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Today's Poll!7 reasons the job gains could last this time
Sunday, March 11, 2012
WASHINGTON (AP) — Wait — haven’t we seen this movie before?
Companies are generating waves of jobs, and unemployment is down.
The same thing happened last year around this time. Then everything faded to black starting with the earthquake in Japan, which struck a year ago Sunday.
Does a happier ending await the job market this time? Economists seem to think so.
For reasons ranging from progress on Europe’s debt crisis to a slowly improving housing market to slightly less gridlock in Congress, the economy and the job market appear better able to withstand setbacks than they were in 2011.
“The internal dynamics of the U.S. economy look pretty good right now,” says Bill Cheney, chief economist at John Hancock Asset Management.
U.S. employers added 227,000 jobs in February, the third straight month of 200,000-plus job growth. The unemployment rate remained 8.3 percent, but it was 9 percent as recently as September. By all measures, the job market is strengthening by the month.
Then again, the numbers can conjure an unsettling sense of deja vu. Last year, the job market had a similar three-month run. From February through April, the economy added an average 239,000 jobs each month.
Helping drive that growth was a new Social Security tax cut that put more money in paychecks for 160 million Americans. The tax cut gives $1,000 a year, or nearly $20 a week, to someone making $50,000. It gives up to $4,272 or roughly $82 a week, to a household with two high-paid workers.
The Social Security tax cut was supposed to expire at the end of 2011. But under election-year pressure, Congress has extended it through 2012.
On top of that, a bond-buying program by the Federal Reserve drove interest rates on mortgages and other consumer loans to historic lows.
Yet just as things were perking up, a freeze descended on the economy and job market.
The March 11 earthquake and tsunami cut off supplies from Japanese factories to U.S. and other manufacturers. The Arab Spring protests escalated oil prices. And gasoline prices followed them up, to a painful $3.98 a gallon by mid-May.
A clash in Washington over the federal debt limit brought the nation to the verge of default and sapped consumer and business confidence. Europe’s debt crisis panicked investors and further shook confidence.
From May through August last year, job growth averaged less than 80,000 a month before regaining strength in the fall.
Economists expect the 2012 sequel to improve on the 2011 original. Here are seven reasons the job market appears on surer footing this time:
Companies can’t squeeze more output from workers
During and right after the Great Recession, companies shrank their work forces because demand plunged and fewer workers were needed.
Once demand started growing again, companies were reluctant to hire immediately. They managed to produce more with the employees they had. But now many companies are finding they can’t continue to do more with less. As demand grows, they’re finding they have to hire.
Consumers are sturdier
Since the recession, households have cut their debts and rebuilt savings. One key measure of household debt burdens — debt payments as a percentage of after-tax income — is at its lowest point since 1994, according to the Federal Reserve.
“Consumer finances are fundamentally healthier than they were,” says Stuart Hoffman, chief economist at PNC Financial Services Group.
As the labor market has healed, Americans have worried less about losing their jobs. As a result, they’re less likely to curtail spending — even in the face of shocks such as a 29-cent jump in gasoline prices in the past month to an average $3.78 a gallon.
Tensions ease in washington
The debt-limit showdown waged last summer between the Obama administration and congressional Republicans rattled confidence in America’s leadership. It looked as if the United States might default on its debts for the first time in history because leaders couldn’t reach a deal.
Since then, thanks in part to election-year pressures, tensions have eased. Republicans dropped threats to let the payroll tax expire. And in an unusual show of cooperation, House lawmakers from both parties backed a bill last week to make it easier for small businesses to obtain financing they need to hire and expand.
Housing is inching back
The collapse of real estate lies at the heart of America’s economic problems. House prices have plunged 30 percent since 2006. The drop has wiped out $7 trillion in homeowners’ equity. Millions of construction workers have lost jobs.
Now, there are tentative signs of recovery. Apartment construction is growing. Construction jobs are slowly returning. Home builders are seeing more foot traffic and gaining confidence that sales will pick up in the spring buying season.
No one expects another boom. But real estate is no longer subtracting from U.S. employment. And there’s hope among economists that higher sales could stop prices from falling further by spring.
Once home prices stabilize, more people will likely decide it’s time to buy. And consumers who worry less about a loss of home equity — the main source of wealth for most people — are more likely to keep spending.
