Tourists shouldn’t come to California from late May through early July – it’s the June Gloom of course. The Alaska Current always keeps the Pacific rather cold, and in June, when the land heats up rather nicely, that heat meets the cold air over the water and we get socked in. What they call the Catalina Eddy mixes it all around in a stew and it inches in off the Pacific in a dense marine layer of dismalness. You might see the sun at three in the afternoon, for about ten minutes, but then it’s gone in the gloom again. It’s day after day of diffused low skies. In July, when it gets really hot, the bone-dry alkali winds blow in hard off the desert, day after day after day, and blow all that stuff all out to sea. But June out here is depressing – or quiet and subdued and a time for contemplation. Just don’t expect Mickey Mouse in the brilliant blinding sunshine. June isn’t very nice out here.
And now we’re not alone. President Obama just got a good dose of his own June gloom:
It is increasingly apparent what the economy will look like when President Obama faces voters in November: pretty much what it looks like today.
And that picture, a report from the Labor Department made clear on Friday, is far from the booming job growth that prevailed only a few months ago. In June, the economy added a meager 80,000 jobs, and the unemployment rate remained at 8.2 percent.
Early this year, optimists buzzed that the jobless rate might touch below 8 percent by the election, a milestone that would be a major symbolic victory for the incumbent. Then employment growth slowed in March and took a turn toward the paltry in April and May.
With Friday’s report, what looked like a blip has now become a streak – and with a gridlocked Congress unlikely to pass any additional stimulus measures before the election, the president is stuck again with an economy in stall mode.
We’re stuck in a rut, with no one having any incentive to get out and push. And this New York Times item also notes that the May job growth figures were revised downward to 77,000 – real job growth to be sure, and maybe just about enough to keep up with population growth – for what that’s worth. But there’s a backlog of thirteen million folks looking for work, and maybe eight million more who gave up looking long ago. And the item also cites economists who say they have scaled back their expectations for the rest of the year. We’re in for sluggishness – Europe is a mess, with its economies contracting dramatically, and there’s slowing growth in what they call emerging markets, and of course it looks like growth in China and Brazil is slowing too. With so many Americans out of work demand here is collapsing, and there’s no one else to buy our stuff.
And forget monetary or fiscal policy. The Federal Reserve long ago reduced interest rates to near-zero. There’s nowhere else to go there – save for another round of quantitative easing, printing money to buy up even more government and corporate bonds, creating demand in the economy when there really is none. And the Fed is on record as saying that of their two mandates – to head off any hint of inflation at the pass, and to create the conditions the assure full employment – they will do what they can with the first, but the second, creating jobs, is something for Congress to work on, not them. They’ve simply walked away from that.
Friday’s report sent stocks theatrically lower on both sides of the Atlantic, as you would expect – it was financial June Gloom with much weeping and wailing. The crew at CNBC should get Oscars, or in their case, Emmys. But you could turn to ESPN and watch the men’s semifinals from Wimbledon, with the volleys back and forth across the grass. Many find that incredibly boring, so they followed the political volleys here:
At a campaign stop in Poland, Ohio, on Friday, Mr. Obama urged voters to take the long view, and to be mindful of the economic state he inherited.
“I want to get back to a time when middle-class families and those working to get into the middle class have some basic security,” he said. “We’ve got to deal with what’s been happening over the last decade, the last 15 years.”
Mr. Romney, on the other hand, emphasized the more recent string of weak job growth that has taken place under Mr. Obama’s leadership.
“This is a time for Americans to choose whether they want more of the same,” Mr. Romney said from Wolfeboro, N.H., where he is vacationing. “It doesn’t have to be this way. America can do better. And this kick in the gut has to end.”
As they say in tennis, advantage-Romney. But this is not game-set-match, but it could be:
From December through February, private companies added an average of 252,000 workers a month. But job growth slowed in March, leading some economists to wonder whether the unseasonably warm winter, rather than a fundamentally healthier economy, had been the real source of the short-lived employment surge.
