If you want to read depressing news, read not more. The unemployment situation in Europe is continuing, and countries like Greece ans Spain are in deep trouble. From Europa.eu.
What are the recent labour market trends?
The economic and employment outlook is bleak and has worsened in recent months and is not expected to improve in 2013, although a more positive outlook for the labour markets is still expected in 2014. The EU is currently the only major region in the world where unemployment is still rising.
The general picture covers a very diverse situation across Member States. There is a growing divergence between unemployment situations. Some MS have weathered the economic crisis well and are recording very low unemployment rates, as low as 4.4% in Austria or 5.4% in the Netherlands and Germany. This is the result of the generally good economic situation in these countries but also because they are reaping the benefits of previous reforms initiated long before the economic crisis hit. In other Member States unemployment is high or rising. Usually these are the countries that were hit hardest by the sovereign and financial crisis, such as Greece or Spain where the unemployment rate is above 25%. But these are also countries with well-identified problems in their labour markets, such as segmentation, insufficiently effective active labour market policies or ineffective links between school and work. These shortcomings have amplified the effects of the crisis though they were not the cause.
Guest post by Azizonomics.
If your predictions are wildly out-of-whack with reality, you need to change your approach.
Here’s a 2009 Obama administration graph authored by Jared Bernstein and Christy Romer showing their calculations for future unemployment levels with and without the Obama stimulus, updated by James Pethikoukis to show the actual figures:
These predictions have been an unmitigated disaster. Not only did the real figures not match up to the advertised ones, but they are also much worse than the baseline expectations. Romer and Bernstein appear to have both severely under-estimated the depth of the crisis, and over-estimated the effectiveness of the stimulus package.
Guest post by Lance Roberts of Streettalk live.
Earlier this year, as the markets were expecting QE3 from one Fed meeting to the next, I was stating another program would not come until September, after data for Q2 GDP could be analyzed. However, as we moved into August and the markets were rallying strongly on “hope” of further balance sheet expansion programs, I moved my QE estimates out until the end of the year. My reasoning, as I stated, was based on the assumption that Bernanke would save his limited ammo for a weaker market/economic environment. Clearly I was wrong.
Much to my surprise, and against all of what seemed logical, Bernanke launched an open-ended mortgage backed securities bond-buying program for $40 billion a month “until employment begins to show recovery.” That key statement is what this entire program hinges on. The focus of the Fed has now shifted away from a concern on inflation to an all-out war on employment and ultimately the economy. However, the big question is: Will buying mortgage backed bonds promote real employment, and ultimately economic, growth? And will this program continue to support the nascent housing recovery?
Employment – Where’s The Demand?
During the Fed’s announcement today Bernanke repeated several times that the primary concern of the Fed is now employment. One of the Federal Reserves primary legal mandates is to foster full employment in the economy. However, after two previous Large Scale Asset Purchase programs (QE),and a Maturity Extension Program (Operation Twist – OT), has employment meaningfully recovered.
Guest post by Azizonomics.
A whole lot of pundits are spending column inches trying to explain the cruel reality of the last forty years — stagnant wages for full-time male workers, and falling wages for men as a whole:
And there has been a huge outgrowth of men who aren’t in the labour force. In 1954, 96 percent of American men between the ages of 25 and 54 worked. Today, that number is down to 80 percent. That’s a humungous decrease.
The question is why.
Mainstream media pundits are suggesting that men are unsuited to the present economic landscape. The suggestion is that men have been bad at adapting to change, and that women have been good at adapting to change:
In The End of Men: And the Rise of Women, Hanna Rosin argues that changes in the world economy have dramatically shifted gender roles. Women have adapted more skillfully to the new socioeconomic landscape by doggedly pursuing self-improvement opportunities, rebranding as the economy requires it, and above all possessing the kind of 21st century work attributes — such as strong communication skills, collaborative leadership and flexibility — that are nudging out the brawny, stuck-in-amber guys. Rock steadiness, long a cherished masculine trait, turns out to be about as useful in our fleet-footed economy as a flint arrowhead. Life favors the adapters, and it turns out they’re more likely to be women.
