A deceptively dismal jobs report, combined with Fed Chairman Ben Bernanke’s acknowledgement that it might be another five years before hiring fully recovers, put the final nail in the coffin Friday on the Obama administration’s claim that nearly $1 trillion in stimulus spending has rescued the economy.
Although the headline number is impressive, with unemployment falling from 9.8 percent to 9.4 percent, the number of new jobs created was a big disappointment and far lower than private forecasters had predicted only days ago.
The Labor Department reported just 103,000 new jobs in December, about half the level projected in private consensus forecasts. An earlier report from private payroll company ADP had suggested that hiring might approach the 300,000 mark.
“We’re just not getting the jobs yet. I was really disappointed with these numbers. I was expecting a pretty big number in terms of job creation,” Wall Street Journal editorial board member and senior economics writer Stephen Moore told MSNBC.
“We need to be creating about two to three times more jobs than we are right now to start making real progress in putting Americans back to work,” Moore said.
The total unemployment figure, on which most people focus, fell in large part because nearly a quarter million people simply gave up their job hunts and dropped out of the workforce altogether, according to Bureau of Labor statistics.
There were 1.3 million so-called “discouraged workers” in December, an increase of 389,000 from December 2009, the government reported. Markets sold off on the jobs report following a bullish year-end push higher that seemed to price in a roaring recovery.
Since December 2009, the economy has added 1.1 million jobs in total, far fewer than the 8.5 million shed in the recession.
In testimony before the Senate Budget Committee, Bernanke painted a dim portrait of an economy adding just enough jobs to keep unemployment from getting worse. It will take up to five years for the nation to return to “normal” employment levels, he said, blaming the torrent of federal red ink for the ongoing economic turmoil.
“The prompt adoption of a credible program to reduce future deficits would not only enhance economic growth and stability in the long run, but could also yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence,” Bernanke told the Senate.
Moore was sharply critical of the notion that it could take another half decade to bring unemployment down to 6 percent, calling it “a disaster.”
“We need to move much faster in terms of bringing the jobless rate down,” he told MSNBC. “So I was really discouraged by that statement by Ben Bernanke. Look, 9.5 percent unemployment is 15 million Americans out of jobs.”
It’s a major shift in tone for Bernanke, one echoed by his peer in Europe, European Central Bank Chief Jean-Claude Trichet, who issued a similar call on governments there to slash budgets, essentially an admission that the Europe’s central monetary authority could do no more.
The problem is same at the Fed. Interest rates already sit at virtually zero and a second, massive round of money printing in order to soak up federal red ink in the form of Treasurys seems to be having little effect.
Long-term Treasury yields have risen, not fallen, despite $185.6 billion a month in Fed debt purchases since Nov. 12. The 30-year Treasury bond is at 4.53 percent, up a full point from levels in August, when the Fed first hinted that a second round of so-called “quantitative easing” would be necessary. Some analysts have suggested that spurring inflation to heat up the economy, rather than reducing medium- and long-term loan, was the true objective behind quantitative easing all along.
As the economy struggles, new Census Bureau data showed a shocking rise in poverty across the nation.
A revised formula shows 1 in 6 Americans is now below the poverty line, 47.8 million Americans. The number of poor over the age of 65 has doubled to 16.1 percent, according to the Census.
Those rising numbers of poor will be looking to their local and states governments for relief. But cash-strapped local governments may not be able to help.
In yet another indication that a gloomy economic reality underlies the drop in overall unemployment, the Census Bureau is reporting that 2009 state revenues plummeted by nearly one-third — the largest single-year drop in more than 60 years. With vanishing revenues and federal stimulus money running out, states such as California, Illinois, New Jersey, and New York face dire economic circumstances of their own.
Combined deficits of $140 billion tower over the states during the next fiscal year, reports the Center on Budget and Policy Priorities in Washington, D. C. If they somehow climb that hill, state politicians will face another of $82.1 billion in shortfalls in 2012, according to the National Conference of State Legislatures. Add to that $1 trillion or more in unfunded retirement obligations.
Rep. Paul Ryan, R-Wis., the new House budget chief, said this week that the GOP has no plans to bail out sinking states.
“Should taxpayers in frugal states be bailing out taxpayers in profligate states?” Ryan said during a forum near the Capitol, Bloomberg News reported. “Should taxpayers in Indiana, who have paid their bills on time, who have done their job fiscally, be bailing out Californians, who haven’t? No, that’s a moral hazard we are not interested in creating.”
President Barack Obama, speaking at a manufacturing facility this morning in Landover, Md., praised the jobs report as good news for the economy and reiterated his view that the recovery is in no danger.
“Now, we know these numbers can bounce around from month to month. But the trend is clear,” Obama said. “We saw 12 straight months of private-sector job growth. That’s the first time that’s been true since 2006.”
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