Implications of Today's Economic News Stephen Levy's Economy Blog, posted by stephen levy, a resident of the University South neighborhood, on Jan 6, 2012 at 11:59 am stephen levy is a member (registered user) of Palo Alto Online
Today brought two more bits of good economic news.
National job growth continued with a gain of 212,000 private sector jobs and a drop in the unemployment rate nationally to 8.5% overall and 8.0% for workers over 20 years of age. This comes on top of 4 weeks of lower first-time unemployment claims.
Many of the job gains in December were the result of higher than expected seasonal hiring in retail stores and the delivery sector—FedEx, UPS and similar companies. We won’t know for a month or two how much of this increased hiring is permanent. But there were also gains in manufacturing, health care, technology and restaurants.
On a much smaller scale Ford today announced the creation of a small research center in Palo Alto. The story is reported elsewhere on Town Square.
"Silicon Valley represents a deep and dynamic technology neighborhood according to the Ford executive who will oversee the Palo Alto office…By locating in Silicon Valley, he added, "our new lab will allow us to scout new technologies and partners in their own environment."
What do these stories imply? The national recovery remains slow but unemployment rates are falling though there are still far too many workers who have been unemployed for a year or longer.
Most of the recent growth has been the result of stronger than expected consumer spending. If consumers are spending money they have and not, once again, going into debt, this is a positive sign for the economy. It also provides support for the federal programs like the payroll tax cut that have supported household income growth during the recession and recovery.
The contrast with Europe is pretty clear. The European austerity programs have slowed economic growth and the region remains in financial turmoil. In contrast the limited refusal to impose austerity in the midst of our nation’s early recovery has at least kept the economy moving forward. In addition U.S. long-term interest rates remain at low levels and, even so, our debt is attractive to world-wide investors.
The Ford announcement today is another is a series of positive signs for Silicon Valley. Job growth here was 3.3% over the past year, second highest in the nation for large metro areas. And the growth is concentrated in high-wage technology sectors with good growth prospects.
Downtown Palo Alto is alive with construction and high demand for commercial space as small start ups find the environment attractive.
The lesson I think for Palo Alto and the Valley is to understand where our strengths lie and make our communities attractive for the talented entrepreneurs, workers and their families who are attracted to locate near the great labor force and creative energy that is coming alive again in the Valley.
Posted by Judy, a resident of the Palo Verde neighborhood, on Jan 6, 2012 at 3:28 pm
" If consumers are spending money they have and not, once again, going into debt, this is a positive sign for the economy"
My brother has a credit card addiction. His wife and three kids are warriors on Black Friday, at the outlets. It all goes onto his credit card. He cannot afford it. So many of those people, who battle to be the first to buy a consumer product, are also putting it on their credit cards.
Like gambling addicts, credit cards are a license to inject $$$ heroin into one's veins, if he or she is an addict.
My brother told me that it was "crazy" this year, at the outlets. He cannot possibly afford it, along with so many others. Any economic benefit, according to recent reports, is due to a bubble of cc addicts. No one should feel good about such "seasonal" spending.
Posted by Fifty-Jobs-Is-Not-A-Surge, a resident of Another Palo Alto neighborhood, on Jan 6, 2012 at 5:04 pm
> The Ford announcement today is another is a series of positive
> signs for Silicon Valley.
Various media accounts of this planned operation suggest that fewer than 50 jobs are anticipated by Ford. While Ford may use this center to locate, wine and dine, future technology partners .. it's not likely that fewer than fifty new jobs are going to have any significant impact on Silicon Valley .. one way or the other.
Posted by svatoid, a resident of the Charleston Gardens neighborhood, on Jan 7, 2012 at 9:27 am
Sharon and Perspective have posted with their expected comments. Naturally if a republican were in the WHite House, they would be singing his praises and trumpeting these numbers.
Sharon should realize that no one has said that this increase in hiring was not due to seasonal workers--Mr Levy mentions it in his post. That is the way the numbers are reported--no trickery involved. Of course Sharon, once again needs to post her comments re Obama being in over his head and being a good speaker from a prepared script--yawn--same old tired complaints from the same old Obama hating, Al Qeida supporting, right-wing, fascist republicans. Perspectives (aka Sharon) comments are more of the same--"if it came from a democrat they have to be lies". I would have thought that with the new year we would have heard something new from Sharon/Perspective--but when you are stuck in a hole that you yourself dug....