State and local government cuts slowing
The Great Recession and the housing collapse dried up tax revenue for state and local governments. Many were forced to lay off teachers and other public workers. Since December 2008, state and local governments have slashed 613,000 jobs, offsetting some of the hiring by private companies.
But the cuts appear to be easing. State governments have added 10,000 jobs so far this year. Local governments last month added 2,000 — a modest total but only the third increase in two years.
“There’s only so many teachers you can cut, so many police officers, so many firemen,” says Mark Vitner, senior economist at Wells Fargo Economics.
Europe’s threat has subsided
Investors panicked last year over the prospect that Greece and some other European countries would default on their debts, stick banks with huge losses and trigger a global credit crunch. Such fears sent stocks tumbling and helped diminish U.S. consumer confidence in the second half of 2012.
But confidence is rebounding. Greece has received a $172 billion bailout, pushing back the threat of a destructive default. And the European Central Bank has made more than $1.3 trillion in low-rate three-year loans to banks since December, making clear it won’t let the European banking system fail.
U.S. banks lending more to businesses
After the September 2008 collapse of Lehman Brothers shook the financial system, U.S. banks cut loans to businesses in 2009 and 2010. The credit crunch fed the economy’s misery by starving many companies of financing needed to grow and hire.
But banks are healthier now. So are the prospects for their business customers. Bank lending to businesses rose nearly 14 percent last year to $1.35 trillion, according to the Federal Deposit Insurance Corp. Loans to small businesses grew at the end of last year for the first time since the FDIC started tracking them nearly two years ago.
William Dunkelberg, chief economist of the National Federal of Independent Business, says the outlook for hiring by small businesses offers “a better picture than we have seen for years.”
Economists are still cautious. A shock like the Japanese quake or further Middle East turmoil could always reverse the gains. Ever-higher oil prices would hurt. And even with the improvements, the recovery from the 2007-2009 remains weaker than past recoveries.
But economists say the job market has likely gained enough momentum to avoid a repeat of mid-2011’s gut-churning drop.
“This year will not be the same,” PNC’s Hoffman says. “We won’t be sitting here in six months saying, ‘Uh-oh, it was another false dawn.”’
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Comments
Graceful 1 year, 2 months ago
AP is at it-AGAIN! This entire article is Obama political propaganda, designed to fool people that the world is all sunshine. What rubbish! Tension is Washington have not subsided. In fact, last month we had the highest deficit ever. washingtontimes.com/news/2012/mar/8/govt-sets-record-deficit-february/. There is speculation that the "deal" entered last year that was intended to solve this problem until after the election has failed and the issue will raise its head again in October. Europe's threats have not subsided. Greece is still on the verge of collapse. The discontent of the people of Greece is still boiling over. Portugal, Spain and Italy are in trouble, too. With gas prices going up consumers will cut back. It can't be avoided because Obama says nothing can be done about it.
wyriontair 1 year, 2 months ago
Well said Graceful, and I don't listen to talk radio and get my information from ALL sources, including Al Jazerra on LinkTV. The local media still hasn't given the amt of the deficit this year alone, what makes anyone think that they will? As for the gas prices, they also fail to mention that because of those high prices we have higher food prices, higher prices on everything we purchase. The fact is we could have energy independence but this administration wants to use algae, solar, wind, etc., which is a noble idea. He is correct when he said that oil production is increased, but he's not truthful in telling that that is only on PRIVATE lands which was because of the former president and Obama's administration has stopped anything on PUBLIC lands. Let's also get rid of having 30 different blends which also raises the cost, why do we have to have so many blends? The truth is out there, people just have to do their own research
wyriontair 1 year, 2 months ago
The oil goes into the market, which is supposed to keep prices down, however, we do not produce enough now to keep the cartels from increasing their production. As long as we are "stuck" with Obama's energy policies, we will have no decease in the cost of gas. Anytime the US has dramatically increased drilling and refining the prices dropped. We still need to eliminate all the different "blends" which is costly and build more refineries, which the government doesn't want to do.
Sequoia 1 year, 2 months ago
I would support more domestic oil drilling if it included a carbon tax or, if we continue to subsidize oil as we now are doing, a corresponding dollar-for-dollar investment in renewable energy, energy efficiency and dispersed generation technology.
