Unemployment And Stimulus

Here is a Wall Street Journal editorial from Monday:

http://online.wsj.com/article/SB10001424052748703298004574459341050610398.html

I found it interesting for two reasons. First, it has a chart that shows the actual Unemployment Rate vs. that forecast in "The Job Impact of the American Recovery and Reinvestment Plan." Currently the Unemployment Rate is approximately 2% above the rate forecasted with the stimulus.

Second, the editorial mentions the idea of an employment tax credit, i.e. granting a tax credit to employers who hire. This is yet another stimulus idea, and as such is subject to the same risks and unintended consequences that I have previously written of. Apparently one idea is to grant a $3000 tax credit for each new hire in 2010.

I don't believe an employment tax credit will solve, or present a significant solution to, our national unemployment problem. As I wrote in the "Why Aren't Companies Hiring?" blog series the Unemployment problem is not simple in nature.


SPX at 1092.02 as this post is written

A Quizzical Quote From Barney Frank

Here is a story from The New York Times of October 8 that discusses the situation at the FHA:

http://www.nytimes.com/2009/10/09/business/09fha.html?pagewanted=1&_r=2

What I found particularly interesting in this story was a quote from Barney Frank, the chairman of the House Financial Services Committee:

"I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”

My comment on the above quote:

??

SPX at 1085.74 as this post is written

NABE Economic Forecast Survey

Here is another economic forecast survey, this time from NABE:

http://www.cnbc.com/id/33278490/

From the article: "The survey of 44 professional forecasters released by the National Association of Business Economists (NABE) found that 80 percent of the respondents believed the economy was growing again after four straight quarters of declines."

The survey's results for 2010 GDP and Unemployment appear similar to those from The Wall Street Journal's survey I posted yesterday.

This article also mentions housing: "About two-thirds of respondents believed house prices would reach a bottom this year and the survey found that high house prices would not pose a threat to the sector's recovery."



SPX at 1076.19 as this post is written

The Latest WSJ Forecasting Survey

I would like to highlight a couple of facets of the latest Wall Street Journal Forecasting Survey:

http://online.wsj.com/article/SB125494927938671631.html?mod=djemalertNEWS

As stated, "The Wall Street Journal surveys a group of 52 economists throughout the year. Broad surveys on more than 10 major economic indicators are conducted every month. Once a year, economists are ranked on how well their forecasts have fared. For prior installments of the surveys, see: WSJ.com/Economist ."

I found two aspects particularly interesting. First, with regard to unemployment, "On average the economists -- not all of whom answered every question -- expect the unemployment rate to peak at 10.2% in February."

Second, for all of 2010, the average forecast is for 2.8% GDP growth. This forecast of 2.8% growth has not changed significantly since May's first response.



SPX at 1078.17 as this post is written

Updates On Economic Indicators

I would like to do a quick update of some indicators that are supposed to predict economic activity. These indicators have been discussed in previous blog posts:

The ECRI WLI (Weekly Leading Index) was at 127.1 in the week to September 25. Here is Press Release:

http://www.businesscycle.com/news/press/1582/

Fortune's Big Picture Index is at 14.25 as of October 2. This is at a level that is very near to the low of the data series; furthermore, as one can see, its gauge depicting "recession v. recovery" seems to strongly indicate "recession."

http://money.cnn.com/magazines/fortune/storysupplement/recovery_index/index.html

Lastly, the Dow Jones ESI (Economic Sentiment Indicator) is shown to be 34.1, according to the September 30 Press Release here:

http://solutions.dowjones.com/economicsentimentindicator/

I find all three of these indicators to be very interesting, and will continue to post them on occasion.

SPX at 1065.48 as this post is written

"Cash For Clunkers" Revisited

Here is an October 5 Wall Street Journal editorial reviewing the "Cash For Clunkers" stimulus plan:

http://online.wsj.com/article/SB10001424052748703628304574453280766443704.html

Also, to provide perspective, a chart of Vehicle Sales from the CalculatedRisk blog (10/1 post) at this link:

http://www.calculatedriskblog.com/2009/10/light-vehicle-sales-92-million-saar-in.html



As one can see, the "Cash for Clunkers" seems to have been successful in temporarily causing a surge in auto sales for July and August.

One could casually observe that the program was successful, in that it caused a short-term sales spike and the purported associated economic and environmental benefits.

However, this observation would be flawed, as many other factors are present as well. I mentioned some of them during my August 4 post.



SPX at 1057.58 as this post is written

"Stimulus Spending Doesn't Work" Op-Ed

Here is an October 1 op-ed in The Wall Street Journal titled "Stimulus Spending Doesn't Work" :

http://online.wsj.com/article/SB10001424052748704471504574440723298786310.html

Although I don't concur with some of the statements in this Op-Ed, I do believe that its overall message and conclusions are important.



SPX at 1054.72 as this post is written

A Note About Unemployment Statistics

From time to time, I will write posts that contain the Unemployment Rate or various other job loss measures. I show these statistics as they are widely used and quoted by others.

From my perspective, however, the methodology used to measure the various job loss and unemployment statistics does not provide an accurate depiction. There are a variety of reasons for this that become evident if one carefully analyzes the unemployment calculations.

I feel that if one were to accurately gauge the Unemployment Rate, the rate would be at least 20%, which is roughly double the official Unemployment Rate of 9.8%. This 20% figure is above the U6 measure of 17% that many have adopted as an accurate benchmark.

What is bothersome is that even the official unemployment statistics that I show in the blog posts display a very worrisome situation.



SPX at 1054.65 as this post is written