Financial News

[Jenksismyhero]

The question then is...why did job loss turn around basically in March 2009?

 

"Turn around" is incredibly misleading. It's basically the same. For 750 billion, tax cuts or no tax cuts, for a .5% change in unemployment, was it worth it? Did it really do much of anything? I don't buy that it "saved" jobs since those "saved" jobs are just slowly being lost over time. If anything it might have delayed some firings, but it didn't just stop them.

 

Again, all the billions spent, and last month 130k jobs were lost. How is that progress?

[Balta1701]

Again, all the billions spent, and last month 130k jobs were lost. How is that progress?

It's not...but it's worth noting...the large majority of the job loss were public sector jobs. The private sector still added jobs...the losses were a combination of public sector job losses and the census job losses. That certainly ought to complicate your picture...government is actually shrinking, but that's not leading to economic growth.

 

And anyway...a 0.5% increase in employment is not small...and that's also an underestimate of where most people's numbers put it.

[Jenksismyhero]

It's not...but it's worth noting...the large majority of the job loss were public sector jobs. The private sector still added jobs...the losses were a combination of public sector job losses and the census job losses. That certainly ought to complicate your picture...government is actually shrinking, but that's not leading to economic growth.

 

And anyway...a 0.5% increase in employment is not small...and that's also an underestimate of where most people's numbers put it.

 

link?

 

And to me even 1% is small in relation to the amount of "spending" we've done, and the additional amount you want. We were supposed to be no worse than 8%. Oops, we're at 9.5%.

Edited August 25, 2010 by Jenksismybitch

[southsider2k5]

In hindsight, what actually amazes me about the last 8 years is how easy it was to call exactly what was going to happen. I mean, I didn't get the tiny details like which bank was going to fail, but in 2004 I was writing that whoever won the Presidential election was screwed in 2008 because there was a massive credit bubble out there, allowing for growth of consumer spending despite the fact that wages were stagnant. In 2003 I decided to rent instead of buy, because I thought California had a housing bubble. In 2005, I moved, but made the same decision. again.

 

About the only thing I think of as a mistake was not realizing how easy it would have been to pick out the peak of the housing bubble. If I'd anticipated that I could have cashed in on the bubble myself. My favorite "the peak is here" story was the "Buy a condo get a prius deal" showing up in more than a few places in California in early 2007...where condo-owners were using the free car as a way of keeping up the nominal sale price but giving the purchaser an extra incentive.

 

Here is the problem. Say you are looking at a place for a 150k right now, with the prevailing rate nationally at 4.75%. You are looking at a monthly payment of $782.47, which comes out to a lifetime payment of just over $280k in a regular old 30 year mortgage, without factoring in property taxes, PMI, or insurance. If you do a get a 10% fall in prices again, from where we are at now, but get rates to go back to a much more realistic 6% you actually end up at an $802.39, or over $290k in lifetime payments. You might save the stickerprice, but you are paying 10,000 dollars more in the lifetime of your mortgage payments. The difference is even higher if the fall in prices is lower, or if the rates see any kind of inflationary pressures at all.

[Balta1701]

link?

 

And to me even 1% is small in relation to the amount of "spending" we've done, and the additional amount you want. We were supposed to be no worse than 8%. Oops, we're at 9.5%.

Frankly, what that 8% number says is how inadequate their initial estimates were of the true scale of the 2008 shock.

 

Here's an easy link from the top of the Google to answer your question.

 

Here's another with the full data table. The "Change in private nonfarm payrolls" is the private sector number...that's positive 71k. 3 lines down from that is change in government payrolls...which is at -202k.

 

What basically happened in 2009 is that the stimulus offset some of the state-level job losses...but there was still so much contraction at the state level that it nearly completely offset the stimulus effect. Therefore...everything leveled out, but nothing went upwards because states and local governments contracted sharply. Now in 2010 the state aid in the Stimulus is gone, so states are contracting even more sharply and that's becoming a major drag on employment.