The problem with "drill baby drill" is that it doesn't really make gas prices meaningfully lower, and it just kicks the can of progress down the road. "Drill baby drill" makes a few important people some money, and it is fun for a politician to yell something that people chant back.
wyriontair 1 year, 2 months ago
Drilling can and should be done in a responsible way, renewable energy has limitations, as for a "carbon tax" I suggest you find out who started that "market", it's interesting, we don't need any other taxes. We could end subsidies to the oil companies, but let's also end subsidies to all coompanies. As for "a few important people", who exactly have the taxpayers been paying big bucks with no hope of any return? The "GREEN ENERGY" political bundlers
Sequoia 1 year, 2 months ago
Well, a carbon tax just makes the company pay for its waste, and reflects the actual cost of carbon-based fuel.
The thing about green energy is that the market is much more diverse and open than conventional energy. It is easier for new participants to enter the market with a new alternative energy product than a conventional energy product. Sure there have been blunders, but we can't let perfect be the enemy of the good (or something like that). Overall, green energy IS the future, whether we lead or not.
RobHunterJohnson 1 year, 2 months ago
Graceful, you are the only one at it again! If you would open you mind and listen to something besides FOX, and RUSH. Things are better because I am working. ROB
linoge 1 year, 2 months ago
I have noticed that most news articles tend to be slanted in one direction or the other. It is probably safe to assume that the truth lies somewhere in between. When we choose to view our world through "tunnel vision" we lose perspective. If our goal is to win people over to our way of thinking, we should try to present our ideas in a fair and balanced way. I do not see this article as being rubbish. The author reports that some economists see positive changes in our future but cautions that these signs can be misleading, that our recovery (which is happening) is fragile.
eileen10 1 year, 2 months ago
I agree with RobHunterJohnson that things are getting better. From the beginning President Obama walked into a mess and Ive always felt he wanted to do everything he could to make things better for all of us and my opinion hasnt changed.
spelchek 1 year, 2 months ago
"From the beginning President Obama walked into a mess and Ive always felt he wanted to do everything he could to make things better for all of us and my opinion hasnt [sic] changed." -- Mr. Obama has outspent Mr. Bush by $1 trillion each year he's been in office. Do you spend money you don't have to "make things better"? Is leaving an even larger deficit for the next president (perhaps even Mr. Obama) not leaving a "mess"? Another 4 years of this man will result in more than a mess; more like disaster.
Sequoia 1 year, 2 months ago
Why is reducing the deficit now THE most important thing? Doesn't economics indicate that more government spending speeds economic recovery and higher employment? And that austerity is the WRONG thing to do now?
I understand we need to cut spending when things are better. That's hard. But doesn't all economics say spend now, cut later?
Don't throw out sound economic theory just because you don't like the president.
JCLifer 1 year, 2 months ago
Cutting handout welfare programs would make more sense. The government should be focusing its efforts to pay people for working and contributing to the economic growth, not on continuing to make more and more people dependent leaches on society. Reward productivity, not procreation and sloth.
spelchek 1 year, 2 months ago
Fair enough Sequoia. However, if this is sound economic theory, then why is this man walking around blaming our problems on Mr. Bush, who spent like Democrat (using the same theory)? And, I will not let you get a way with your last sentence. I'm sure Obama would be the nicest guy I've ever met that is destroying our economy. Policy, not person.
wyriontair 1 year, 2 months ago
Sorry, government spending does not speed economic recovery, you're trying the follow the Keynes theory used during the depression, it didn't work then and it won't work now. Obama's spending is way way out of control and it hasn't done a thing but increase the debt
asb 1 year, 2 months ago
Government intervention to speed and slow economic growth by spending and hoarding has worked for the 5,000 years we've got records on. It worked well enough during the depression to feed and employ millions of our grandparents. Keynes wrote clearly what history has taught; government spending to compensate for private doldrums (usually caused by ignoring our penchant for stealing anything not tied down), and stifling loans to cool off inflation work.
spelchek 1 year, 2 months ago
Reagan's unemployment low: 5.4%
Reagan's approval, last year: 64%
Mr. Obama's current and lowest unemployment rate: 8.3% --
41% of Americans approve of the job Mr. Obama is doing.
