This post is in three parts.
First, the bad news about the economy.
Second, the economy according to Fox News.
Third, those glimmers of economic hope.
The bad news:
Today’s “good” news that the unemployment rate fell to 9.4 percent—the first rate drop in 15 months—as the U.S. economy “only” shed 247,000 jobs in July, is of course no comfort to the millions of Americans who are still unemployed, and especially to those who have lost all hope of finding a job and to those who have, or are about to, run out of unemployment benefits. Nearly 1.5 million Americans will exhaust their extended unemployment benefits by the end of the year.
According to the Huffington Post: “…in a grimmer development, the number of long-term unemployed — people who’ve gone without a job for 27 weeks or longer — rose by 584,000 to 5 million, from 4.4 million in June. Three out of 10 unemployed people have joined the ranks of long-term unemployed.”
According to Christine Owens, director of the National Employment Law Project: “Never in the history of the unemployment insurance program have more workers been unemployed for such prolonged periods of time…An unprecedented 5 million — one out of three jobless workers — have been unemployed for six months or more, and their families are straining to meet basic needs in an economy that has not yet begun to produce jobs.”
Their situation is tragic and no amount of positive economic indicators, short of a miraculous and sudden turnaround in this critical part of the economy, will help these unfortunate people out.
The news according to Fox:
Fox News and other naysayers made it quite clear today that the stimulus is not working and pointed out all the relevant and irrelevant negative indicators. For example, that this “infinitesimally small” drop in the unemployment rate is statistically insignificant, which may be right—but gee whiz, try to see at least “a glimmer of hope.” That the Obama administration is managing expectations. Of course, that the “cash for clonkers” program continues to be a total failure. They also emphasize—almost to the exclusion of everything else—what is not included in the numbers: the tragic high number of people no longer looking for work, etc.
Fair enough.
According to the New York Times, the Republicans had to throw cold water on the good unemployment news: ”No one would argue that the stimulus has done nothing, but it certainly does not look like we are getting our money’s worth,” said Douglas Holtz-Eakin, an economic adviser to John McCain during his presidential campaign.
A little bit of sour grapes, but, again, fair enough.
Now for those glimmers of economic hope.
The 9.4 percent unemployment rate is indeed good news, regardless of the caveats and the nay saying. Plus, we have to keep reminding ourselves that unemployment is a lagging indicator of the economy.
President Obama himself said today that “We’re pointed in the right direction” and “We’re losing jobs at less than half the rate we were when I took office,” but he also cautioned that the road to recovery will be a long one, and that “We won’t rest until every American that is looking for work can find a job.”
What do the markets and the experts have to say?
Well, the short answer today is “plenty of good things.”
Responding to an unemployment report that was better than expected, the Dow Jones industrial average rose 114 points (198.46 for the week) to 9,370.07, capping its fourth straight weekly gain, and staying at the highest levels since since President Obama was elected on Nov. 4, 2008.
Not bad for those “meaningless market fluctuations.”
The good unemployment report, the wild success of the “cash for clonkers” program (that has been so maligned and ridiculed by Republicans), and good news about manufacturing, construction and banking, sent the Standard & Poor’s 500 index over 1,000 this week, for the first time in nine months, closing at 1,010.48. This is 49.4 percent from its 12-year low in early March, the steepest surge since the Great Depression.
The Nasdaq composite added 21.75 for the week ending at 2,000.25.
About 2,300 stocks rose on the New York Stock Exchange, and financial and retail stocks also rallied today with the good economic news.
And what do the experts say?
The Wall Street Journal tells us that:
Most economists view the easing as a sign that the slump, which has erased two million factory jobs since the start of the recession in late 2007, has finally hit bottom, though they still don’t expect the sector to begin adding jobs soon.
“This tells us that the recession is slowly grinding to a halt — but it hasn’t ended yet,” said Dan Seiver, a finance professor at San Diego State University.
And Paul Ashworth, Capital Economics, says:
July’s Employment Report is the gift that keeps on giving. Nearly every element of it is positive. Most notably, non-farm payrolls fell by a more modest 247,000 last month, the smallest decline since August 2008. Admittedly, a decline in employment of that magnitude still seems hard to square with the growing speculation that the recession ended around mid-year. Looking back, however, the economy lost 265,000 jobs in the first month of the recovery in 2001 and 226,000 jobs in the first month of the recovery in 1991.
Finally, still Bloomberg.com:
The market’s rebound restored almost $4 trillion in value to U.S. equities, according to data compiled by Bloomberg, after 2008 marked the worst year for stocks since the 1930s. Reports this month showed better-than-estimated sales of cars and pending contracts to buy existing homes, while service industries contracted less than economists forecast.
The pace of U.S. job losses slowed more than forecast last month and the unemployment rate dropped for the first time in more than a year, the clearest signs yet the worst slump since the Great Depression may be ending.
Today’s report also showed the average work week expanded to 33.1 hours in July from 33 hours in the prior month. Average weekly hours worked by production workers increased to 39.8 hours from 39.5 hours, while overtime held at 2.9 hours for a second month. That brought the average weekly earnings up to $614.34 from $611.49.
According to the New York Times:
Last week, the government announced another significant improvement — the overall economy contracted at an annual rate of only 1 percent in the spring quarter, vastly better than the fall and winter months.
“The labor market, like the overall economy, is beginning to stabilize, with the expectation that job losses will approach zero by the end of the year,” said Chris Varvares, president of Macroeconomic Advisers, who expects that the unemployment rate will peak at less than 10 percent.
July’s unemployment figures may in fact be a flash in the pan. Even so, there are now too many glimmers of hope that make it difficult to totally pooh-pooh the notion that our economy is improving, albeit it may be doing so ever so gingerly.
The author is a retired U.S. Air Force officer and a writer.