Posted by stephen levy, a resident of the University South neighborhood, on Jan 7, 2012 at 12:20 pm stephen levy is a member (registered user) of Palo Alto Online
Normally 90% of the posts on any blog are skeptical, confrontational and generally grumpy. Town Square is no different from most blogs and much milder in tone except for the New York Times blogs.
The Ford announcement does not promise many new jobs immediately but it has important implications. Folks could lighten up a bit and imagine what the bloggers would have said if the headline were "Ford considers and rejects Palo Alto as a site for a new research center."
So this IS good news and reinforces expansions by Google, Apple, Facebook, Palantir and many others in the Valley.
Moreover, the company's explanation reminds us that entrepreneurs come here to be close to a talented workforce, which means the workers and their families must be attracted to live here. We are an innovation center and our economy will be determined in great part by our ability to continue to attract talented folks.
That, in turn, means that part of our compettive advantage must be in having great schools, housing that sustains the job growth and communities with infrastructure and public services that says "Come live and work here, not elsewhere."
Posted by stephen levy, a resident of the University South neighborhood, on Jan 7, 2012 at 12:35 pm stephen levy is a member (registered user) of Palo Alto Online
Svatoid is right on. Once a topic is about presidential politics folks line up on the data depending on how they want to spin the political implications. So every month when the jobs report comes out, Repbulicans say it would be better if Obama disappeared no matter how good the news is and Democrats say "we are on the right track and moving forward" no matter how disappointing the news is.
There are three independent data sources for job and unemployment trends and they all report the same findings--1) job levels are rising, 2) unemployment levels are falling and 3) these gains are modest in comparison to historical trends in recoveries and it will be a long time before job and unemployment levels reach pre-recession levels depending on world events and national policies.
Job trends come from employer data as was reported yesterday and also from the monthly household survey that provides te unemployment estimates. The employer data tends to underestimate job losses when the economy is sliding as in 2009 and underestimate job gains when the economy recovers as it misses firms going out of business as recessions build and new firms in the early part of a recovery.
So job estimates were revised downward through most of 2009 and have been revised upward in most months in 2011.
The household survey better captures trends in self employment and in workers in new firms. The unemployment decline is real even if part is from workers leaving the workforce.
However in Silicon Valley and California the decline in unemployment rates is occuring with gains in the labor force.
The third independent source of data is the first time unemployment claims, which have finally dropped to the level consistent with job growth.
The future is still uncertain as world economic turmoil can hurt our economy as can bad economic policy from Congress.
But the recent data for Silicon Valley, the state and nation shows a slow upward path for job levels and a decline in uenmployment, especially here in the Valley where job growth has pushed the unemployment rate from 11% to 9% with further gains likley in 2012.
Posted by Fifty-Jobs-Is-Not-A-Surge, a resident of Another Palo Alto neighborhood, on Jan 7, 2012 at 12:37 pm
> We are an innovation center and our economy will be determined in
> great part by our ability to continue to attract talented folks.
Who is "we"? If you are talking about Palo Alto as a place .. there is little to endorse that point-of-view. Anyone who remembers the trashing that the City Council, and many residents, gave "business" just a few years ago when the so-called "ground floor retail" ordinance was put into effect. We also see an almost hatred of business from time-to-time when supermarkets want to expand to larger than 20,000 square feet. Certainly the almost-war over Alma Plaza comes to mind.
If "we" are the City of Palo Alto government--there is no evidence that the local government has the slightest idea what "technology" is, or what to do with it.
That leaves Stanford, as the reason that a company might locate here--which seems to be clearly stated in the Ford-issued press releases.
So .. having Ford open this office is not "bad news" .. it's just not "good news". This tiny little office will bring in little in terms of any additional tax base, and the four or five employees that choose to live here are not going to increase the property tax base.
All in all .. Ford's opening this office is a non-event.
Posted by stephen levy, a resident of the University South neighborhood, on Jan 8, 2012 at 10:24 am stephen levy is a member (registered user) of Palo Alto Online
The "we" I refer to is Silicon Valley and Palo Alto as a part of the Valley. To paraphrase an old saying "It takes a Valley to create economic competitiveness".
