Why they’d rather talk about Sarah Palin

Insty has a new running gag/meme: “Why they’d rather talk about Sarah Palin (cont’d)

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): Investors Have Been Fleeing Municipal Bonds. “A few factors can be blamed for this sudden retreat, but the one making all the headlines is the fear that cash-strapped states and municipalities issuing the bonds will renege on promises to investors.”

Posted at by Glenn Reynolds on Jan 17, 2011 at 7:03 am Link

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): America: Paydown Problems.

As it stands today, the US borrows about 40 cents of every dollar it spends. Curbing the budget deficit has been the stated mission of Mr Ryan, a rising Republican star, for several years. But such calls for action have multiplied in Washington in recent months, igniting what some say is the fiercest debate over fiscal and budgetary policy in decades.

The risks are big. If the government rushes into austerity, cutting too much and too quickly, it could stunt economic recovery. But if the political system cannot forge some kind of consensus on steps to restore US deficits to sustainable levels, the danger is potentially even greater: a sovereign debt crisis in the world’s largest economy.

Fortunately, the country’s in the very best of hands.

Posted at by Glenn Reynolds on Jan 17, 2011 at 2:42 am Link

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): Unemployment In The U.S. Is Actually Worse Than Pakistan. “The Eurozone is at similar levels to the US, but when most of the countries that have a higher unemployment rate than the US are collectively referred to as PIGS, it’s not very encouraging.”

Posted at by Glenn Reynolds on Jan 16, 2011 at 11:28 pm Link

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): “We’re fine at the moment, and we’re screwed long term.” Well, ordinarily I’d be worried. But with the best and the brightest at the helm, I foresee nothing but smooth sailing.

Posted at by Glenn Reynolds on Jan 16, 2011 at 10:54 pm Link

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): Soaring Global Food Prices.

Posted at by Glenn Reynolds on Jan 16, 2011 at 10:37 pm Link

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): Holiday Spending Record Not As Good As It Looks.

This past season’s revenue marked a 5.7 percent increase over holiday 2009. That’s the strongest gain since 2004. While encouraging, that doesn’t mean shoppers have recovered from the loss of $11 trillion in household wealth. From consumers’ perspective, the economy hasn’t improved dramatically from last year, as credit remains tight, unemployment hasn’t budged below 9 percent, and home values are still depressed. Consumer confidence is hovering at the same level as a year ago and well below the point that signals a stable economy. . . .

In several categories, spending on gifts fell short of shoppers’ 2007 outlay. In 2010, consumers spent $50.7 billion on clothing and accessories like shoes and scarves; in 2007, that figure was $51.3 billion even before adjusting for inflation. Holiday revenue at department stores was $45.3 billion last year, much less than the $50.4 billion that traded hands in 2007.

Read the whole thing. It’s better than last year, but it’s not exactly “Happy days are here again.”

Posted at by Glenn Reynolds on Jan 16, 2011 at 8:00 am Link

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): U.S. Satisfaction Remains Near 12-Month Low. “Gallup finds 19% of Americans satisfied with the way things are going in the United States at this time — essentially on par with the lowest level of the past 12 months, 17%, registered in December. . . . The current low level of satisfaction is likely tied primarily to the economy.”

Posted at by Glenn Reynolds on Jan 15, 2011 at 11:25 pm Link

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): Munis Crashing For Third Straight Day, And This Is The Worst Yet.

Posted at by Glenn Reynolds on Jan 14, 2011 at 11:49 pm Link

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): The Worst Combo: Consumer Spending Is Mediocre, Gas Prices Rising, And Retailers Have No Pricing Power. “Things are starting to look a little stagflationary.”

UPDATE: Consumer Confidence Slips Surprisingly on Jobs, Fuel Costs.

Posted at by Glenn Reynolds on Jan 14, 2011 at 12:59 pm Link

Posted at by Glenn Reynolds on Jan 14, 2011 at 8:43 am Link

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): AP: Over 1 million Americans seen losing homes in 2011. “The bleakest year in the foreclosure crisis has only just begun. . . . Lenders are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages and industry experts say more people will miss payments because of job losses and also loans that exceed the value of the homes they are living in.”