[Balta1701]

Here is the problem. Say you are looking at a place for a 150k right now, with the prevailing rate nationally at 4.75%. You are looking at a monthly payment of $782.47, which comes out to a lifetime payment of just over $280k in a regular old 30 year mortgage, without factoring in property taxes, PMI, or insurance. If you do a get a 10% fall in prices again, from where we are at now, but get rates to go back to a much more realistic 6% you actually end up at an $802.39, or over $290k in lifetime payments. You might save the stickerprice, but you are paying 10,000 dollars more in the lifetime of your mortgage payments. The difference is even higher if the fall in prices is lower, or if the rates see any kind of inflationary pressures at all.

The key flaw remains...why would interest rates go back towards 6%?

 

Here's a 10 year bond rate graph through yesterday.

 

We're almost back to late-2008 flight to safety numbers on the 10 year bond. If interest rates tick upwards at all, that'll basically resume the housing crash. The only reason why rates would go up is to fight inflation...and that is a long, long way off right now. If the Fed or the Congress decided to get off its tail and do something about unemployment, maybe a few years later once unemployment started pushing back towards 6%, inflation might be more of a concern, but until then, there's a massive unfilled output gap and basically no reason for rates to rise.

[southsider2k5]

The key flaw remains...why would interest rates go back towards 6%?

 

Here's a 10 year bond rate graph through yesterday.

 

We're almost back to late-2008 flight to safety numbers on the 10 year bond. If interest rates tick upwards at all, that'll basically resume the housing crash. The only reason why rates would go up is to fight inflation...and that is a long, long way off right now. If the Fed or the Congress decided to get off its tail and do something about unemployment, maybe a few years later once unemployment started pushing back towards 6%, inflation might be more of a concern, but until then, there's a massive unfilled output gap and basically no reason for rates to rise.

 

If there is any kind of inflationary pressures, or any kind of real recovery it won't take long at all. We were just at 5.5% six months ago for national rate averages. Heck June of last year we were ticks under 6%.

[NorthSideSox72]

Here is the problem. Say you are looking at a place for a 150k right now, with the prevailing rate nationally at 4.75%. You are looking at a monthly payment of $782.47, which comes out to a lifetime payment of just over $280k in a regular old 30 year mortgage, without factoring in property taxes, PMI, or insurance. If you do a get a 10% fall in prices again, from where we are at now, but get rates to go back to a much more realistic 6% you actually end up at an $802.39, or over $290k in lifetime payments. You might save the stickerprice, but you are paying 10,000 dollars more in the lifetime of your mortgage payments. The difference is even higher if the fall in prices is lower, or if the rates see any kind of inflationary pressures at all.

That's a great example of what I was saying - when you are talking about the last few % points of value around the bottom of a market, trying to play those last few out gives you a lot less gain and more risk than if you get in now while rates are low. And as you also pointed out, and as everyone I talk to in the sector agrees, inflation and interest rates have to rise pretty soon. No one knows exactly when pretty soon is, but it is basically inevitable in the relatively near term.

 

Balta, if you want to try to find that perfect bottom, I'd suggest going to a night club instead of playing the market timing game.

 

[Balta1701]

That's a great example of what I was saying - when you are talking about the last few % points of value around the bottom of a market, trying to play those last few out gives you a lot less gain and more risk than if you get in now while rates are low. And as you also pointed out, and as everyone I talk to in the sector agrees, inflation and interest rates have to rise pretty soon. No one knows exactly when pretty soon is, but it is basically inevitable in the relatively near term.

 

Balta, if you want to try to find that perfect bottom, I'd suggest going to a night club instead of playing the market timing game.

 

Anyway, now the issue is I'm back to expecting to move within a year or two and I don't know exactly when.

[Jenksismyhero]

That's a great example of what I was saying - when you are talking about the last few % points of value around the bottom of a market, trying to play those last few out gives you a lot less gain and more risk than if you get in now while rates are low. And as you also pointed out, and as everyone I talk to in the sector agrees, inflation and interest rates have to rise pretty soon. No one knows exactly when pretty soon is, but it is basically inevitable in the relatively near term.