Firms are attracted to Palo Alto to be in Silicon Valley--our labor pool, universities and deal making possibilies.
And firms are attracted to Silicon Valley because the Valley includes communities like Palo Alto that people find as attractive places to live.
I enjoy living in Palo Alto and do not share posters mainly negative views of city government. People disagree about public policy and voters and council do not always make the choices I favor but I can take the bad for the mostly good.
Perhaps the grumpy posters would feel more at home in Mountain View, Montana or Mississippi. There are lots of choices about where to live.
Posted by Kelton, a resident of the Charleston Meadows neighborhood, on Jan 9, 2012 at 7:49 am
The bozo's ("Something smells") who claim the 200,000 jobs created are somehow "suspect" can't even remember how things were a few Decembers ago with a different president:
"The U.S. economy lost 524,000 jobs in December, closing out the worst year for job losses since World War II, the Labor Department said Friday. … Nearly 2.6 million jobs were lost in 2008, with 1.9 million destroyed in just the past four months, according to a survey of work places. It's the biggest job loss in any calendar year since 1945... The report was worse than expected, with payrolls in October and November revised lower by a total of 157,000 jobs. November's loss was revised to 584,000." Web Link
Why would anyone consider voting for republicans, even a sane one like Huntsman, when they created this disastrous economy? We're still digging out.
Funny that all the GOP candidates can't mention the B word ("bush")as they pontificate about this economy. Yet they want to repeat his disastrous policies.
Posted by Perspective, a resident of the Greater Miranda neighborhood, on Jan 9, 2012 at 9:38 am
Kelton: You are correct about one thing. Who would vote for anyone who brought about the economic problems and made them all worse?
Those of us "tea partiers" (who were not called that during the Bush years when we were not seen and not heard by either the Repubs in power or the media) were already p.o.'d about one thing we saw coming down the pike: huge deficits. Whether it was 170 billion/year when the Repubs controlled all, or 500 billion per year when Dems controlled both houses and Bush finally found his veto pen, or more than 3 times 500 billion/year now at 1.7 trillion, it is all unacceptable enslavement of our children. Add to it any government laws which kill businesses and destroy personal responsibility for bad choices ( which kills good choices), and we have had enough.
My memory is excellent...I remember well the unemployment numbers, jobs lost, etc of December 2008.Not coincidentally just after the election of the fox guarding the henhouse as businesses battened down their hatches. I remember well how what could have been a small recession was turned into a near-depression by electing a completely illiterate economic mindset with no stops at all on foolish.
If we don't stop this, we can all look forward to becoming Greece.
I am not a "bozo" ( nice debating style you have there!). Analytical thought requires putting into perspective any data. How to reconcile the lowest labor force since the early 80s with any kind of "lowering unemployment" assertion?
Several scenarios: 1) manipulation of data in some way ( not counting those who have fallen off the unemployment check rolls, those who have given up looking for work and decided to "retire" or live on one income instead of 2..any number of ways to manipulate the data). 2) A sudden change in the last few years in age demographics. Suddenly we have a lot fewer 18-65 year olds compared to over 65 year olds? I doubt it.
There may be more. What are they? The question begets skepticism. How to reconcile the data.
I truly hope that we are on the mend back toward what we are happy with, which is around 5-6% unemployment rate. I am a skeptic though, since I see nothing changing which would encourage businesses to
hire or people to work. The only way such changes are likely to be enacted is by replacing "big government" thought in DC with "smaller government" thought.
Nov 2012. It isn't just a President we are electing, it is both Houses.
Posted by Kelton, a resident of the Charleston Meadows neighborhood, on Jan 9, 2012 at 10:03 am
"Whether it was 170 billion/year when the Repubs controlled all..."
Clinton handed Bush a $100+ billion SURPLUS, and an economy that created 20+ million jobs in 8 years.
Bush's last deficit exceeded a trillion dollars, and all he bought with that profligate spending was a terrible economy shedding half a million jobs a month. So let's revisit your statement "Who would vote for anyone who brought about the economic problems..."
Republicans only want to be "fiscally responsible" when they are OUT of power.
"Just 11 years ago, Republicans insisted budget surpluses were bad for the economy, while Democrats told us surpluses would make the economy flourish. Al Gore said pay off the federal debt; George W. Bush said cut taxes so people would have more money.