Posted at by Glenn Reynolds on Jan 14, 2011 at 8:10 am Link

WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): $5 a gallon gas? Washington insiders are wondering if the next real economic crisis facing President Obama is when gasoline prices spike to $4 or $5 per gallon. At today’s press briefing, a White House press spokesman rebuffed queries about the possibility saying ‘there are many people that would get upset at me if I started to opine on oil and gas prices, so I won’t.’”

Posted at by Glenn Reynolds on Jan 13, 2011 at 11:15 pm Link
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WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): Jobless claims jump, wholesale food costs surge. More thoughts here.

Posted at by Glenn Reynolds on Jan 13, 2011 at 4:13 pm Link
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WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): U.S. On The Way To Losing AAA Credit Rating.

Posted at by Glenn Reynolds on Jan 13, 2011 at 8:47 am Link
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WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): How a housing slump will slow the jobs train.

It seems impolite to ask, what with employment growth sucking wind already. Companies added just around 100,000 jobs a month over the past year, a rate Fed chief Ben Bernanke dismissed Friday as “insufficient to materially reduce the unemployment rate.”

Not a pretty picture.

But it gets worse. Economists at Bank of America Merrill Lynch say one key to a jobs recovery is an improvement in housing — because so much job creation is driven by new businesses that have in recent years been financed in part by home equity borrowing.

This sort of job creation has been missing the last couple years, thanks to the housing crash. If U.S. house prices embark as expected on a new decline, the long-awaited hiring renaissance could be put on hold yet again.

“There has been an adverse feedback loop where low home prices lead to tight credit, hurting jobs and prolonging the housing recession,” writes economist Michelle Meyer.

Much of the concern about another housing downturn revolves around the banks. A sharp house-price decline could lead to more foreclosures, hammering profits and reducing lending, such as it is.

But Meyer points to another effect that could be equally powerful for the jobs market. She notes that falling house prices hit home equity, preventing small business owners from tapping a key source of financing.

It’s a reverse “wealth effect.” Hope and change!

UPDATE: Reader John Murrey emails:

I’ve been a real estate agent with my own business and now work for a Top 10 national bank. The other problem that’s going to occur is a drop in labor mobility that will limit job growth and full employment as workers are trapped in homes they can’t afford, can’t sell in areas where job growth is non existent or negative. This will go a long way towards making lending even tighter as people walk away from those homes or are locked in with few affordable resources to finance a business.

Yes, it’s a vicious spiral.

Posted at by Glenn Reynolds on Jan 13, 2011 at 7:00 am Link
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WHY THEY’D RATHER TALK ABOUT SARAH PALIN (CONT’D): Man the Lifeboats! Oil Prices Could Scuttle Recovery. I’m paying $3.25 for gas now. I notice that the big rise in gas prices hasn’t gotten much press attention, though.

Posted at by Glenn Reynolds on Jan 12, 2011 at 2:26 pm Link
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CHANGE: HOUSING MARKET SLIPS INTO DEPRESSION TERRITORY. No wonder they’d rather talk about Sarah Palin.

Posted at by Glenn Reynolds on Jan 12, 2011 at 8:43 am Link

Psychological defense mechanism or red herring? Methinks, a bit of both.

Goldman-Sachs pours water on Dem electoral hopes

James Pethokoukis (via Insty) looks at the wishful economic thinking engaged in by the Democrats.

There is a statistical relationship called Okun’s Law (really more of a rule of thumb) between GDP growth and job growth. A simple Okun analysis leads to the conclusion that the unemployment rate rose higher than was warranted given the severity of the Great Recession Why? Perhaps businesses, fearing another Great Depression, panicked and just hacked their workforces to bits. Okun’s Law was suspended, but only temporarily perhaps.

If one buys this theory, then eventually there should be some payback for that psychological overreaction. At some point soon, unemployment should fall way faster than what the rate of economic growth would indicate according to Okun’s Law. At least this is what the White House —  and congressional Democrats hope. And if they are right, the job market might well unexpectedly strengthen right into the November midterm elections, helping avert the worst for Democratic House and Senate incumbents. No Republican tsunami.

But a brand new study from the economics team at Goldman Sachs throws cold water on all this. Their analysis is that the deviations from Okun’s Law were within the historical norm, so no sharp rebound (bold is mine):

It is a common belief that employment and hours worked fell more sharply during and after the 2007-2009 recession than can be explained by moves in real GDP, or in more technical terms, that “Okun’s law”—the empirical relationship between jobs and GDP—broke down during and after the recession. Many forecasters believe that this implies a large amount of pent-up hiring, as the “error” in Okun’s law proves temporary and firms hire aggressively in order to return staffing levels to more normal levels relative to production.

