million unemployed but the 1.6 million who want a job but aren't actively looking for work. It affects millions more who want a full-time job but must get by with part-time work. And it weighs on the more than 130 million employed.

"The greatest single concern people appear to have about the economy is jobs," investment house Fred Alger Management Inc. said in its November market review. "We have companies and an economy that can shift gears quickly, but not the kind of job creation and job security that people understandably seek."

'Still very cautious'

For Falcon, as for many companies, the 2001 downturn was swift and harsh. Annual sales tumbled from $20 million to $14 million. The 305 employees shrank to 175. "Sometimes," Bender said, "you have to cut off your arm to save your life."

The emergency surgery was a success. For the fiscal year that ends in April, Falcon expects again to hit sales of $20 million. But the payroll is back to only 200 workers. Any further growth, Bender said, "will be incremental. We're still very cautious."

So, too, are consumers. Although the economy expanded during the third quarter at its fastest rate in 19 years, people's confidence in the future remains "middling," noted Richard Curtin, who directs the University of Michigan's monthly consumer survey. The tenuous job situation is a big reason.

"It used to be understood that when business weakened, layoffs went up. When it improved, people were called back to do the same jobs at the same employers," Curtin said. "Now, if people lose their jobs, they have to find new skills and a new job at a new employer. It's a more daunting challenge."

Layoffs amid profits

It's one that many stand to face, even as the economy picks up steam. The job placement firm of Challenger, Gray & Christmas in Chicago reported that planned layoffs at U.S. firms were 171,874 in October, more than double September's total and the highest in a year.

Duke Energy Co. said it would eliminate 8 percent of its global work force, or 2,000 jobs. Sony Corp. will cut several thousand U.S. jobs as part of a major restructuring. Tyco International Ltd. said it would do away with 7,200 jobs, or 3 percent of its labor force.

In some cases, the cuts were accompanied by solid earnings reports. Boise Cascade Corp. said sales increased 9 percent in the third quarter and profit nearly quadrupled. But the wood-products firm is continuing layoffs, which have reduced the number of employees by 460 this year and will lop off an additional 90 during the fourth quarter.

Electronic Data Systems Corp. fulfilled Wall Street's expectations for the third quarter, but the computer services company nonetheless announced it would cut an additional 2,500 jobs in its third layoff in a year.

But one major company going against the trend is IBM Corp., whose chairman, Samuel J. Palmisano, said he foresees the need in 2004 "for approximately 10,000 new positions in key skill areas." IBM has 315,000 employees, roughly the same number it had when the boom peaked in 2000.

However, fewer than half its workers are in the United States, and Palmisano didn't specify where the hiring would take place. Alliance@IBM, a union representing workers at the technology company, said the announcement was a "smokescreen" for the fact that many IBM jobs were being transferred overseas, where they would be filled by Indian or Chinese software engineers.

Signs of hope

For its part, the Bush administration suggests that the employment picture is bound to improve next year as the economy continues to strengthen. And there are some promising signs. First-time unemployment claims unexpectedly dropped last week to their lowest level since early 2001.

Although initial claims often are revised upward, economists were heartened by the report, saying it could be further evidence that the drought in jobs was coming to an end.

Analysts say 150,000 jobs must be created every month just to keep pace with population growth. Only if more than that number are created would the unemployment rate, currently 6 percent, continue to fall.

"There can't be a jobless recovery," Treasury Secretary John W. Snow recently told the Economic Club of Washington. "The nature of a recovery is to recover. You don't recover if lots of people are looking for work and can't find work."

Yet that's just what's happening in some places. A survey of 74 companies by Pacific Staffing, which supplies temporary workers to hundreds of local businesses in the Sacramento area, found that most weren't planning to add employees.

"We haven't seen a big spike the way you would have in previous recoveries," said Pacific Staffing President Jay Jurschak.

Firms expand operations

If investments aren't being made in new people, money definitely is being put down for new equipment. Business spending on equipment and software rose 15.4 percent in the third quarter, the biggest jump since the first quarter of 2000.

Pine Hall Brick Co. in Winston-Salem, N.C., just built its fourth factory and retooled part of an older plant. Both are now heavily automated. As a result, Pine Hall's brick-making capacity is up about 25 percent -- but its employee count has risen only 10 percent.

"It's better for us now, and for our employees," said Pine Hall President Fletcher Steele. "We took the guys who used to move bricks by hand and trained them to operate machines. The employees who remain are more highly skilled."

Falcon Plastics, which makes custom injection moldings, restructured during the recession out of necessity. It also gambled on a better future, increasing the size of one plant from 30,000 square feet to 50,000.

By this point, the Falcon factories are fairly humming. Employees are working 48 hours a week - "some voluntary, some mandatory," Bender, the president, said. Despite the fact that they're getting time-and-a-half for those extra hours, Bender said it's no more expensive than giving benefits to new workers.

All of this helps explain why the unemployment rate in Falcon's home state, where two of its three factories are located, isn't dropping faster.

South Dakota's jobless rate nearly doubled from 1.9 percent in March 2000 to a recessionary peak of 3.7 percent in December 2001. The most recent rate, in September, was only marginally improved at 3.4 percent.

'Lean and mean'

Doing more with fewer workers cuts across the economy. Intel Corp., the Silicon Valley chip maker, reported third-quarter sales rose 20 percent and net income more than doubled compared with the same period last year. The reason: increased productivity.

Over the past four years, Intel has been building wafer fabrication plants in New Mexico, Arizona, Oregon and Ireland.

"They're a huge capital investment, but the payoff is tremendous," spokesman Chuck Mulloy said. "We can make more than twice the number of units with the same staff."

For the fourth quarter, Intel projects sales as high as $8.7 billion. That would equal its record achieved in the fourth quarter of 2000, when the company had 86,000 employees. Current employment is 79,000. There are no plans to add more in the U.S. until the economy "improves significantly," Mulloy said.

Productivity is up just about everywhere. In the third quarter, nonfarm productivity rose 8.1 percent, a rate exceeded only twice in the last decade.

"If you survived the last few years, you've done it by being really mean and lean," said Scott Montrey, a spokesman for the National Assn. of Manufacturers. "And once you get lean and mean, you don't go back to being fat and lazy."

The trouble, economist Nick Perna said, is that "if every company was lean and mean, the economy would be in serious recession."

Perna, who is credited with coining the term "jobless recovery" more than a decade ago, is hopeful that, as confidence builds and the economy expands, hiring will follow. After all, the jobless recovery of the early '90s eventually gave way to a lengthy, job-packed expansion.

"In the best of all worlds, we'll get rapid productivity growth and, when people are displaced, they're able to find work in other sectors," Perna said.

John Challenger, chief executive of Challenger, Gray & Christmas, the placement firm, is more bleak.

"My sense is that hiring and job creation will be meager," he said. "There are huge transformative forces at work, with technology and globalization forcing us in different directions. I think we're in uncharted territory."
Copyright © 2003, The Los Angeles Times