During the Bush years Democrats decried the red-ink budgets, while Republicans assured us that no real harm would come from a $5 trillion borrow-and-spend spree." Web Link
As far as "us tea partiers" - no such thing. You're just the fringe of an already extreme fringe right. Seriously, just because the Koch brothers funded Dick Armey's faux grassroots group Freedomworks and came up with a test marketed name (albeit a great name, from a marketing perspective,) doesn't change the zebra's stripes.
Fringe is still fringe.
As soon as the GOP is back in power, they'll be spending like drunken sailors again, only on things that their investors, errr... "donors" want: tax subsidies for big oil, insurance companies, removing regulation from Wall Street, etc...
But then the tea baggers will magically disappear, Freedomworks will be suddenly silent.
What makes you think the GOP corporatist's have any use for the fringe once they're back in power?
Posted by Eaton, a resident of the Esther Clark Park neighborhood, on Feb 3, 2012 at 9:17 am
Perspective said: "Will await 'revised downward" numbers next month, as has happened for over a year..or more."
They were revised - up: "The Labor Department also revised up estimated job gains for November and December by a total of 60,000." Web Link
"Job growth surges, jobless rate near 3-year low" Web Link
23 months of private sector job growth. Sure beats the Bush policies that gave Americans 500,000 to 750,000 job losses per month. When Obama took over, Bush policies cut 4 million jobs in 6 months; also shave GDP by 8%. We now have a growing GDP for a couple years, but have much more work to get this economy and jobs where it belongs.
Imagine if the John Beonher of 2010 ("job creation is job one") actually helped in any way - zero jobs bills, but plenty of abortion votes, plenty of "reaffirm our motto" votes. And threatening to shut down the government actually caused a hiccup in hiring. Way to go John!!
I, too, wish to repeat Kelton's question: "Why would anyone consider voting for republicans, even a sane one like Huntsman, when they created this disastrous economy? We're still digging out." Alas, the sane one is out - left with guys that just want to cut Romney's 13% effective tax rate in half.
Posted by Judy, a resident of the Palo Verde neighborhood, on Feb 3, 2012 at 12:02 pm
You forgot the other side of the equation:
Recent US Federal Debt Numbers
Gross Federal Debt Debt Held by Public
FY 2012 $16.7 trillion $10.8 trillion
FY 2011 $15.5 trillion $9.9 trillion
FY 2010 $13.5 trillion $8.2 trillion
FY 2009 $11.9 trillion $6.8 trillion
FY 2008 $10.0 trillion $5.3 trillion
Gross Federal Debt is the total debt owed by the United States federal government. It comprises “debt held by the public” and “debt held by federal government accounts,” such as IOUs owed to the Social Security trust fund. “Debt held by the public” includes debt actually held by the public and foreign governments, and also debt held by the Federal Reserve System, i.e., monetized as part of the monetary base.
This huge increase in national debt will probably be resolved through inflation, a very insidious tax on fixed-income and relatively poor poort.
Posted by Eaton, a resident of the Esther Clark Park neighborhood, on Feb 3, 2012 at 1:27 pm
Judy: Awesome post! Thanks, but I didn't forget that side at all; in fact the single best way to reduce the deficit is to get Americans gainfully employed, driving up revenues.
Just curious: were you a deficit hawk when Reagan tripled the national debt? Were you posting here (or anywhere) when George Bush doubled the national debt?
Of course, as a deficit hawk, you must have applauded Bill Clinton for having balanced the budget and giving Bush and the GOP House (till 2007) and GOP Senate (2002 till 2007) a surplus. What happened to that surplus?
Perhaps you are under the COMPLETELY MISGUIDED NOTION that Republicans are "fiscal conservatives" when ALL EVIDENCE shows that it is Democrats that are the fiscal conservatives.
But back to today's deficit, which is created from a number of factors, outlined here: Web Link
"There is a way to tally the effects Obama has had on the deficit. Look at every piece of legislation he has signed into law. Every time Congress passes a bill, either the Congressional Budget Office or the Joint Committee on Taxation estimates the effect it will have on the budget over the next 10 years. And then they continue to estimate changes to those bills. If you know how to read their numbers, you can come up with an estimate that zeros in on the laws Obama has had a hand in. [...]