In contrast, we have argued that the relationship between employment and GDP remains quite similar to past cyclical norms, and that employment growth will therefore follow GDP growth without a “special hiring dividend.” … The bottom line is that there is no convincing evidence for a breakdown in Okun’s law, and hence no particular reason to expect a large amount of pent-up hiring during the recovery. … Overall, we see no evidence for any meaningful deviation of the unemployment rate from its historical relationship with real GDP.”

And here is a chart to help visualize the point:

goldmanchart

Bottom Line: Unemployment of 9.5 percent or so for the rest of the year seems baked into the cake (this is what the Fed and the economic consensus see) unless GDP growth starts to boom. And good luck finding forecasters who believe that. So far, this recovery has fit into the slow-growth, New Normal paradigm. Although it was a deep recession just like in 1981-82, the recovery has only been half as robust. Voters may not blame Democrats for the Great Recession, but they will likely hold them accountable for the Not-So-Great Recovery.

Recovery? What recovery?

Ace admin “Purple Avenger” recently had to drive from Florida to NY State on account of a sudden death and funeral in the family. His, admittedly anecdotal, observations from the road trip make it seem like the “recovery” is still some distance away outside Washington DC:

– A lot of billboards are still empty. This was true on I95 as well as some of the alternate routes (like rt17 and various back roads through WV and VA I wandered off onto to avoid rolling into the D.C. vortex at 5pm rush hour. I guess out of business businesses aren’t buying advertising.

– Many still existing painted billboards are quite faded and haven’t seen fresh paint in a long time.

– At some exits, once thriving large truck stops doors are shuttered. This is usually when there’s another competing one at the same exit.

– Many rest stops are closed. It looks like some states have taken to closing rest stops to save money (all the FL rest stops on I95 were still open).

– Observed McLame bumper stickers outnumbered Ogabe by 3:2. In 3,000 miles and seeing many thousands of cars, I saw exactly 3 McLame stickers versus exactly 2 for Ogabe. Actually, political bumper stickers of any sort were uncommonly scarce. I take this an ominous sign of growing widespread discontent.

– The Birchers were out of the closet with a “Had Enough Change Yet?” billboard just outside York PA.

– One of my friends in NY has been an over the road trucker all his life. He hasn’t been able to get a load or run for over a year. This is a guy who’s qualified to haul anything from apples to any hazardous placarded load, including nuclear weapons. Times are tough in the trucking business. The “bigs” like J.B. Hunt have canceled major fleet upgrade orders they had planned. They’re hunkered down, hard.

– There seems to be an uptick in bogus “work zones” in some states to enhance the number of miles over which enhanced speeding fines apply. Toss out a few orange barrels, setup a work zone sign, even when there ain’t a lick of work going on for 20 miles, and let the troopers do the dirty work. Slick. Sneaky.

– There seemed to be an uncommonly large number of cars from NJ/PA/NY loaded with household goods headed south for this time of year that did NOT contain spring breakers. I wonder if all that global warming this past winter is prompting a bunch of people to flee the northern states for good?

The comments are also quite interesting. Even in Texas, which has weathered the storm better than most states, things are not well:

164 I know Texas closed a bunch of rest stops years ago because of an ADA lawsuit. Rather than spending the money to bring them up to compliance, they just closed down the non-compliant ones.

Lots of empty bill boards here too, which has gotta suck because Texas is very very strict on billboards. Almost impossible to get a permit for a new one, and costly to keep existing ones permitted.

What strikes me is all of the for sale signs on homes. There is not a neighborhood anywhere in the Austin metro area that doesn’t have multiple for sale signs up on every block. One street I drove down, it was literally every other house.

Texas has fared better than the rest of the country, but times are definitely tough. This is my second year of unemployment. House was foreclosed on in February, only reason we could afford to move is that the apartments are so desperate to rent that we got a $199 move in, $199 first months rent and $805 a month on a three bedroom apartment. (Cheaper than than the house payment was.)

Thinks it’s gonna be a long time before it gets better.