“The net of it is not as if the economy is collapsing, but it wasn’t really as strong as it looked in December, January and February,” said Jim O’Sullivan, United States economist at High Frequency Economics.
The economy had a good run there, but it may have been a fluke. Things all along might have been as bad as Romney would like them to be. The only decent job growth was in temporary help services, the low-paying crap jobs. The Times item quotes folks saying that it looks like employers were not confident enough of the recovery’s “sustainability” to invest in permanent hires. Their order books are slowly growing, but they’re wary.
But it’s not all gloom:
Among the few bright spots in Friday’s report were ticks upward in average hourly earnings (to $23.50, from $23.44 in May) and the length of the typical private sector workweek (34.5 hours, from 34.4). Still, the overall weakness in the report may have nudged Federal Reserve officials toward additional monetary stimulus.
That means the Fed will probably print more money:
“The odds of QE3 happening before the election are clearly going up,” said Jay Feldman, an economist at Credit Suisse, referring to the nickname for a third round of stimulus known as quantitative easing.
Others say they should not do that – they’re not sure that’s very effective or even needed now. They’re as confused as everyone else – what happens in Europe, or doesn’t, and a slowdown in China, matter much more – and that’s out of our hands.
Still, things here are about to get worse:
Struggling local governments have been shedding workers. There was a brief respite in June, but economists generally seem to expect the layoffs to pick up again for the rest of the year.
Under current law, the end of 2012 will also bring a torrent of federal tax increases as the Bush tax cuts and temporary payroll tax reductions expire. The government is also scheduled to lop off a huge chunk of federal spending because of measures set in motion by Congress’s inability last December to come up with plans for longer-term fiscal restructuring.
There’s more of course:
In addition to those components of the so-called fiscal cliff, the federal extension for unemployment benefits ends this year, meaning that, in most states, newly unemployed workers will receive no more than 26 weeks of jobless benefits, according to the National Employment Law Project. Without extended jobless benefits, unemployed workers will have less disposable income, cutting their spending, and reducing employers’ need to hire more workers.
We could fix that, but we won’t. It’s an election year. The Republicans need a failed economy. And Matthew Yglesias notes that this is just what they’re getting:
With revisions we have 80,000 jobs in June; 77,000 jobs in May; and 68,000 in April. Three makes a trend is the rule of journalism, so that is definitely a new weak trajectory for job growth. You’d need about 200,000 new jobs a month to be making meaningful progress toward reducing the unemployment rate. The good news, such as it is, is that the trajectory is upwards. That’s visible in the headline jobs numbers and in the fact that both wages and hours worked went up in the June report. But I think it’s clear that we’re settling on a no-recovery path.
And Joe Biden’s former economy advisor, Jared Bernstein, agrees:
Today’s report suggests that the downshift looks real, and that’s what should be absorbing policy makers’ time and energy. Unfortunately, in a hotly contested election year, they’re more likely to target each other than to target the job market.
Ezra Klein certainly wants Fed action now and the economist Justin Wolfers sees it coming – “The big question is whether this is a weak enough report to get the Fed to move. I think it is, and they will.”
In the Economist, Ryan Avent is pretty fed up with those guys:
As this new jobs report makes clear, the Fed is falling wildly short on the employment side of its mandate; unemployment remains more than 2 percentage points above its estimation of the “natural rate” of unemployment. All the more striking, then, that the Fed is also falling ever farther short of its inflation target, as well. The Fed next meets from July 31st to August 1st. These new jobs numbers will raise hopes for action, potentially including a third round of balance-sheet expansion via asset purchases: QE3.
But here’s a counterargument from Peter Boockvar:
Bottom line, the 3rd straight month of job growth below 100k is pathetic with an average of 78k in that time. The weakness in April and May were likely due to some weather give back from strength over the winter but June is more likely being negatively influenced from the growing global economic moderation that will likely intensify in the 2nd half, thus furthering the malaise in the labor market. While a figure like today will only invite more FOMC [Federal Open Market Committee] deliberations, if only cheap money was the magic elixir to what ails us, the global economy would be roaring. Deleveraging however is the only real, long lasting cure.
