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Warmer Weather Helps the Job Market
Tweet Share on Facebook March 15, 2007 CommentAll the bears on the economy have been telling the rest of us to keep a close eye on jobless claims. If they start rising–probably driven by spillover from the weak housing market, the theory goes–that will be an important sign that the labor market is weakening. And if the labor market is weakening, so eventually will consumer spending. Thus, a recession is nigh. But today's data from the Labor Department show initial jobless claims fell 12,000 to 318,000 for the week ending March 10–down from a peak of 359,000 in early February. That drop provides a nice piece of evidence that the February surge in jobless claims was indeed weather related and not a sign of an increasingly weak job market. As the econ team at Action Economics puts it:
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Subprime Scare Is March Madness
Tweet Share on Facebook March 14, 2007 CommentMaybe the troubles in the subprime mortgage market will turn into some sort of nasty financial contagion that will dramatically worsen the broader housing market and nudge the economy into recession. But I have a difficult time seeing that happen as long as jobs and incomes are growing. For starters, the 97,000 jobs added in February isn't such a bad performance, considering the terrible weather that month that also seemed to quash retail sales. And if recent history is any guide, that jobs number will be revised higher.
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Just Dying to Worry About the Economy?
Tweet Share on Facebook March 12, 2007 Comment (1)As I mentioned to CNBC's Maria Bartiromo last weekend on her show, The Wall Street Journal Report, right now the U.S. economy sort of reminds me of the dysfunctional family in the Oscar-nominated film Little Miss Sunshine: It doesn't work perfectly, but it gets the job done in the end. To economists Brian Wesbury and Robert Stein of First Trust Portfolios, today's soft economy reminds them of the slowdown during the 1990s expansion:
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Is McCain Really a Born-Again Tax Cutter?
Tweet Share on Facebook March 9, 2007 CommentThe embryonic Rudy Giuliani campaign has gotten a lot of stick from critics who doubt he'll be able to effectively win over Christian conservatives because of his liberal social views. Less has been said about Sen. John McCain's need to win over another important GOP group: economic conservatives. McCain voted against President Bush's 2001 and 2003 tax cuts, though he voted in favor of the 2006 extension of Bush's capital gains and dividend tax cuts. Here's what McCain, who reportedly has been consulting with supply-side guru Arthur Laffer, says about tax cuts on his exploratory committee website:
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Consumers Are Still Key to Avoiding a Recession
Tweet Share on Facebook March 8, 2007 CommentRecession predictions are all over the map right now. Alan Greenspan thinks there's a one-third probability. Economist David Rosenberg of Merrill Lynch estimates there's a 55 percent chance. Joel Prakken, chairman of Macroeconomic Advisers, thinks there's "well less" than a 50 percent chance–and dropped his rough estimate to around 20 percent after a bit of hectoring by me. (Prakken also expects growth in gross domestic product to "pop back up" in the second half of the year, to at least 3 percent.)
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How Democrats Plan to 'Rearrange' Your Taxes
Tweet Share on Facebook March 7, 2007 CommentI'm not exactly sure what changes to the tax code New York Democrat Charles Rangel, chairman of the House Ways and Means Committee, is planning to propose to pay for a fix in the alternative minimum tax. In an interview with Bloomberg, he said Congress could "rearrange" tax rates. And here is what he told Fox News, when he asked if was going to try to roll back the Bush tax cuts:
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Where Are the Pro-Growth Presidential Candidates?
Tweet Share on Facebook March 6, 2007 CommentWhile not discounting the importance of Ann Coulter's epithet and David Geffen's slams, someone might want to also ask the 2008 presidential candidates about their agendas to help grow the economy. Earlier today, the Labor Department reported that 2006 productivity growth was a so-so 1.6 percent, the weakest showing since 1997. Between 1997 and 2006, we had eight fantastic years of productivity growth, so maybe 2006 was a statistical fluke. Yet why take the chance? Productivity is the key, ultimately, to higher living standards and higher wages. Higher productivity makes dealing with problems from Social Security to healthcare to climate change a whole lot easier. Right now, the various presidential candidates are all a little light on the details of their economic agendas, so maybe their pro-growth policies are yet to come, whether it's tax reform or regulatory reform or more spending on basic research or government-sponsored innovation prizes. For now, though, Hillary Clinton is talking about confiscating oil profits and working on equal pay for women. Barack Obama is pounding the Iraq war. John McCain, at least on his website, is focused on fiscal discipline and ending wasteful spending. Rudolph Giuliani talks about cutting taxes on New Yorkers but fails to link to an overall growth strategy. Mitt Romney has come about the closest among the candidates to pushing a clear pro-growth message on trade, taxes, and innovation, but he still skimps on the details.
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Would a 2007 Recession Clinch 2008 for the Democrats?
Tweet Share on Facebook March 5, 2007 CommentIt's been humorously suggested that Barack Obama's landslide 70-to-27 percent victory against Alan Keyes in the Illinois 2004 U.S. Senate race had one minor silver lining for Republicans. After that blowout, they knew exactly how big their core, crawl-across-broken-glass-to-vote-GOP base was in the Prairie State.
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Probing the Mind of Bush's Economist, Edward Lazear
Tweet Share on Facebook March 2, 2007 CommentThe stock market, taxes, the budget, and inflation were among the topics Edward Lazear, chairman of the Council of Economic Advisers for President Bush, and I chatted about in his office yesterday afternoon at the Eisenhower Executive Office Building adjacent to the White House. I will post a full transcript later, but here is the quick-and-dirty version for your perusal.
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Stock Market Drop Should Scare Congressional Protectionists
Tweet Share on Facebook March 1, 2007 CommentRemember the 1994 movie Speed? It's the one where a madman (Dennis Hopper) takes a bunch of bus passengers hostage and then rigs the vehicle to explode if its speed falls below 50 mph. That's a pretty good way of thinking about China right now. The Chinese economy is all about speed. It's growing at about 10 percent a year, as it seems to do year after year. But if the economy slows just a bit, lots of bad things will very likely happen. While China is often portrayed as an unstoppable economic juggernaut, the mixed Chinese economy–described by some as "Leninist corporatist"–is full of stresses, inefficiencies, and imbalances. For example, the World Bank has estimated that if Chinese GDP growth fell by just 2 percentage points, 60 percent of the country's bank loans would become nonperforming. A sharply higher yuan–the goal of U.S. "fair trade" proponents–might have just that effect. And this is an economy that needs to create 24 million new jobs a year to keep up with the flood of peasants continuing to pour into cities looking for a better life. Social unrest is already rising in China, and a slowdown would surely make things far worse. China may seem like a homogenous Borg-like entity to many westerners, but it's not. Back in the early 1990s, after the 1989 Tiananmen Square massacre, one Pentagon study predicted that China could break up into a dozen or so smaller countries like one mega-Yugoslavia. But even continued fast growth is not enough. The country needs to get its ever wealthier consumers to save less and spend more in order to make the economy less dependent on investment-led growth. As Morgan Stanley economist Stephen Roach wrote after this week's big drop in the Chinese stock market:
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