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Dismal Unemployment Numbers Send Markets Tumbling

By: Brad Jackson (Diary)  |  September 2nd, 2011 at 10:00 AM  | 

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the dismal unemployment figures for August, the possibility of QE 3 and the possibility of another financial crisis.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Economy Gains No Jobs in August, Rate Holds at 9.1%
BLS: The Employment Situation – August
Stocks Plunge 2% After Dismal Jobs Report
Ghosts of Lehman And a Budding Bank Crisis

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  • Death_of_the_Donkey

    look at the internals of the Household Survey and the breakdown by education. If you have a college degree (or at least some college, ie associates degree) your unemployment rate is relatively low and we created 580,000 of those jobs last month. If you have high school or less (or are under 25) you have essentially no job prospects and we continue to shed those jobs (and have even since the “official” end of the recession).

    • dajeeps

      But I haven’t seen any statistical correlation between education levels and persistently high unemployment in a stagnant economy. In economics, there is a golden rule to never reason from a price change because the chances of reaching conclusion that can be supported by all the underlying facts are less than 50/50. I would venture to guess that it equally applies to attempts to explain other kinds of economic phenomena, including unemployment.

      The data presented might suggest nothing more than when there are not enough jobs to go around, those who are perceived to be already educated have a competitive advantage because they look better on paper. There isn’t anything here that suggests that lack of education, self-education, or a decade or more experience in a particular field has an impact on the number of available jobs, or that if everyone obtained a formal degree, the unemployment problem would suddenly disappear.

      • Death_of_the_Donkey

        is a structural change in our economy that coupled with globalization and technology has made (is making) the jobs for those without educations more scarce.

        • aesthete

          whatwith specific gluts and market re-adjustments. Reminds me of some of the stuff that Tyler Cowen has written on the subject.

          • Repair_Man_Jack

            I think employers would want to be like VInce Lombardi. They want the best, and could give a rat’s rectal oriface how they get these quality individuals. They can’t line these people up and give them IQ tests w/o getting sued. They can’t directly eliminate for a number of factors that would eliminate candidates with a low probability of longterm success.

            So they use the best proxy they can lay hands on. Right now, perhaps to their own demise, they believe that proxy is the Sacred Sheepskin. It represents a certain level of erudition, polish and socialization that makes an individual acceptable.

          • aesthete

            For starters, I’m not an Austrian –more of a monetarist at this point, but the work I’ve been involved in and observed has been strictly experimental microecon-based, so I’ll confess to being uninformed beyond the basics. That said, I just don’t see that there’s a particular shift from what we’ve been doing as far as job creation goes: the new jobs are still in business, finance, tech and engineering, and have been for a while.

            This seems to imply to me one of two things. First, that the jobs that previously existed outside the “job-creation” categories of the past 20 years were slightly past the point of marginal returns. At this point, it wouldn’t make sense to fire those people who are a little past that point, for all the usual “sticky wages” rationales (morale issues, labor laws, unemployment compensation, unions, etc). However, it also wouldn’t make sense to hire additional people when those people past that point quit voluntarily or retire. If that’s true, unemployment in those categories has simply been exacerbated by the recession, rather than being a driver of said recession. Second, it could imply just what you just said. Businessmen are looking to hire the best, and hiring only those with college degrees and bachelors’ is the gentlemen’s way of filtering for IQ, social class, or other desirable traits.

        • dajeeps

          But the point I was making is that the current statistics you gave do not provide enough evidence to prove that point. It is anecdotal evidence at best that doesn’t seem to hold up when considered along with other facts about how we got to where we are.

          Consider that for almost a decade the regulatory structure funneled trillions of dollars of potentially productive capital, through the capital reserve ratios, into government consumption for low income housing and expanding mortgage credit availability, and what the opportunity cost of doing that might be to productivity and expansion of the economic base. Capitalism needs capital to expand and grow, and enterprise ventures do not exist in a vacuum. They expand the periphery that creates an entire range of jobs from janitorial and ditch digging, to those requiring advanced degrees and they pull along with them consumer demand.

