Jobs? and Obama’s Speech

Well if we needed confirmation that Obama’s sudden firm focus on jobs is justified, today’s report of claims for unemployment insurance provides all we need.

Claims dropped 8,000 to 470,000. The problem with this is that last week we saw a sudden uptick of 34,000, and most of the ‘experts’ thought that this week’s number would more than offset that. Last week’s report was looked at as an aberration: it included a backlog of data sent in by states where Martin Luther King day had messed up the data collection. The Fed’s, it was argued, had erroneously inflated the numbers – the seasonal adjustment failed to account for the data collection problem and treated the increase as normal. Thus it was widely expected that this week’s data would see an equally strong decline.

Well that line of reasoning sounded fine at the time. Now it looks a tad hollow. The optimists keep grasping at anything, even faux seasonal adjustments, to find evidence of growth and recovery. The truth seems to be much more banal and unfortunate: there is no such evidence.

Instead the outlook for jobs is firmly stuck in neutral. Most weeks bring a tiny amount of progress, then, every so often, we see a reversal. Cumulatively we are moving in the right direction, but improvement is glacial.

Looking back we can see that the levels of new unemployment claims has backed off substantially from the hideous peaks of last year. the issue we face is that with progress so slow, and with no breakthrough seemingly imminent, we all feel as if nothing is going on. And perception is everything. As long as the weak employment outlook hangs like a dark cloud over us there will be no sudden spurt of activity. On the contrary, attitudes will stay gloomy and nerves fraught – hardly the way to enter spring or summer.

I should make a comment on last night’s state of the union speech. Frankly I found it ordinary. I missed it in real time so I was forced to watch it this morning, and had the benefit of commentary already in hand. As theater it was better than its economic content was policy prescription. I liked the brick thrown at the insane Supreme Court decision to allow big business to buy elections. Only in America could ‘freedom of speech’ be so contrived as to condone corruption. Orwell must be proud of the new meaning given to that phrase.

The sad fact is that this administration, by turning away from health care and towards the budget deficit, cost control and jobs programs merely highlights its weakness of last year. I agree we need action on jobs. Lots of action. Expensive action. How that squares with the need to freeze the budget – except for defense and entitlements – I don’t know. The speech seemed like an effort to stand tall after the defeat meted out by the Senate leaders – those 40 41 Republicans who now run the country. A concerted attack on unemployment was what many of us were shouting out loud for last year. Why it took a year of humiliating senatorial obstructionism and defeat to get the message drummed into Obama’s head I don’t know.

Recall those infamous bank stress tests from early last year? I criticized them at the time because they included a worst case scenario that included only 8% unemployment rates. I argued that unemployment was bound to be much more than that, so the stress tests significantly understated the problem – in fact I said they were rigged so the banks would all pass. Well, now it looks even worse: the administration probably did think that 8% was the worst case. Otherwise they might have been more urgent it attacking unemployment back then when it counted for so much more. So the stress tests weren’t rigged, the administration was totally ill informed about the extent of the damage to the economy. Which is odd given the number of very sharp [supposedly] that are acting as advisors.

So here we are a year later, the rot still eating away at the economy, and all of a sudden we get an urgent message from the White House: its all about jobs now. Duh. Yawn.

And the capitulation to Republican thinking on the deficit could not be more complete. If you are a deficit hawk Obama is now your guy. If you want to limit spending on domestic programs while we pump more money into the military, Obama’s your guy. The surrender to GOP policy talking points is stunning. Last year I disparaged the Republicans for arguing that we need, as a country, to cut government spending so that the voters see that ‘government gets it’. It was terrible policy then and it remains terrible policy now. That Obama has gone from laughing at them to agreeing with them is tragic. He is making no attempt to make the correct argument to the voters: we need to keep spending. He has given up.

Having said that, as far as I can tell no one in the administration believes that a freeze on domestic discretionary spending will solve anything. It will shift the cost curve not one jot over the long term. Only substantial cuts in defense spending and strong limits on health care costs will accomplish that. Since, for whatever reason, we as a nation are unwilling to face that reality, we are forced to use ruses and window dressing to convince ourselves we are making progress. Frankly I am tired of ruses: they remind me of George Bush and his infamous eleven year expiry date for his tax cuts. Including things in budgets – like those expiry dates – that you have no intention, ever, of doing, is both disingenuous and gutless. I expected that from Bush, I expect more from Obama.

I think its called leadership.

One point Obama made was important though: the Senate is totally dysfunctional. As I have noted here, it is odd in the extreme that the confirmation of Bernanke can be pushed through on the basis of a straight majority, but nothing else can. Moreover the stupid and undemocratic notion that we need 60 out of 100 to constitute a majority for all legislation is just bizarre. It fosters obstructionism and grandstanding. And it spits in the face of the voting public who elect majorities and then expect action. For a country so obsessed with its constitutional foundation it is beyond strange that we all tolerate a system of government that is nowhere mentioned in that hallowed document.

In the context of the Senate’s preference for discussion rather than actual legislation, I expect Obama’s attempts to get a good jobs program or substantial financial reform to founder the way that health care did. We will be reduced slinking through the back door once again with minor tweaks and bureaucratic alterations simply because the bold option is obstructed by our Republican led government.

Nothing in the speech inspires a change in my expectations: Obama is good at words, but the unemployed people of America need action. Now.

Put up, or shut up.