There’s no hope. Give up. And Walter Russell Mead sees widespread ineptitude:
There are those who say we need to print much more and spend much more to get the economy going again, and those who say that doing that will just get us deeper in the hole with nothing more to show for it. The likely result of this impasse is that we won’t do what anybody recommends, but bumble along instead halfway between the two extremes, hoping something turns up. And if we’re lucky, which I think we probably will be, the politicians won’t do the equivalent of pouring sugar in the gas tank by failing to resolve the budget and tax crunch coming at the end of the year. That’s not a solution; it just means we won’t deliberately drive our car into the ditch.
Ed Kilgore simply considers the political implications:
We’ll see how the spin goes, but this is precisely what Mitt Romney’s beleaguered campaign team needed today: an excuse to get back to what it does best, which is mindless fulmination over short-term economic indicators.
But in Business Times, Christopher Matthews – not the mad MSNBC host – points out that for many, this isn’t about politics:
Of course the real losers in this situation aren’t the politicians, but the more than 5.4 million Americans among the long-term unemployed. According to the National Employment Law Center, recent changes to the federal unemployment benefits program and the expiration of some state programs will cause half a million of these workers to lose their benefits by the end of August.
Oh, them. Maybe they’ll all vote for Romney now.
No, wait – Romney wants to spend even less money on them, directing all available funds to dramatically lowering taxes on the rich and on corporations, as that’s the way out of this mess. And those unemployed folks should take personal responsibility for themselves. Their plight is their business, not the government’s business.
Sure, vote for Romney and his buddies, but Jeff Spross says one might remember who’s really responsible for getting us into this mess, starting with filibustering the American Jobs Act:
Last October, Senate Republicans killed a jobs bill proposed by President Obama that would have pumped $447 billion into the economy. Multiple economic analysts predicted the bill would add around two million jobs and hailed it as defense against a double-dip recession. The Congressional Budget Office also scored it as a net deficit reducer over ten years, and the American public supported the bill.
And there was stonewalling monetary stimulus:
The Federal Reserve can do enormous good for a depressed economy through more aggressive monetary stimulus, and by tolerating a temporarily higher level of inflation. But with everything from Ron Paul’s anti-inflationary crusade to Rick Perry threatening to lynch Chairman Ben Bernanke, Republicans have browbeaten the Fed into not going down this path. Most damagingly, the GOP repeatedly held up President Obama’s nominations to the Federal Reserve Board during the critical months of the recession, leaving the board without the institutional clout it needed to help the economy.
And there was threatening a debt default:
Even though the country didn’t actually hit its debt ceiling last summer, the Republican threat to default on the United States’ outstanding obligations was sufficient to spook financial markets and do real damage to the economy.
And there was cutting discretionary spending in the debt ceiling deal:
The deal the GOP extracted as the price for avoiding default imposed around $900 billion in cuts over ten years. It included $30.5 billion in discretionary cuts in 2012 alone, costing the country 0.3 percent in economic growth and 323,000 jobs, according to estimates from the Economic Policy Institute. Starting in 2013, the deal will trigger another $1.2 trillion in cuts over ten years.
And there was cutting discretionary spending in the budget deal:
While not as cataclysmic as the debt ceiling brinksmanship, Republicans also threatened a shutdown of the government in early 2011 if cuts were not made to that year’s budget. The deal they struck with the White House cut $38 billion from food stamps, health, education, law enforcement, and low-income programs among others, while sparing defense almost entirely.
The record is clear:
There have also been a few near-misses, in which the GOP almost prevented help from coming to the economy. The Republicans in the House delayed a transportation bill that saved as many as 1.9 million jobs. House Committees run by the GOP have passed proposals aimed at cutting billions from food stamps, and the party has repeatedly threatened to kill extensions of unemployment insurance and cuts to the payroll tax.