 

Balta, if you want to try to find that perfect bottom, I'd suggest going to a night club instead of playing the market timing game.

 

ba-doom-ching!

[NorthSideSox72]

 

Anyway, now the issue is I'm back to expecting to move within a year or two and I don't know exactly when.

Well for your situation, I know its sort of tough, because you don't even necessarily know where you will be in a year or two. That's a whole different ballgame, and I am not sure what the right course of action is for you.

 

[Balta1701]

Well for your situation, I know its sort of tough, because you don't even necessarily know where you will be in a year or two. That's a whole different ballgame, and I am not sure what the right course of action is for you.

Rent, and if I get caught by a minor interest rate increase I don't really care long-term because even if they go up slightly, they won't go up a lot. It's a nice safe play, and it actually has the potential to even still pay off.

[jasonxctf]

Joining the backlash against House Majority leader John Boehner's (R-Ohio) economic speech yesterday, Mark Zandi, Moody's chief economist, said Boehner was "just wrong" to call the $787 billion stimulus spending "a failure."

 

If there was no stimulus at all, Zandi said, unemployment would be at around 11.5% rather than 9.5%.

 

"I think if we had not had the stimulus, estimates put forward by the Congressional Budget Office are absolutely right: we'd have 2.5-3 million fewer jobs than we'd have today," he said at a Christian Science Monitor breakfast briefing this morning.

 

What needs to change are people's expectations, he said. "The stimulus did exactly what it was intended to do. It was intended to end the recession, jump-start the economy, and it did that," said Zandi, who has advised both Obama and John McCain in the past.

 

As Zandi points out, the government spent "a minor amount" of stimulus money in the first quarter, which jumped to $100 billion in the second quarter and another $100 billion in the third quarter.

 

"It's that key change that provides the economic juice...that's when the recession ended," Zandi said. "This is why the benefits of stimulus are fading, because we've gone from $100 billion in spending to zero."

 

[Jenksismyhero]

http://www.nationalreview.com/battle10/244...ichael-sandoval

 

Michael Bennet, D-Colo,at a town hall meeting in Greeley last Saturday, Aug 21 said we had nothing to show for the debt incurred by the stimulus package and other expenditures calling the recession the worst since the Great Depression. [...]

 

Regarding spending during his time in office he said, “We have managed to acquire $13 trillion of debt on our balance sheet” and, “in my view we have nothing to show for it.” Speaking of the debt, he said our debt almost equals the economy. Regarding the current job situation, Bennet said the situation has been dire for over a decade saying, “We have created no net new jobs in the United States since 1998” which were the last two years of the Clinton administration. Pointing to a slide showing budget expenditures, he said that currently 65 percent of the budget was for social security, Medicaid and Medicare expenditures and that we could not grow our way out of debt.

[kapkomet]

I have a lot more to say about the business holding cash thing and I will try to post more later, and not mark to market later.

 

[jasonxctf]

http://www.nationalreview.com/battle10/244...ichael-sandoval

 

 

when it comes to economic issues, i think i'll take the words of a chief economist at one of the nation's leading financial houses over a freshman senator running for re-election.

[Jenksismyhero]

when it comes to economic issues, i think i'll take the words of a chief economist at one of the nation's leading financial houses over a freshman senator running for re-election.

 

Because those guys are ALWAYS right. See: Greenspan, Alan.

 

More bad news: Economy coming to a screeching halt.

[jasonxctf]

Because those guys are ALWAYS right. See: Greenspan, Alan.

 

More bad news: Economy coming to a screeching halt.

 

 

Better than expected... http://finance.yahoo.com/news/Economic-gro...set=&ccode=

[NorthSideSox72]

Because those guys are ALWAYS right. See: Greenspan, Alan.

 

More bad news: Economy coming to a screeching halt.

LOL @ coming to a screeching halt. The problem is actually something new and unique - that we are still looking at moderate growth over time. Enough to not be diving into a worse recession, enough to avoid deflation certainly... but not enough to make any real ground on employment numbers. Its frustrating as hell.

