Moodys.com is out with their latest forecast, and here's a look at where they think unemployment is headed (thanks to economist Mark Zandi for sharing these data). First, they've got unemployment going up a bit before it comes down... and even then, it's still elevated by year's end... well into the 8s.
This comes right out of the type of analysis shown here on the economic consequences of below-trend growth. Moody's GDP growth forecast for this year is 1.7%-and unless GDP is beating the trend of around 2.5%, the unemployment rate will tend to rise.
But let's look at some policy issues invoked by their unemployment forecast, particularly the impact of the payroll tax holiday (PTH) and extended unemployment insurance (UI). The president has, of course, been calling for Congress to extend these for another year given that they expire at the end of this year.
As I wrote yesterday:
These are both essential -- EPI estimates that to lose them next year would cost over one million jobs. But since they're already in the system, they don't add anything new, so it's like keeping your foot where it is now on the accelerator. If they expire on schedule at years' end, your foot comes off. But keeping them going only maintains current speed, such that it is.
Like most forecasts right now, Moody's assumes that the payroll tax holiday -- a 2% wage boost for most workers worth over $100 billion/year -- will be continued next year. That's built into their forecast.
Using Moody's estimates of the impact of these policies on growth and some of my own calculations about the growth of the labor force, one can back out the path of unemployment under two different scenarios:
- Iif we fail to extend the PTH (bad!)
- If we are able to extend both the PTH and UI (good!)
If Congress lets the PTH expire, unemployment goes up more and ends up only slightly below 9% at the end of next year. If we extend the PTH and UI, the jobless rate falls a bit further, though it would still be up there at 8.3%.
At any rate, as Ezra Klein stressed Thursday on an MSNBC segment we did today (with Zandi, no less), it's way past time to stop inflicting wounds on ourselves. Keeping these measures in the economy next year is the least we can do -- that's the starting point upon which to build other job growth ideas, like FAST!
Update: A commenter asked the good question: how do the PTH and UI have an impact on unemployment? The PTH is a 2% wage subsidy, so it puts more money in your paycheck which lots of folks then spend. The extra spending creates more economic activity, including jobs, and that lower unemployment. Similarly, people receiving unemployment insurance benefits tend to spend them with the same result: more growth/jobs than would otherwise occur.
This post originally appeared at Jared Bernstein's On The Economy blog.
The double dippers sure as hell have not been removed from holding over inflated salaried positions.
It sure would be nice to see some of these journalists grow some balls and go after these scamming idiots and stick to the story until we get some real answers and not a line of bull$hit that’s been going on for over two years.
How much money is it costing the tax payers?
How many jobs are they holding that someone unemployed could be doing instead of getting unemployment benefits?
You want spending cuts? THAT WOULD BE A GREAT PLACE TO START!
For the sake of argument -- Since you weren't there -- how do you he didn't try to get the maniximum amount he could get from the hostage takers with nothing to lose from their
craven perspective?.
http://thehill.com/homenews/house/169077-ignoring-liberal-dems-obama-endorses-longer-payroll-tax-holiday
So the PTH is inherently dangerous, and any increase in spending from it is minute compared to the increase in spending that would result from putting the unemployed to work.
Cuts are not the answer, and that includes cuts from a PTH. The U.S. needs a federal jobs program. Every leading economist advocates this. There is huge popular support for it. Only the politicians seem too stupid, or too venal, or both, to understand this.
The working class needs a labor party.
Not credible.
Please, respectfully, stop making excuses for Mr. Obama's incompetence.
it is not all doom and gloom however as there are things we can do to drive growth. Hugh populations in other countries are developing and we can take advantage of this by increased exports and new technologies. Also, we now know that we have massive energy deposits here. To develop them creates many good jobs and drops our export of wealth to producing countries.
Our gov. needs to redo the corp. tax code to increase our exports and the dept. of energy,if not closed, should get together a real energy independence policy which they have been tasked with for ever.
I remember President Obama saying, near the beginning of his administration: "We will spend our way out of this mess." Asinine economics then, asinine economics now. And the author (in the quote, above) indicates that he has drunk the kool-aid.
Question: if all this 'extra spending' will create jobs, then where are they? We have had the 'pth' around for awhile, and we are at 9% and have been, or above, for quite awhile.
Of course, as soon as the deficit hawks got some traction in 1937, the unemployment rate started to go back up. The fiscal conservatives just don't learn.
Which of these would you eliminate?
Brookings did a lot of great work before the Big O took office, and knew we needed a larger Stimulus at least a full $1 Trillion but that of that we needed for 15% of it to be for Infrastructure and job creation..
Obama and Larry Summers who doesn't believe in "infrastructure" only allowed a bit less then 4% to go to Infrastructure..!
They Obama and Summers then squandered 40% of the Stimulus/ Recovery on meaningless Tax Cuts...
Brilliant..!
You have to go to Harvard and or run it, to be that stupid and arrogant....QED..!
But the good news is, as Third World competitors become wealthy, their living standards and wages will rise...eventually China will locate its industries here, hiring a new breed of low wage American workers. www.hard-truths.blogspot.com
Employers in China are already complaining about the high cost of workers there, and there is much more labor unrest in China than we hear about here. Chinese employers are locating factories out in the provincial rural areas, where people will still work cheaper, and they are investigating locations in Brazil, Vietnam, and even Africa.
This could put pressure on the big employers who would be constantly
asked to participate. The fairs could be put on all over the country
and lathered with publicity. Saturate the public with the message...
JOBS OR BUST. Since the polls show overwhelming support for
jobs, this would be a winner. ChuckV
It would be a good way to highlight the jobs problem, but there are constant job fairs everywhere.