In short, if you’re hurting, as we all are, consider why we’re still hurting.
In the New Republic, Noam Scheiber sounds the same theme:
The upshot is that we’re no longer in a world where sending states a few tens of billions of dollars to shore up their finances is going to get the recovery on track. The economy, by which I mean the private sector, is disconcertingly weak, and strengthening it is going to take something on the order of several-hundred-billion dollars.
The good news is that Obama actually has a plan of roughly that magnitude – the $450 billion American Jobs Act he proposed last September, replete with new payroll tax cuts and additional aid for the unemployed. The bad news is that, in the vein of his “private sector is doing fine” comment, we’ve heard remarkably little about this package in recent months. I’m not sure if that’s because Team Obama believes focusing on it would draw attention to how fragile the economy is at an inconvenient time in the political cycle. Or because, after three plus years of intransigence, Obama has calculated that Republicans aren’t going to abruptly drop their deal-breaking opposition.
Then Scheiber kind of blames Obama:
One theme that runs through numerous White House missteps these last few years is the impulse to game out what the political constraints will allow, then proceed within them, rather than start with the optimal policy and fight for as much as they can get.
Hey, no one’s on your side, or our side. It’s all politics.
Harold Evans might agree, in a way, as he reviews something off-topic, Zbigniew Brzezinski’s new book, Strategic Vision: America and the Crisis of Global Power – mostly about geopolitics, but also, as Evan notes, about much more:
He went against the grain of elite opinion in the 50s by predicting that the Soviet Union was doomed to break up, and break up along nationalist lines; he foresaw the danger of allowing Ayatollah Khomeini to control the Iranian revolution and urged military action to forestall him; in the late 70s, he forecast the Soviet invasion of Afghanistan. He’s been so right on Soviet matters that it is downright disconcerting to read his new book…
It’s the thesis that intrigues Evans:
America now exhibits the same symptoms of decay as the Soviet Union did just before its fall: a gridlocked governmental system incapable of enacting serious policy revisions, bankrupting itself with a gross military budget; failing in a decades-long attempt to control Afghanistan; a ruling class cynically insensitive to widening social disparities while hypocritically masking its own privileged lifestyle; and finally, in foreign affairs, becoming increasingly self-isolated while precipitating a geopolitically damaging hostility with China.
Brzezinski concedes this parallel may be over drawn – there is the little matter of American freedom, for instance – but he is surely right that there is a dangerous new volatility.
And much of that is due to our economic fecklessness:
His anxiety is whether our West, disunited and economically turbulent, can get its act together to be a balancer and conciliator between the new powers as Britain was in Europe during the 19th and early 20th centuries. If we could contrive a renewed and larger West – which we so signally failed to do in the 30s – he believes the U.S. can help a resurgent Asia avoid a struggle for regional domination by mediating conflicts and offsetting power balances among potential rivals. Otherwise as China grows and other emerging powers – Russia or India or Brazil – “compete with each other for resources, security, and economic advantage, the potential for miscalculation and conflict increases.” …
He recognizes America’s potential; he is not a conventional declinist: “in every significant and tangible dimension of traditional power – military, technological, economic, and financial – America is still peerless.” What makes him angry is how the potential is being wasted. He condemns the “costly unilateralism of the younger Bush presidency” that led to a decade of war in the Middle East and the derailment of American foreign policy at large. He is scathing about the recklessness and greed of the financial systems that brought America low; disgusted by our “third-world” infrastructure; appalled at how America has become “the most unequal major developed country in the world” with stagnation in social mobility; unsparing about the vitriolic partisan discourse feeding on an American populace “highly ignorant about the world” – over 30% of American adults cannot name two countries America fought in World War II.
No, we’re not – but maybe it’s just June gloom – dense fog at dawn and hazy murk the rest of the day. The gloom will eventually go away – unless the Republicans keep having their way. They like the gloom, or at least they find it useful.