tonto_goldberg 1 year, 2 months ago
Greece has a contracting economy because of their EEC-imposed austerity program. You can't save your way out of a recession and you can't spend your way out of a deficit. You have to choose the lesser of the evils. Only in a fantasy can you reduce saving and expand the economy.
wyriontair 1 year, 2 months ago
Every president "walks into a mess", that's the reality of the job. The policies of this administration are ruining this country and costing us billions of dollars, now he signed a new law that will prevent anyone from protesting anywhere near him, or any elected official that has secret service protection. The secret service has the discreation as to whether you'll be arrested or not for a felony. Doesn't that cause anyone else to take a step back and look at what has been happening? If it doesn't you'd better start asking yourself why it should. From healthcare to "green energy", which the only "green" happening is the "green" his bundlers are getting.
wyriontair 1 year, 2 months ago
you are correct, however, being the "constitutional scholar" as Obama professes to be, he should not have signed it, he had that discreation so he should take the credit for it, just as people have said Bush should take credit for NCLB which was pushed by former Senator Ted Kennedy-D MA.
JMO 1 year, 2 months ago
Wow. Am I actually reading comments that indicate perhaps BOTH sides are to blame for things? What an amazing insight. Refreshing in these comments.
wyriontair 1 year, 2 months ago
There's nothing amazing about it, everyone should look at both sides and gather all the information they can before they form an opinion. We used to be taught at home and at school to do that but sadly that doesn't happen any longer.
Sequoia 1 year, 2 months ago
There are usually more than just two sides, so the problem is looking at "BOTH" and acting like you've done due dilligence. Too often, a completely ridiculous opinion is treated like a valid assertion simply because one "side" utters it. Then, if a reporter just comes out and says that the opinion is completely ridiculous, then he's called "biased" just because he dares utter the truth.
Both "sides" want the media to act like lapdogs. Quote one side. Quote the other. End the story. For Pete's sake don't ANALYZE. That's bias!
People think media should quote "side" saying "blue" and the "other side" saying "red," then stand back and says "Well, we quoted both sides so we're fair and balanced. Our work here is done."
The media should 1) describe 2) quantify 3) analyze.
asb 1 year, 2 months ago
By any valid measure, the economy is past bottom in its recent cycle. Unemployment, growth, availability of money, and others. Several business sectors are actually booming (oil and agriculture for example). Europe is also recovering. Yes, it's a slow recovery. Yes, far too many people who want work are still looking. Yes, housing is still depressed. But only by measures of fear and a desire for Obama to fail is the economy not better and the USA collapsing.
spelchek 1 year, 2 months ago
Mr. Obama will be defeated in Nov. by simply presenting his spending habits and many broken campaign promises. Reagan was brilliant compared to Bush. Clinton (excluding lying under oath and sexual promiscuity) was brilliant compared to Obama. That said, give me another Reagan, not the current Republican line up. Democrats should be demanding more of their president, not trying to cover / butter up his record. Never thought I'd say this, but I wish you would have chosen Hillary over the inexperienced community organizer turned rookie politician.
JCLifer 1 year, 2 months ago
"I wish you would have chosen Hillary over the inexperienced community organizer turned rookie politician."
AMEN!!! She would be a better candidate right now than Obama or any of the Republican candidates.
BTW: What is up with the Missouri Republicans? Why can't they find any good candidates to run for governor for the last two elections and the one coming up?
spelchek 1 year, 2 months ago
I hope the MO Republicans come up with something soon. Although, there's no guarantee a Republican governor is going to make things any better, but we can hope.
wyriontair 1 year, 2 months ago
Hillary Clinton would have been so much better, up until now she's been a very effective Sec'y of State. It is unfortunate that she is now interjecting the Obama campaign talking-points during her press conferences.
the1joncook 1 year, 2 months ago
Uh oh.........a second term for the President seems even more a reality. When one considers the liberal turn to occur in the Circuit Court and Supreme Court with a second Obama term it is understandable the conservatives are going apoplectic. If things continue to move in the direction they have been for the last three months, and there is little reason to believe they will not, it will be a bloodbath of recriminations within the Republican Party after November.
tonto_goldberg 1 year, 2 months ago
The GOP pattern has been to double down on radicalism after a serious trouncing. The nation's mood will change and there will be slow change from within the GOP. They will be back, just not by November 2012. Maybe by November 2014.
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