Economy Watch: Economy Continues to Create Jobs
- Feb 03, 2012
The U.S. Bureau of Labor Statistics reported on Friday that 243,000 jobs were added to the economy in January—up unexpectedly from 203,000 in December (which was revised upward a little). The private sector hired a lot of people, with large gains in professional and business services, leisure and hospitality, and manufacturing. Government employment changed little over the month, so at least it wasn’t a drag on the overall total. The nation’s unemployment rate shrank from 8.5 percent to 8.3 percent.
On Thursday the U.S. Department of Labor had reported that for the week ending Jan. 28, initial jobless claims were 367,000, a decrease of 12,000 from the previous week’s revised figure of 379,000. The four-week moving average for new jobless claims was 375,750, a decrease of 2,000 from the previous week.
The weekly jobs report came on the heels of Thursday’s report by consultancy Challenger Gray Christmas Inc., which found that planned mass layoffs by private companies increased in January to 53,486, up 28 percent from 41,785 in December. Such a large number of planned layoffs isn’t that unusual in January, especially as retailers cut back, though this January’s number was also up from the same month a year ago, when planned firings totaled 38,519.
CBO outlook sees more sluggishness
The Congressional Budget Office released some unpleased reading on Thursday in the form of its “Budget and Economic Outlook: Fiscal Years 2012 to 2022.” “The pace of the economic recovery has been slow since the recession ended in June 2009,” the report said, “and CBO expects that, under current laws governing taxes and spending, the economy will continue to grow at a sluggish pace over the next two years.”
The tedious pace of growth partly reflects the dampening effect on economic activity from the higher tax rates and curbs on government spending scheduled to occur this year and especially next, the report continues. “Although CBO projects that growth will pick up after 2013, the agency expects that the economy’s output will remain below its potential until 2018 and that the unemployment rate will remain above 7 percent until 2015,” the report notes.
Regarding the future direction of the federal deficit, the CBO said that if spending continues to rise in an environment characterized by federal revenues that about at the average share of GDP that they have for the past 40 years—rather than being allowed to increase, as under current law—the resulting deficits will spike federal debt to “unsupportable levels.” The kicker is that to prevent that outcome, Congress will have to restrain the growth of spending for Medicare, Medicade, Social Security, and defense; raise revenues above their historical share of GDP; or pursue some combination of those two approaches, according to the CBO. In recent years—decades—Congress has been unready, unwilling and unable to do exactly that.
Bernanke, congressmen spar over monetary policy
Ben Bernanke was on Capitol Hill on Thursday, talking to the House Committee on the Budget during a hearing with the expansive title, “The State of the U.S. Economy.” After formal comments by the chairman, however, the title might as well have been “Paul Ryan (and Others) Berate Ben Bernanke Over Monetary Policy.” Rep. Ryan of Wisconsin happens to be chairman of the Budget Committee at the moment, and he went out of his way to express his displeasure over low interest rates and other Fed monetary policy: “I think this policy runs the great risk of fueling asset bubbles, destabilizing prices and eventually eroding the value of the dollar,” he said.
In a calm, central banker sort of way, the chairman stood his ground in the face of such criticism by Ryan or other members of the Republican-controlled committee (and it should be noted that Bernanke, too, is a Republican). “We are not seeking higher inflation,” Bernanke asserted. “We do not want higher inflation and we’re not tolerating higher inflation.”
Wall Street wiggled around indecisively on Thursday and finally ended up mixed. The Dow Jones Industrial Average lost 11.05 points, or 0.09 percent. The S&P 500 and the Nasdaq were up 0.11 percent and 0.4 percent, respectively.