So the center built a baseline that includes everything that predated Obama and everything we knew about the path of the economy and the actual trajectory of spending through August 2011. Deviations from the baseline represent decisions made by the Obama administration. Then we measured the projected cost of Obama’s policies."
"From 2001 to 2009, Bush's policies, including two wars, higher Pentagon spending in addition to those wars, tax cuts, higher discretionary spending and the prescription drug program contributed $5.1 trillion to the nation's debt. From 2009 to 2017 (using projections for 2011-2017), Obama's policies have added or will add $983 billion."
Not even in the same ballpark. So again,as a deficit hawk, you seek to repeal Bush's tax cuts (that have not created any jobs), get out of Afghanistan and repeal Medicare Part D, as those are the biggest non-recession factors applicable to our current deficit, correct?
Imagine if Americans had GOP help instead of their hindrance!!!
Clinton created 23 million jobs. Bush ended his term with 800,000 jobs lost per month. Fighting back against the Bush recession policies, Obama has 23 months of private sector job growth, despite GOP inaction on jobs in the House.
Why would anyone want a return to PROVEN disastrous GOP policies?
Posted by stephen levy, a resident of the University South neighborhood, on Feb 4, 2012 at 11:53 am stephen levy is a member (registered user) of Palo Alto Online
Yesterday's news was very good for the nation.
The jobs data and the decline in first-time unemployment claims announced the day before are solid news that the economy is growing.
Still, the climb out of the deep recession will take much longer than normal and people who are still hurt by the recession and housing crash will find recovery painfully slow.
Still, this IS good news and better for our area as yet another company (KLA) announced an expansion in their workforce yesterday and the San Jose metro area was tied with Houston for the fastest growing large metro area in 2011 measured by job growth.
The political debate seems unaffected by the news. For a while we had the President saying the economy was getting better and would certainly have been worse under the policies of the previous adminstration. Now we have Republicans acknowledging that the economy is getting better but claiming it would have been even better under their policies.
One thing does seem clear--that the austerity policies in Europe are pushing the region near or into recession while the stimulus efforts have supported private sector job growth here.
In the political debate my perspective is in line with what the poster Eaton has been writing although I don't think minds are suspectible to change by facts once the silly season is upon us.
Posted by Matt, a resident of the Meadow Park neighborhood, on May 15, 2012 at 2:27 pm
Also interested, as this topic started with a national overview many months ago, your thoughts on the Stimulus and it's ability to further pull our nation out of recession and the unemployment issues we face.
Governor Romney supported Stimulus in Jan 2009: "The president's plan for economic recovery, including a stimulus bill which includes a very health dose of tax reductions, is something which I think showed a willingness to actually listen to some of his own economic advisers that have pointed out in their research that tax reductions have a bigger economic stimulus impact than spending money on infrastructure does." Of course, for political reasons, the Governor flip flopped on this and now attacks Stimulus.
Governor Romney also understands that cutting spending at this time does not help, but only hinders recovery (from multiple statements, such as:) "Now, I'm not going to cut a trillion dollars in the first year. And I heard a question. Why not? And the answer is: taking a trillion dollars out of a $15 trillion economy would cause our economy to shrink and would put a lot of people out of work." Of course, for political reasons, the Governor flip flopped on this and now supports tax cuts for billionaires while cutting programs that support the working poor and middle class.
Europe's austerity, which when implemented cut growth significantly, shows us that reducing spending also reduces revenue. Stimulus spending, including supporting states to hire back workers, builds revenues and helps recovery.
Additional spending on infrastructure not only helps recovery further, but sets up America with the tools we need to compete in the 21st century. We must support America's business community by resisting all efforts at austerity.
We must build and employ our way out of this 4 year old economic disaster.
We must NOT elect someone who seeks to repeat the same Bush policies and mistakes. We must continue the 25 consecutive months of private sector job growth under President Obama.
Posted by Perspective, a resident of the Greater Miranda neighborhood, on Jul 6, 2012 at 6:40 am
OMG, Matt: 1/2 of 1/3rd of our Fed govt by Repubs, with Reid blocking every single bill brought forth by the House; and the Repubs are the "obstructionists"?? Wow. Alice in Wonderland and 1984 rolled into one.
Did you see the really cool jobs report today? (sarc off).