 

In most previous recessions, there was a big jump back, typically on a similar scale to the depth of the fall. A steep rebound. In this case, the rebound started sooner, but has been much less steep, than previous ones.

 

[Jenksismyhero]

LOL @ coming to a screeching halt. The problem is actually something new and unique - that we are still looking at moderate growth over time. Enough to not be diving into a worse recession, enough to avoid deflation certainly... but not enough to make any real ground on employment numbers. Its frustrating as hell.

 

In most previous recessions, there was a big jump back, typically on a similar scale to the depth of the fall. A steep rebound. In this case, the rebound started sooner, but has been much less steep, than previous ones.

 

You seem to know much more about this than me. Do you think slow, gradual growth is better in the long term than an immediate short term jump?

[NorthSideSox72]

You seem to know much more about this than me. Do you think slow, gradual growth is better in the long term than an immediate short term jump?

I honestly don't know. See, here are some possible scenarios.

 

Scenario one (which many Obama supporters think may be true) says that the GDP curve in this case hit bottom and rebounded faster, but ascended slower, and that's good because you avoided the area underneath that curve that a steeper recession would have created. This logic is that the recession was stopped earlier, but came out slower, ending up in the same place some few years down the road, but with less aggregate area below the zero line. This theory assumes that government and/or business actions staved off a worse recession.

 

Scenario two (this is one that Kap was getting at) says that in the short run, this recovery does indeed beat out a steeper recession, but that the curves pass each other a second time as the steeper recession bounces back faster, and reaches the zero line faster. In this case, the amount of area between the curves favors the slow recovery in one area, and the fast recovery in another. Potentially, the total area difference in negative territory could be less for the steeper recession, if the slow recovery model takes too long to work. This model assumes that government and/or business action was simply avoidance more than solution, thus giving you a loss even on 50/50 area differential due to the time aspect.

 

Then there are all sorts of other scenarios. Really, it could be lots of things. I was just trying to point out that this recession and its rebound are somewhat unique - and I am honestly not sure, in the long run, if that ends up better or worse.

 

[southsider2k5]

You seem to know much more about this than me. Do you think slow, gradual growth is better in the long term than an immediate short term jump?

 

The issue is to clear the problems that underpin the private economy. Basically this contraction in growth is showing that despite the stimulus, the private sector still hasn't recovered.

[NorthSideSox72]

The issue is to clear the problems that underpin the private economy. Basically this contraction in growth is showing that despite the stimulus, the private sector still hasn't recovered.

Definitely true. The stimulus money clearly created or saved jobs, but so far, the positive effect that has had on private industry has been small or non-existent.

 

[jasonxctf]

Definitely true. The stimulus money clearly created or saved jobs, but so far, the positive effect that has had on private industry has been small or non-existent.

 

and i think that was the problem with the stimilus program all together and quite frankly some other iniatives that the administration rolls out. they dont do a good enough job of telling people the reasonable expectations of the program. so people either assume that this program (or any program) will be the be-all end-all solution to any/all problems, or the other side sets the bar so damn high that success can never be reached in their eyes.

 

imagine where we'd be if there was no tarp, no stimulus and no lifeline extended to the car companies. What would unemployment, banking and the economy look like then?

 

[NorthSideSox72]

and i think that was the problem with the stimilus program all together and quite frankly some other iniatives that the administration rolls out. they dont do a good enough job of telling people the reasonable expectations of the program. so people either assume that this program (or any program) will be the be-all end-all solution to any/all problems, or the other side sets the bar so damn high that success can never be reached in their eyes.

 

imagine where we'd be if there was no tarp, no stimulus and no lifeline extended to the car companies. What would unemployment, banking and the economy look like then?

No doubt those things had a positive effect. But I disagree that the marketing aspect was the main problem with the stimulus. The biggest problem with it is that it was weighted far too heavily on a combination of short-term, non-sustainable jobs, and tax cuts that didn't target business growth. They went about it the wrong way, and were less effective than it could have been as a result.