Spending Daily | October 5, 2012
Positive Jobs Report Obscures Major Obstacles To Growth
The unemployment rate dropped to 7.8 percent in September, down from August’s 8.1 percent, according to the Bureau of Labor and Statistics’ jobs report released today. ”Today’s announcement that the unemployment rate has dropped to 7.8 percent is a thin veneer on a turbulent economy,” said Public Notice Executive Director Gretchen Hamel. “Right now we’re treading water with a low labor participation rate, and this report is confirmation that growth is still sluggish at best. With the national deficit topping $1 trillion for a fourth straight year and the fiscal cliff threatening to throw us back into a recession, there is hardly cause for celebration. Americans are worried, and we can’t afford to wait any longer for Washington to get its act together and get our economy back on track.” While Washington may tout a decrease in unemployment, a closer look at the numbers across the states tells a different story.
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Today’s Twenty-Somethings “worse off than most”
Keith Hall editorializes in the LA Times, “In 2008, young Americans voted in their largest numbers in a presidential election since the Vietnam War. Recently, however, there has been considerable speculation about whether they will show up at the polls in November. When you look at how badly they’re faring in today’s economy, they could scarcely choose a worse time to stay home. … Americans who enter the workforce during a recession always face an uphill battle, but this generation is worse off than most. According to the Bureau of Labor Statistics, for 25- to 54-year-olds — the bulk of the workforce — the unemployment rate is 7.1%. But for 18- to 24-year-olds, the rate is more than twice that, at 15.7%.”
Imagine someone borrowing $50K a year for college—then declaring that they have an extra $500 K to spend over the next decade
Glenn Kessler from The Washington Post reports again on “Obama’s faux deficit plan”, writing, “Obama often claims that his plan has the ‘balanced approach’ of the Simpson-Bowles deficit commission proposal, but the Simpson-Bowles plan is actually quite different, calling for tough spending cuts and substantial tax reforms — not the faux proposals contained in the president’s budget. For instance, Simpson-Bowles envisioned $4 trillion in debt reduction over nine years; the president’s plan would spread the cuts over 10 years. … Moreover, the administration is also counting $848 billion in phantom savings from winding down the wars in Iraq and Afghanistan, even though the administration had long made clear those wars would end. In other words, by projecting war spending far in the future, the administration is able to claim credit for saving money it never intended to spend. (Imagine someone borrowing $50,000 a year for college—and then declaring that they have an extra $500,000 to spend over the next decade once they graduate.)”
HHS Awards PR Firm $3.1M Contract to Promote New Healthcare Law
The Washington Examiner‘s Joel Gehrke writes, “President Obama’s Health and Human Services Department hired a public relations firm to tell Americans about the perks in Obamacare and how they can enroll in the health care law’s exchanges. HHS gave Weber Shandwick a $3.1 million contract. ‘Weber will create a strategic plan with short- and long-term tactics for exchange outreach and education,’ PR Week reported earlier today. … HHS gave a $20 million contract to another PR firm, Porter Novelli, earlier this year. That effort will be led by former Obama campaign surrogate Kiki McLean. In California, taxpayer money will also pay for flattering remarks about Obamacare to be worked into TV shows.”
Obama’s “Christmas Bonus”?
Politico reports, “When the September jobs number comes out Friday morning, it won’t be an exact count of how many Americans found employment last month. …The federal government routinely adjusts its jobs number — at times by several million — in order to discount job growth or losses for seasonal variations in employment, such as the hiring spike precipitated by the holiday season or construction layoffs in the winter. And September and October are months where the numbers spike in advance of the holiday shopping season. These seasonal hires will have zero effect on national coverage of the report — nor will they do anything to shield Obama from the monthly barrage of Republican attacks — but research suggests the jobs may help the president sell voters on the idea that the economy is improving with Election Day only a month away. None of the hiring indicates real economic growth. Instead, it’s a fall sugar high that comes with a winter crash. Retailers ditch the seasonal employees in January.”
“Fed Signals Move Toward Thresholds for Keeping Stimulus”
Bloomberg reports, “The Federal Reserve signaled it’s moving toward linking its outlook for near-zero interest rates to specific economic conditions such as a decline in the unemployment rate. The move would represent a shift from the Fed’s policy of tying low rates to the calendar. At its last meeting, the Federal Open Market Committee extended its time horizon at least through the middle of 2015 from late 2014, a decision that some policy makers said could be misinterpreted as a downgrade of their economic outlook, according to minutes of the Sept. 12-13 gathering.” Some policy makers would like to see the Fed keep low interest rates until the unemployment numbers come down unless inflation rises above a 3 percent threshold. “Minneapolis Fed President Narayana Kocherlakota last month proposed holding ratesnear zero until unemployment falls below 5.5 percent, so long as the outlook for inflation does not breach 2.25 percent. Under such a proposal, the Fed might not raise rates for four years or more, he said. … Bernanke said in an Oct. 1 speech in Indianapolis that forecasting the main interest rate will remain near zero until mid-2015 ‘doesn’t mean that we expect the economy to be weak through’ that date.”
Despite Mounting Debt, Spain Bailout May be Unlikely
Bloomberg reports, “A possible bailout for Spain is not imminent, a European Union official said, as concerns grow over the country’s ability to reach its deficit-reduction targets. There’s no guarantee that Prime Minister Mariano Rajoy will ask for aid from the EU rescue funds and he’s facing a challenge to deliver the budget-deficit cuts pledged, the aide, who asked not to be named, told reporters in Brussels today. While European Central Bank President Mario Draghi said yesterday the ECB is ready to start buying bonds of sovereigns that qualify for aid, officials from Spain, Germany and now the EU have damped expectations of a rescue this week. Rajoy on Oct. 2 denied reports a rescuerequest would come this week. Economy Minister Luis de Guindos last night said no bailout was needed. … Spain’s 2013 budget assumes the economy will shrink 0.5 percent, less than the 1.3 percent median contraction predicted by 21 analysts surveyed by Bloomberg. Linde, the Bank of Spain chief, said targets were ‘certainly optimistic’ in testimony to the parliament’s budget committee.” If Spain’s economy weakens any more it may face austerity measures and a widening deficit. It would also mean the country would have to ask the EU for lower target numbers which have been granted to them in the past.