          What has happened to us is that capitalism was suffocated by the central economic planning apparatus making end roads around natural market ordering and allocation of resources, and it went on so long that we are quite far behind the eight-ball in being able to generate enough jobs to keep pace with even normal demographic changes.

  • bk

    But it’s funny how the same people who blame Bush for 9/11 – less than 8 months after he took office – also blame Bush for 2 years and 8 months of Obamanomics disasters.

  • steve010

    Does Washington, and specifically, BHO, really want to get to full employment quickly. The answer is very simple. Two simple proposals 1) Repeal Obamacare, lock stock and barrel and 2) lower the Corporate tax rate to 10% for at least 10 years. You don?t need a degree from Princeton or Harvard to figure this out.

    The Heritage Foundation?s James Sherk recently released a paper comparing the rate of net job growth before and after the passage of ObamaCare in March 2010. The findings show that job creation came to a screeching halt at the time ObamaCare was enacted.

    Two other minor proposals that would drastically spur job growth at no expense to taxpayers are immediately speeding up the process of permitting oil/gas exploration and drilling and permitting of the construction of nuclear power plants.

    Of course, none of these proposals will be mentioned by His Highness during his ?JOBS speech? next week. Which brings me to the main course of action by the House of Representatives. Ignore BHO?s double down Keynesian proposals and propose these four above measures and send them to the Senate for action, as a pledge to restore full employment. If the WH and the Senate fail to act, then campaign like crazy.

    Proposals to increase net job growth that won?t work. 1) extending the unemployment insurance payouts 2) extending the payroll tax cuts 3) taking money from oil companies and giving it to fed govt to repair schools, roads and bridges 4) any type of ?green? jobs spending 5) more ?shovel ready? jobs programs.

    If the House goes along with BHO on his proposals, this action would probably help defeat BHO in 2012, but these actions on his proposals are totally irresponsible on the part of the HoR. The result would be a longer recession, no net jobs created, and more fed debt.

    • renl57

      If you lowered the corporate tax rate to 10%, business would begin to make plans to expand. But it would take years to put such plans into effect–it always does. (How long does it take to build a new factory or industrial park or skyscraper today, with all the environmental, union, antitrust, and other obstacles in the way?)

      In the meantime, you would blow a hole in the Federal budget and add even more to the national debt.

      Sure, in time you would see business expand greatly and pay taxes on that expansion–but not right away. We would have to endure huge deficits and more national debt–for 2 or 3 years at the very least.

  • Death_of_the_Donkey

    I think this would be a great idea. Let anyone who wants to refinance (current principal, no writedowns) at current rates. This would have a huge positive impact on the economy, likely keep more people in their underwater homes, and have relatively few negative externalities. The logistical question would be how to get title searches done on all these properties in a reasonable amount of time and at an affordable cost (could be included into the new mortgage as a possibility).

    • acat

      I’ve been tumbling this one around in my head for a while, trying to figure out what your logic is.

      I’m not seeing it.

      If current principal exceeds the value of the home – which is what “underwater” means – why is it in *anyone’s* interest to refinance? Just the lower interest rate? With the house still underwater, no bank should* want to touch them, short of a “short sale” refi.

      Also, with the expenses you’re pushing onto the principal – title searches aren’t free, closings aren’t free, lawyers certainly aren’t free – I question whether it’s even a net positive, let alone a good enough one to be worth taking.

      Mew

      * not that it’s stopped ‘em before

      • acat

        is what’s going to turn this around.

        My money is on inflation.

        Literally.

        Mew

  • http://impudent.edublogs.org/ kyle8

    gold has shot up past the price of platinum.

    In one week I have gained about $2400 in asset value.

    I am not a wealthy man, but I am so glad that I put some of my savings into gold three years ago. I will have to sell it some time or the other.

    I was thinking that it wont go much above $2000 an ounce, but now I am not so sure. I think it might just be a reaction to these numbers and will probably fall a lot next week. I might try to get out early monday and sell it all.

    • acat

      Sell half.

      If it goes higher, you won’t feel that you got burned.

      If it does come crashing down, you still got profits at the top.

      Mew