What if mighty Ben is wrong? Guest post by Azizonomics.
Ben Bernanke at Jackson Hole:
If we are willing to take as a working assumption that the effects of easier financial conditions on the economy are similar to those observed historically, then econometric models can be used to estimate the effects of LSAPs on the economy. Model simulations conducted at the Federal Reserve generally find that the securities purchase programs have provided significant help for the economy. For example, a study using the Board’s FRB/US model of the economy found that, as of 2012, the first two rounds of large scale asset purchases may have raised the level of output by almost 3 percent and increased private payroll employment by more than 2 million jobs, relative to what otherwise would have occurred.
Bernanke’s estimate of two million jobs created as a result of his policy appears to be a stitched-together estimate based on two research papers: Fuhrer which estimated a gain of 700,000 jobs from QE1, and Chung et al which estimated 1,800,000 jobs.
On those vanishing jobs. By Ice Cap Management.
Los Angeles, California – Freda Tolberman loses her job as a shipping clerk with a trucking company. She initially received 26 weeks of unemployment benefits from the State of California, then she received an additional 73 weeks of financial help from Washington. Today, Freda no longer qualifies for unemployment benefits and has given up looking for work.
Louisville, Kentucky- 46 year old Frank McGee also loses his job. Frank has better luck than Freda and does manage to find gainful employment, but at a salary 35% less than what he made before.
Washington, DC- US Bureau of Labor Statistics number crunchers, crunch numbers throughout the night. Despite their best efforts, they are unable to hide the true picture of the jobless situation in the USA.
At its peak in 2008, the US economy was supported by over 138 million workers. Today, despite the American government spending billions to create jobs and printing trillions to save the banks, the American job machine has a total of 132 million people working. That’s a full 6 million less jobs than 3 years ago and is actually the same number of people who were working 11 years ago.
As The Trader wrote about on Thursday, the latest out of Spain is the accelerating fall in property prices. With every politician, banker and speculator in Spain waiting for the market to turn higher, and all problems will be solved, this is another blow to their expectations/business model. Some more color on the subject, that will get more attention shortly, as Spain is hard to bail out given the size of the economy. From Acting Man.
It is well known that Spain’s economy is in a depression, and we do not use this term lightly. With the official unemployment rate at about 23% and youth unemployment close to 50% it is not an exaggeration to speak of a depression. The probability of social upheaval erupting with greater frequency is extremely high. We already noted that the general strike recently called for by Spain’s unions is only the fifth since the end of the Franco regime in 1975. It is a rare event in Spain and underscores the decline in the social mood and the growing desperation. Those who still have work want to protect their privileges and use the unemployed as their political weapon.
Market thinking so permeates our lives that we barely notice it anymore. A leading philosopher sums up the hidden costs of a price-tag society.By Michael Sandel via the Atlantic.
THERE ARE SOME THINGS money can’t buy—but these days, not many. Almost everything is up for sale. For example:
• A prison-cell upgrade: $90 a night. In Santa Ana, California, and some other cities, nonviolent offenders can pay for a clean, quiet jail cell, without any non-paying prisoners to disturb them.
• Access to the carpool lane while driving solo: $8. Minneapolis, San Diego, Houston, Seattle, and other cities have sought to ease traffic congestion by letting solo drivers pay to drive in carpool lanes, at rates that vary according to traffic.
• The services of an Indian surrogate mother: $8,000. Western couples seeking surrogates increasingly outsource the job to India, and the price is less than one-third the going rate in the United States.
• The right to shoot an endangered black rhino: $250,000. South Africa has begun letting some ranchers sell hunters the right to kill a limited number of rhinos, to give the ranchers an incentive to raise and protect the endangered species.
Biderman on those jobs.
The global media continues to unblinkingly report US government statistics that jobs and wages are in recovery. However, maybe reality is beginning to sink in. The Wall Street Journal reporter Jon Hilsenrath, the unofficial Federal Reserve mouthpiece, this past Monday wondered in print: “Something about the US economy is not adding up….How can an economy that is growing so slowly produce such big declines in unemployment.” (full article here.)